Wineries Find Insurance Companies Unwilling to Cover 'Smoke Taint' After Wildfires

Insurance is intended to indemnify the holder in case of loss—and in this case, that loss doesn't appear to be debated: After the 2017 Wine Country Fires, two major wine companies—Vintage Wine Estates (VWE) and Kunde Enterprises—attempted to collect millions of dollars in compensation for wine that was ruined due to smoke taint. But according to court documents, their insurance providers—seven in all—refused to pay out, reportedly claiming that the damage wasn't covered. So the winemakers are fighting back with an ongoing lawsuit to the tune of $19 million.

"We're not going to let the insurance companies push us around," Pat Roney, CEO and founding partner of Vintage Wine Estates, which is claiming $12 million of those damages, told the Sonoma Index-Tribune. "We know we're not the only ones with smoke taint in their wine," adding that they have the "means to fight back" and "want to set the precedent."

Apparently, the argument hinges on when the smoke taint occurred. The insurers apparently claim that their coverage "does not cover damage to grapes on the vine," only to harvested grapes and wine in storage or processing, according a quote attributed to one insurer named in the court filing. Many wine drinkers might assume that smoke taint—which is when smoke in the air leads to unwanted smoky flavors in a wine—occurs during the growing process. But VWE and Kunde instead claim, "Smoke from the wildfires infiltrated the winemaking process," as the lawsuit states, meaning they believe they should be covered. (I'm not an actuary, but it's easy to see why an insurer would want to separate coverage for fruit exposed to the elements differently from the more contained production process.)

As you might expect from a major wine producer, Roney told the Index-Tribune that his vineyards have records on when grapes were harvest and can prove it was before the October wildfires, information he says can be backed up by "several witnesses."

Whether this distinction will hold up in court, however, is to be determined, and regardless, this already long process appears just to be getting rolling. The lawsuit was initially filed back in August and apparently both sides won't be seen in court until at least January. Still, as wildfires continue to be a growing issue in California, this precedent is likely one worth setting.