An insured owns a winery. Due to lingering smoke from nearby wildfires, the grapes, which were in various stages of the harvesting process, sustained damage.
Q: An insured owns a winery. Due to lingering smoke from nearby wildfires, the grapes, which were in various stages of the harvesting process, sustained damage. What coverage do they have under their nonstandard, special coverage insurance policy for grapes that were already harvested and were being stored in the warehouse?
Response 1: The definition of “stock" in the client's nonstandard, special coverage form appears to include grapes not on the vine as long as they are on the insured's premises. I do not think the exclusion of “dispersal…. of pollutants" applies because the pollutant, in this case, smoke resulted from a covered cause of loss, the wildfire. I see no other exclusions that apply to a stock of grapes not on the vine.
I think your insured will need to make the case that the grapes in question were directly damaged by the smoke.
Response 2: Submit the claim and see what the carrier says.
Response 3: Did you review the policy and find any coverage in it or other insurance policies the client might have in place? If there's no coverage, will the client sue your agency for failing to provide the coverage—as often occurs? Are there proposals for coverage that your agency made and were rejected by the client?
For an analysis of the client's policies, your client's lawyer should retain an expert consultant that would provide a legally protected report to the lawyer.
Response 4: I'm unaware of an exclusion that would apply to damage to harvested grapes caused by smoke from a hostile fire. Several references in the policy language may proactively support coverage.
Response 5: Since the policy is written on a special form, it is the responsibility of the insurer to deny coverage based on the contained language. Smoke is considered a peril within the policy, but it's not stated whether the smoke source may hinder the claim.
Response 6: If fire is an insured peril, so is smoke damage.
This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.