Wine industry spotlight: 5 risk management lessons from the Napa quake

Published on Thu, 09/18/2014 - 19:05
wine barrels

On August 24, 2014, California Bay Area residents got an early morning wake-up call. The 6.0 magnitude quake was the biggest to hit the area since 1989, and it wreaked havoc in the historic town of Napa. The quake injured 170 and killed one, knocked out power to 15,000 residents, caused gas leaks, burned homes, buckled roads, and seriously damaged many residential and commercial buildings. The cost? Early estimates of the overall insurable property losses are hovering around $250 million.

For winery owners in the historic Napa Valley vineyards just a few miles away, the quake was also a wake-up call. According to the Napa Valley Vintners, a local trade association, more than 120 wineries were affected, with losses estimated at $50 million.

Natural disasters have a way of presenting teachable moments. So what lessons should winery owners learn from the Napa earthquake?

Lesson #1: Have an emergency response plan. The quickest way to restore some order to the chaos of an emergency is to have – and follow – a comprehensive emergency response plan. You’ll need to assess all possible hazards and risks, and develop a plan for responding. Check out these earthquake resources from FEMA to help you assess your risks. Your plan should address these areas:

·         Resource management

·         Crisis communications

·         Business continuity

·         IT

·         Employee assistance

·         Incident management

Lesson #2: Invest in quake-proof equipment and infrastructure. For instance, select your tanks and barrel racking systems for their seismic stability.

Lesson #3: Obtain an engineering report to evaluate the stability of your structures and equipment, and to make recommendations for retrofitting buildings and adding or designing equipment anchoring systems for better support.

Lesson #4: Conduct a cost-risk analysis for the purchase of earthquake insurance on structures and critical equipment such as tanks.

Lesson #5: Have the right insurance. The Napa quake has served as a reminder of how few California business owners have earthquake insurance. It can be costly, big earthquakes are rare, and many simply believe it’ll never happen to them. But earthquakes can happen anytime, and they can quickly put you out of business if you’re not prepared. Make sure your operations are adequately insured, not just for damage to infrastructure and equipment, but for business interruption and other risks.

Will you be ready for the big one?

Following the Napa quake, new radar images of the area taken by NASA revealed several small fault lines that nobody knew were there. Scientists are also warning about the Cascadia fault system just 100 miles off the north coast of California running north to Vancouver, saying it’s about due for a good shake. Cascadia created a 9.0 quake back in the 1700s, believed to be the largest earthquake the continental U.S. has ever seen. Then there’s the more famous San Andreas Fault, which could produce a large quake at any time.

Bottom line – it’s not a matter of if, but when another big one is coming.

With the complex and unique risks inherent to the wine industry, you need an insurance partner who knows your operations as well as you do. Contact us to speak with one of our Vintners & Growers experts today.