Live Asset Insurance earned some major industry visibility and credibility when it was featured recently in Wines and Vines Magazine’s December 2009 issue. The piece focused on the services Live Asset offers, as well as the reasons growers should strongly consider the grapevine insurance Live Asset provides.

 Shortcomings In Federal Crop Insurance Plan Demands More Options

Live Asset Managing Director David Teed was interviewed for the Wines & Vines article as the leading expert in the grapevine insurance industry.

“The company focuses on protecting perennial crops — not just vines but also trees, shrubs and other plants at locations such as parks, orchards, tree farms, golf courses and even zoos. It covers the trees at the San Diego Wild Animal Park, for example, and also covers Christmas tree farms.

David Teed, managing director of Live Asset Insurance, says the company recently targeted winegrapes as well. “Government crop insurance covers grapes and raisins, but not the vines themselves. They had a pilot program in Napa Valley to cover vines, but realized they weren’t allowed to compete with private industry, so they backed off.” He claims that his service is unique.

Teed adds that the insurance companies that protect wineries typically avoid exterior assets or set very low limits on coverage; in fact, the company is now receiving referrals from some of these insurers.”

Find More Information On Live Asset’s Vineyard Insurance

Check out the full article at the Wines and Vines Magazine website and be sure to learn more about vineyard insurance from Live Asset.

The number of celebrity vineyards that are popping up all over the world is growing as process of growing grapes and making wine grows in popularity.  Actors, directors, and even politicians are using a part their substantial incomes to open up their own “grape-stomping grounds,” and some are actually achieving quite a bit of respect from many people within the wine community for the quality of their output—and not just for the celebrity-factor.

Vineyards require a great deal of investment of both time and money, and it’s worth taking look at the famous names that have done a fine job with the allocation of each.

A Rundown of a Few Top Celebrity Vineyards and Their Locations

Mario Andretti – The winery of this Indy/Daytona 500 victor (Andretti Winery) is located in the Oak Knoll portion of Napa Valley, California, and is well known for its pinot grigio, merlot, and chardonnay.  It spans 42 acres and, along with being quite a sight unto itself, boasts a large wine club membership; a significant roster of special events; and frequent tastings. 

Sam Neill – Sam Neill received a significant boost to his fame with his role(s) as Grant in the Jurassic Park films, and has since obtained a similar benefit with his notable efforts toward his vineyard Two Paddocks, located in the Central Otago region of New Zealand.  Though now expanding, Two Paddocks has for quite some time been known for its pinot noir and ecological friendliness.

Francis Ford Coppola – Well known for his capacity for filmmaking, Francis Coppola is also quite the wine connoisseur and owns a reputable vineyard entitled the Rubicon Estate in Rutherford, California.  He has owned the property for over 20 years and, from what many well established authorities report, has improved dramatically thanks to Coppola’s fastidious efforts.  Like Andretti above, Coppola’s winery features a wide range of features for wine buyers and functions as a prominent attraction of the area.

With more and more of the wealthy population pouring their capital into developing wineries, it is apparent that there are burgeoning risks.

All Vineyards Need Protection, Even Celebrity Vineyards

Burning through capital needlessly for disasters and mishaps that could have easily been covered by our vineyard insurance is frustrating and inconvenient, even if you have a ton of it. The visibility of celebrity wineries and the growth the industry demands that viable protection exists in the event of damage to the vines and infrastructure of a vineyard. Live Asset is the pioneer and the leading expert in the field.

Check out our recent blog posts on vineyard start-up costs; how to protect your vineyard investment; and a recent report on starting a vineyard.

In our last post, I talked about the multi-year gap between starting a vineyard and having government-subsidized crop insurance kick in to protect your vineyard investment. Live Asset Insurance offers protection for those vineyard start-up costs that would otherwise be left exposed to potential disaster.

One of the examples given to attempt to quantify vineyard establishment costs was the seemingly endless variety of products offered by a company like Orchard Valley Supply. Purchasing the infrastructural materials they offer would costs thousands on their own, not to mention the cost of acquiring land; getting that land into growing condition; installing things like trellises and irrigation system; and more.

So what would be typical vineyard establishment costs?

The real answer is, “It depends.” But that would make for a very short blog post.

It really does depend on many factors – size of land, geographic location, desired production amounts, etc. The folks with the Arizona Wine Growers Association posit the following:

The capital requirements needed to become successful in the wine business depends on ones goals. The cost can range from as a few thousand dollars for those who own an acre of vines and sell their grapes to a winery, to millions of dollars to develop vineyards, a winery and market a brand of wines. The Per-Acre cost of bring a vineyard into production is estimated at between $6,000 and $15,000. It will take 3-5 years for grapes to mature enough to be used in wine production. There are additional cost for land, equipment, machinery, staff, consultants, marketing and other expenses.

Just to reiterate – that between $6,000 and $15,000 per acre to get a vineyard into production.

So, For A 15-Acre Operation, The Vineyard Start-Up Costs Would Be Significant

The AWGA also created a draft of Vineyard Investment Costs for a 15-acre vineyard with 10 acres in production.

According to their numbers, nearly $300,000 later, you’d have yourself 10 acres of productive vineyard. Now, remember that the first three to five years of that time, your investment is not eligible for coverage under the federally-backed crop insurance programs. That would leave you with hundreds of thousands of dollars invested with no protection.

Vineyard Start-Up Costs Are Too Big To Leave At Risk

Now that you have some sample numbers to ponder, the need to protect what you’ve purchased becomes too clear. With the vineyard insurance that Live Asset provides, you can protect your sizeable vineyard investment during a vulnerable period. It wouldn’t make sense not to protect the future of your vineyard.

Undoubtedly, if you are thinking of buying a vineyard or creating one from the ground up, the challenges are many and a vineyard investment is a huge one indeed. Of course, that shouldn’t deter you. But, a realistic estimate of vineyard costs should be the crux of your vino-venture.

The Real Investment Cost & Risk Of Starting A Vineyard

In our last post, we focused on a University of Arkansas report discussing considerations for starting a vineyard. That report fell far short of incorporating all of the costs, most notably vineyard insurance.

However, even protecting your vineyard assets with insurance is not a cut-and-dried prospect. Did you know that the time between starting or buying a vineyard and the time it starts producing certain amounts of viable grapes, your assets are not eligible for coverage under the federally subsidized crop insurance program?

The investment required to create a vineyard is hefty, so the protection provided to your investment should be thorough.

In other words, say you start a vineyard and purchase all the land, labor and equipment needed to start growing grapes. Until your vines start producing a certain tonnage of grapes, all of those assets – all of that vineyard investment – is left uninsured against potential destruction.

That’s Three To Five Years Of Vineyard Costs Left Exposed To Risk

On average, it takes three to five years for a start-up vineyard to produce viable grapes. During that time, all of the infrastructure and the costs associated with installing that infrastructure are waiting to be destroyed. It’s a bit of a grim statement, but the stakes are that high.

Take a look at Orchard Valley Supply, one of the top suppliers of things like trellises; stakes; harvest supplies; irrigation equipment; and too many other products to list. A healthy vineyard investment would consist of thousands of dollars of equipment from a place like Orchard Valley Supply, in addition to land purchase (if applicable); labor and equipment to get the land in growing condition; irrigation; quality rootstock; and more.

We’ll cover the costs of starting a vineyard in more depth in our next post.

The point is that all of this time and capital invested in creating your vineyard will not be protected through crop insurance programs until your vines start producing mass amounts of grapes.

And that’s where Live Asset Insurance can help you avoid the risk of potential destruction of your vineyard investment. We are the only firm to cover that vital vineyard infrastructure until the federal crop insurance kicks in. We effectively protect your vines and their life support system from in the event that they are destroyed or damaged by natural occurrences – like wild fires, for example.

Live Asset Insurance Coverage Protects Your Vineyard Investment

The first three to five years of the life of your vineyard is crucial for future success. It is truly the infancy of your venture. Leaving the future of such a huge investment to the whims of Mother Nature doesn’t make financial sense. That timeframe of risky exposure for your vineyard is unnecessary when Live Asset can provide protection during those vulnerable years.

At Live Asset Insurance, we are used to explaining our unique insurance coverage to brokers and owners themselves. When it comes to vineyard insurance, we educate people on where government crop insurance drops the ball; where traditional coverage falls short; and how our coverage picks up the slack. 

Our vineyard insurance covers the live assets, vines in this case, and supporting systems like trellises and irrigation systems.

So, winery insurance in general takes some effort to understand and our specialized insurance options for vineyards from Live Asset takes some explanation. You would think that insurance options for anyone starting a winery would be a part of any basic description of how to start a vineyard, right? That sentiment is, apparently, wrong.

University of Arkansas Report Makes Little Mention of Insurance When Starting a Winery

I almost couldn’t believe what I was seeing when I came across this U of Arkansas Division of Agriculture report, “Considerations for Starting a Winery,” by Justin R. Morris, director of the Viticulture and Enology Program.

Trying to figure out how to start a winery or vineyard? There's more to it than what's in this report.

The report covers everything from regulatory approvals to the process of winemaking. I imagine that most would take it as an all-inclusive guide for how to start a winery. Morris makes just two mentions of insurance in about 77 pages and both mentions are passing references.

Only two times does this report mention insurance and the value imparted by those references is zero. Don’t get me wrong, it’s not a bad report and the information that is in there is quality. It’s the omission of discussing insurance that is extremely questionable – especially given that many, many commercial wineries are in California and subject to any number of natural disasters.

Winery Insurance is One of The Most Important Issues to Address When Starting a Vineyard

Obviously, I have a vested interest in letting people know about the unique  insurance options Live Asset offers to wineries and vineyards. But, it does a disservice to not only those who insure wineries, but those trying to learn how to start a vineyard, when a discussion of starting a winery ignores insuring the very plants and equipment that requires so much investment.

The IRS is stepping up its investigations to ensure the wine industry’s compliance with its regulations. What this means for both wineries and those who would insure them is described in detail below. David Teed, Managing Director of Live Asset Insurance, lends his expertise to see just how these wine industry developments might play out and how Live Asset Insurance fits into the picture. 

Q:  What was so clearly lacking (enough that the IRS is investigating) in the current winery accounting audits?

A: Wine industry owners use ”bulk wine” and “cased goods” to identify their inventory under the LIFO rules. The IRS is concerned that “the wineries overly broad definition of items failed to determine properly its LIFO index in accordance with Section 472 and case law and thus the LIFO method did not clearly reflect income.”

Q:  Does this current IRS examination of the “last in, first out” method of accounting mean that the nature of wine industry compliance will have to more closely account for wineries’ inventories?

Or, similarly, will wineries have to redefine what they consider inventory?

A: “Under the rules of LIFO you have the right under tax law to use real costs which we track all the time, said Dave Brotemarkle, of Brotemarkle, Davis & Co, LLP in St Helena, California. And the IRS is wondering how many items should be in that cost-for every vintage, for every kind of wine sold. It creates a tremendous burden of record keeping to track all those things in detail. Furthermore if LIFO changes substantially, there could be a HUGE tax bill due to wineries.”

Q:  What does this mean for those who offer insurance to the wine industry? 

Will a more precise method of carrying out winery accounting audits (which the IRS seems to be in favor of) mean that wineries will need to more properly insure their assets?

A: The IRS is looking into using the “Average price index”. According to Tom Davis of Brotemarkle, Davis & Co.who said  ”Another concern is that the IRS is now deciding that the LIFO calculations wineries have been using might be better measured using and average price index, based on the food and beverage industry” Davis says: We feel that is not accurate. The cost of farming and production of higher quality grapes and wines has increased at a faster rate than that. LIFO gives you the absolute right to make a calculation based on real costs and how they have changed, not using a government-provided index.” This IRS ruling does not directly affect the insurance protection required, but could squeeze dollars away from the risk management budget if the associated costs escalate.

Q:  The ultimate goal here is a more accurate method of accounting for winery income.

Assuming the IRS decides to hold wine industry reports to a higher scrutiny, how will that affect a company like Live Asset Insurance? 

A: I think it will help firms like ours that insure the “source of all wine revenue”. Without vines there can be no wine. Just like the cork industry cannot survive if there are no cork trees. We insure the source and for those that are leveraged or would rather transfer the risk of loss at a small cost will continue to search out products like ours. 

Q:   What can Live Asset do for wineries that face a more strict set of accounting practices?

A:  We are very well connected to CPA’s and work closely with CPA’s and Lenders throughout the country involved in the winery world. Being able to connect them to professionals that understand their business is one of our biggest assets. We only provide coverage for plant material so we have no hidden agenda. All we want to do is insure grapevines!

Q:    What is the link between this current IRS examination into wine industry compliance and the winery insurance that Live Asset offers? 

A:  The key to everything is awareness and communication. If the wineries know that we are a resource for those in need of a solution, real or perceived, then we want to be included as part of their “protection team”. We can bring to the table a host of outside professionals from the Banking, Crop Insurance, Accounting and Legal fields. We like to think of risk as a table on which the business owner places his most treasured possessions, and like a table with 4 legs the more secure the 4 legs are the better for the grower. We are the only leg that brings money to the table if a covered loss happens. This makes us one of the most important parts of any growers team, and if we can help by insuring the owners VINES, to keep them in business or put them back in business, then we help everyone else that earns their income from the “production of those VINES”.

More info on winery accounting audits and wine industry compliance, along with insurance options

For more information the IRS winery accounting audits and wine industry compliance, check out this WineBusiness.com article, Wine Industry CPAs Seek Solution to LIFO Challenge by IRS. 

For more information on Live Asset Insurance and the unique options they provide for the wine industry, check out these examples of how vineyard insurance works.

California wildfires are all too frequent events. Not three months removed from damaging Southern California wildfires, the Santa Cruz region of the state is on the tail-end of what is being dubbed “The Lockheed Fire.” For Live Asset Insurance, the current wildfires in California are yet another reason to consider offering insurance for things like trees, shrubs, landscaping and vineyards – the live assets that produce the fruits, nuts, veggies or berries.

California Wine Regions At Risk Again From Current Wildfires In California

The Lockheed Fire-along with another blaze in the Central Coast region-have so far consumed over 92,000 acres. Each one is reported to have been largely contained (as of August 19), which is good news for firefighters and threatened residents and businesses.

The Santa Cruz wineries appear to be safe for the moment, while some of those in the Central Coast have been closed.

The California wine regions appear to have escaped unscathed this time around, but it is scenarios like these that should make any insurance broker or vineyard owner consider insurance to protect the vines themselves. For example, if one of the Santa Cruz-area wineries were affected by this wildfire and they had a policy through Live Asset Insurance, assets like the vines, trellises, clips and the irrigation system could have been covered.

Unique Live Asset Policies Fill Insurance Gaps No Other Plan Can (Or Will)

Live Asset’s winery insurance provides a solution for wineries that could face devastation at the hands of Mother Nature – like the current wildfires in California. In fact, wineries across the nation are regularly at risk to wildfires. Government-backed crop insurance excludes vines from their program. This leaves the industry – and places like the famous California wine regions – vulnerable to tremendous economic loss.

Live Asset Insurance is designed to insure only the plant, tree, shrub or vine – not the fruit, nut, vegetable, berry or spice that is produced by the live asset itself. When it comes to vineyards and wineries, our motto is “No Vine, No Wine.”

Staying On Top Of California Wildfire Information And News

Some say the best defense is a good offense. In addition to keeping up to date on California wildfire information and current California wildfires, vineyards and their insurance brokers should plan for the worst to ensure the best results. The California wine regions appear to have skirted trouble with the latest wildfires, but their live assets – the vines that produce the grapes – are sometimes worth millions. Live Asset Insurance picks up the coverage where other programs can’t

To learn more about what is going on at present in California-or just more about wildfires in the region in general-take a look at the California Department of Forestry and Fire Protection’s website.

For an example of what vineyard & winery insurance can do to protect against disaster, take a look at how Live Asset Insurance can create a policy that can protect those live assets like vines for any vineyard.

Wine grape vineyards in California had a tough 2008 crop season. In some areas of California, some growers saw 25 percent drops in their wine grape yield. Even without the 2008 frosts and other weather challenges, growing wine grapes is an expensive venture that isn’t all that easy.

Multiple frosts cost north coast California wine grape vineyards nearly $150 million

People with intimate knowledge of the California vineyard industry have called the 2008 spring frosts “historic.” According to press reports, most of the damage stemmed from one chilly April night that frosted hillside vines that normally escape damage. Most growers, though, took lessons from last year and are expecting a comeback for 2009.

Live Asset wine vineyard insurance offers more coverage for California wine grape vineyards and more

What some people growing wine grapes don’t know is that their existing wine vineyard insurance has some serious and potentially costly deficiencies.

Live Asset Insurance offers insurance for vineyards like no other

There is no coverage for the actual vines anywhere else in the country except with Live Asset Insurance. Vineyard crop insurance only covers the grapes and raisins after they reach a certain size and production tonnage. As a result, there are thousands of start-up wine grape vineyards that have no insurance at all for their plant material. That means for at least 5 years they are holding their breath and so is the lender.

Take a look at what Live Asset Insurance can do to protect wine grape vineyards in California and elsewhere.