Californian wineries sue insurers for $19m over smoke taint

Sonoma-based wine group Vintage Wine Estates (VWE) and family-owned winery Kunde have sued their insurers for combined total of US$19 million for refusing to cover them for losses caused by smoke taint.

In a court document filed back in August at the Sonoma County Superior Court, Kunde Winery said that it had lost “more than $7 million due to smoke taint” experienced as a result of the October 2017 wildfires. Vintage Wine Estates, meanwhile, claims to have suffered a $12 million shortfall.

Kunde and Vintage Wine Estates argue that their insurers should cover all losses sustained as a result of smoke taint as part of their “all risk” coverage.

They argue that their policies had “no clearly applicable exclusions”, but that both insurers “have refused to indemnify the plaintiffs for damage to their wines”.

“When the plaintiffs needed the defendants most, they refused to honour their obligations to pay for these losses, which have had a significant financial impact on the plaintiffs’ businesses,” the documents read.

The insurers involved in the case include National Surety Corporation (Allianz), and certain underwriters at Lloyd’s of London including RSA Insurance Group, Liberty Speciality Markets, Navigators Underwriting Agency, Brit Global Specialty and Travellers Marine Cargo.

While most of the grapes had been harvested when the fires struck in October 2017, some wine products in various stages of the winemaking process were exposed to smoke, leaving the finished wines with a perceptible smoke taint.

This, the wineries claim, “destroyed the marketability of the wine, beyond a mere salvage value”.

Kunde’s insurer, Allianz, argued that it was not obligated to pay out owing to the fact that “the smoke taint which damaged the wines resulted directly from the grape’s [sic] exposure to smoke from the wildfires while they were still on the vines and did not result from exposure to smoke during the production process.”

Kunde argues that this is incorrect, and that the grapes had been harvested before the wildfires broke out. Furthermore it claims that the smoke taint occurred through exposure during the winemaking process.

Likewise VWE, which is insured by a number of businesses operating out of Lloyd’s of London, was told that its policy “does not cover damage to grapes on the vine. The Policy only covers damage to harvested grapes or wine…handled by VWE for storage or processing.”

Once again VWE has stated that the damage occurred after the grapes were harvested.

Allianz has subsequently filed a motion to have the case transferred to the federal court, with a hearing scheduled for 20 December.

Speaking to Sonoma Index Tribune, Pat Roney, CEO and founding partner of VWE and a shareholder in Kunde, said that both wineries have “several witnesses” who can confirm harvest dates, as well as thorough records which clearly document when vineyards were picked.

“[The insurers] are just trying to not pay out, they do not want to assume the responsibility,” he said.

He said that both Kunde and VWE are not the only wineries to suffer from smoke taint, however smaller producers lack the “means to fight back”.

“We want to set the precedent,” he said.

This follows news of another smoke taint related lawsuit reported in August. California estate Westside Winery sued Long Island wine distributor SMT Acquisitions, claiming it was wrongly accused of selling wines from the 2017 vintage that were affected with smoke taint.

SMT Acquisitions rejected 4,841 cases of Noble Tree wine from the Sonoma-based Westside Winery because it believed the grapes used to make it were exposed to smoke from California wildfires.

As reported by the New York Post, the grapes used to make the 2017 Noble Tree wines “were harvested and in indoor storage tanks before the wild fire referenced by SMT Acquisitions”.“SMT Acquisitions asserts it is not obligated to take possession of, or pay for, the 2017 wines on the basis that they are purportedly ‘smoke tainted’ due to certain California wild fires. It’s simply not true,” said the claim filed by Westside.

Westside is suing SMT for the US$400,000 it is owed for the rejected 2017 wine.