~ WINE INSURANCE: PROTECTING YOUR LIQUID ASSETS ~ by Julian Hitner and Liz Palmer


In case the worst happens …

From time to time a private collector will ask me to review his or her wine collection; to examine its content, evaluate the bottles, offer a few pointers on proper storage techniques, wine recommendations and followed (of course) by a few glasses — my favourite sort of recompense. Personally, I would argue that every fine wine collection should be examined at least once a year by a second, seasoned pair of eyes to make sure all conditions have been met. What I look at is to see that the temperature is constant and accurate, the humidity is appropriate, the racks are securely fastened, there are no pungent odours or leaks coming from the shelves or walls, inventory has been properly maintained, and so on.

In the wine industry, Insurance appraisals are highly recommended with an inventory of 10 or more bottles. Such appraisals are an invaluable tool toward maintenance and perpetuation of an ‘active’ fine wine collection, a collection that is both enhanced and depleted by the continuous compilation and heavenly consumption of its contents. And yet, all too often the collector will advise me that they have neglected to insure their collection. The reason? Most commonly, it just never occurred to them that their collection needs to be protected against fire, theft and breakage and a broad range of other losses.

Most fine wine collectors tend to be immensely proud of their liquid assets, their vinous pride and joy, which they might have spent decades building up, sourcing rare bottles from esteemed estates and the finest wine shops, housing them in state-of-the-art, custom-built vaults. You’d think that such individuals, oftentimes outstandingly moneyed, would be more concerned about a ‘worst case scenario’ befalling their collection! Not so.

There are, in fact, companies that specialize in providing comprehensive insurance policies for collections of fine wine. Recently, I sat down with Katja Zigerlig, Collections Specialist for Chartis Insurance, at Reds Bistro in Toronto. Over a few glasses of Flat Rock Cellars 2007 Chardonnay (VQA Twenty Mile Bench (88/100, $16.95)), it quickly became evident that the practice of proper fine wine insurance isn’t something to be taken for granted. According to Katja, “the majority of wine collectors do not have adequate insurance. They accumulate wealth in their cellars, but few think about the perils facing their ‘liquid’ investments.”

Initially, Katja addresses the subject of purchasing premium wines for investment. A subject of considerable controversy, and not necessarily for enjoyment (though a few bottles might be cracked open here and there), thus driving up the price of such wines for less affluent enthusiasts – is neither new nor going away anytime soon. Without question, the benefits of collecting fine wine as an alternative investment can be exceedingly attractive. For Katja, “Building a wine collection is not just a passionate pastime; it can also be a savvy financial move. Investment-grade wines – including high-end Bordeaux, Burgundies, and cult California Cabs – have consistently held their value. Many investment-grade wines get better with age, giving the collector time to decide whether they want to drink or sell select bottles.”

I asked Katja what kind of perils can befall a collection, particularly those found in southern Ontario? For Katja and her team, one of the greatest risks is water damage caused by busted pipes in cold weather. To combat this, it is always recommended to leave some space between the floor and the first row of wine racks, as well as to avoid placing cases directly on the cellar floor.

And the other risks? Katja states that “we find most claims result from five areas: temperature control malfunctions; theft or disappearance; power outages; water damage from flooding; and bottle breakage.” In the end, the owner of any fine wine collection ought to make efforts to minimize such risks, while at the same time ensuring they have adequate coverage in case the worst happens.

How do you calculate the value of your collection? You will probably have an idea of how much your collection is worth but for the purposes of obtaining insurance, this will simply not do. It is imperative that the provenance of each bottle (ex. proper transport) be verified as best as possible. Katja states that “If bottles are not tracked properly, it is much harder to determine how much insurance coverage is needed.” Next, one must go through the admittedly arduous step of determining the approximate value of each wine, something your insurance provider can easily guide you through. At the same time, your storage area will need to be assessed for potential hazards, otherwise referred to as “risk management.” This accomplished, you will now be able to decide on which policy is best for you.

On a general level, Katja states that a good wine insurance policy should include “broad, customizable coverage; mechanical breakdown coverage; immediate coverage for new acquisitions; worldwide coverage; and coverage for bottles in transit.” Even if you continually add and subtract wines from your collection (‘active’ collection), there are “blanket policies” available.

To protect your investment of both time and money against catastrophes, befoul (nasty stenches), minor earthquakes or other incidents, I highly recommend that you have your collection inspected and evaluated by a professional wine cellar expert and he will then direct you to an independent insurance agent or broker.

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~ by Liz Palmer on September 19, 2010.

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