Speaker 15: John A. McKinsey of Stoel Rives LLP

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Risk Management for Wine Sales Operations John McKinsey Stoel Rives LLP I.

Introduction

Unless a wine business sells all of its wine through distributors, the complexities of wine retailing invariably brings in risks. Tasting rooms in particular present a myriad of risks of liability. Liquor regulations create many requirements involving how wine is stored, how it is sampled, and how it can be sold. Generally risks of liability (as opposed to business risks) for sales operations fall in these categories: • Personal injury (physical harm) • Discrimination injury (primarily the Americans with Disabilities Act or “ADA”) • Employment lawsuits • Alcohol related injuries • Alcohol regulation violations • Inventory damage (shrinkage, fire, theft etc) • This summary focuses on the ADA and insurance related injuries and not on liquor regulation or employment law. II.

Insurance

While insurance is generally available for on-premises harm that occurs to guests and also for wine inventory, insurance is not generally available to discrimination harm such as that which the ADA involves. A.

Premises Liability Insurance

Nearly every tasting room operation has insurance for “slip and fall” and similar types of injuries. It is worth reviewing the extent of coverage you have, the deductible to determine whether they are adequate and satisfactory. It is even more worthwhile determining what the policy does not cover. For instance, will the policy cover harm occurs in part from a guests disorientation because of the alcohol they consumed while on the premises? Does it cover harm that occurs once the guest has left your property? Law Seminars International | Winery & Wine Distribution Law | 8/7/07 in Quincy, WA

Speaker 15: John A. McKinsey of Stoel Rives LLP

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The age old advice here is to “read the policy” something few purchasers of insurance ever do. Where you encounter an exception or exclusion from coverage that you care about, discuss it with your provider. They may offer coverage for that event. If not, you will be alerted to your lack of protection in that area and can implement operational processes that reduce your risk. B.

Inventory insurance

If you store a lot of wine, it may be worth it to you to insure it. Insuring wine requires careful review of the valuation terms, as well as an understanding of when wine will be considered harmed. For instance, is wine that gets too hot for a few days damaged for purposes of your insurance? You should also ensure that you have coverage for all of your wine. Typically, you have to indicate the location of your wine in your policy. If, after obtaining insurance, you then use a off-premises wine storage location, it may not be covered. You should also read and know what restrictions the insurer will have on any wine they take title to because of a claim. There is history of insurors selling fire “cooked” wine after they have taken title to it. If the wine is being sold under your label that can, of course, be tremendously harmful to your reputation for quality. C.

Insurance Checklist 1) Why are you seeking insurance? 2) What is the value of what you want to ensure? What risks are you trying to insure against? 3) What will the policy cover? - Read the policy. (RTP) 4) How much will it pay?-RTP 5) What limitations or exclusions apply?- RTP 6) Have you listed all premises including off-site storage? 7) Have you RTP? 8) Is the price of the policy worth it for the protection you will receive? 9) Are you maintaining accurate and clear records as to what insured items you have and what condition they are in? Are those records stored somewhere other than with the insured product?

Law Seminars International | Winery & Wine Distribution Law | 8/7/07 in Quincy, WA

Speaker 15: John A. McKinsey of Stoel Rives LLP

II.

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The Americans with Disabilities Act

The Americans with Disabilities Act (ADA) creates a risk of liability for tasting room operations and any other facilities that a winery operates open to the public. This includes spaces rented for weddings or special functions, gardens, patios, and even wine making facilities if tours are offered. The ADA is a veryu complex “law” that if nearly impossible to perfectly comply with. Yet, one mistake can result tens of thousands of dollars in attorneys’ fees and settlement payments. Often however, the cost and benefit of a repair can be much greater than the risk of liability and value it provides in terms of access. Thus, many wineries (and other businesses) often choose to accept a “mostly compliant” condition with the a generally accessible facility to persons with disabilities. A.

Background

The ADA is a federal law creating a category of prohibited discrimination. It has three categories: governmental, employment and public accommodations. It is this latter category, public accommodation, that applies to winery tasting room operations and other facilities open to the public. The federal government has also enacted guidelines which include exacting specifications and drawings for specific features involved in public accommodations. States have embodied most of the drawings and specifications in their building codes. Some states have discrimination statutes of their own (California’s is notable for creating a much higher risk of liability than under federal law). The building codes, however, often contain deviations from federal requirements and also additional requirements. Sorting through all of these requirements requires a very experienced and knowledgeable professional. Architects, engineers and lawyers often have these levels of experience. B.

Applicability of the ADA to Older Buildings

The ADA applies to all public accommodations. OLD BUILDINGS AND BUSINESSES ARE NOT EXEMPT FROM THE ADA! The ADA does apply differently to an older building than it does to one constructed after 1991. But today, in 2007, for all intensive purposes, it is much more likely that every ADA requirement applies to every older building. There are special exemptions that can be obtained, such as for historical buildings, but they only apply to specific Law Seminars International | Winery & Wine Distribution Law | 8/7/07 in Quincy, WA

Speaker 15: John A. McKinsey of Stoel Rives LLP

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requirement and then only when they have been sought and obtained from local government. Thus, if your building does not now have a specific exemption for a specific condition, then that condition will probably apply should a person bring an ADA discrimination claim against you. C.

Basic Rules for Access under the ADA

The following is a short list of basic rules I have developed that are useful to keep in mind. 1. If it is public, it needs to be accessible: Generally, you should assume that if you make a portion of a facility available to the public or provide a certain service to the public, then that facility or service has to also be usable by a disabled person. If it is a specific general service covered by exacting regulations (restrooms, for instance) then what it means to be accessible is very specific. If, however, it is a unique service (winery tours, for instance) than “accessibility” takes on a tailored definition. 2.

Equal dignity: If you offer a service to the public (such as a restroom, wine tasting, etc.) then you have to offer it equally to a disabled person. Thus, for instance, if you offer a male restroom and a female restroom that are not accessible, then you cannot offer unisex accessible restroom as a third restroom.

3.

The Fist Rule: Hardware such as door knobs and faucets, need to be operable with a mostly closed fist with little or no twisting or turning. Thus all door hardware needs to be lever-type. Door locks pretty much need to be push button.

4.

The Rolling Rule: All the features of your tasting room operation need to be reachable by a smooth surface that a person in a wheelchair can roll to. This sounds obvious, but you need to apply this rule and look down at the ground while you walk your entire facility from parking lot space to tasting counter, to restroom, to aisles, to patio. You will likely find curbs and thresholds that appear to risk blocking someone from accessing a portion of your facility.

5.

The Protruding Object Rule: You cannot have objects that protrude more than 4 inches into a walking path than the

Law Seminars International | Winery & Wine Distribution Law | 8/7/07 in Quincy, WA

Speaker 15: John A. McKinsey of Stoel Rives LLP

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farthest protrusion at ground level. This is for blind people to avoid striking their heads or torso on objects that their cane does not detect. D.

Requirements

The following areas have exacting requirements for accessibility. This is not an exhaustive list, but rather the categories of services most likely to be offered in a winery tasting room operation. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Parking Path of travel from parking and sidewalks to entrances (there are very extensive requirements for stairs and any non-level path) Entrances to buildings Dining surfaces (tasting counters or tables to eat at) Transaction counters Restrooms Merchandise displays ATMs Drinking fountains Pay phones Vending machines Picnic areas

You should determine which of these services/facilities you offer and whether they are compliant. The best way is to get an audit done. You can also try to self-audit by studying the federal requirements and your state’s building code. You will also need to evaluate the extent to which other services you offer are accessible. Tours of wine-making facilities for example will not have specific requirements to follow, but instead will require a subjective evaluation of whether they are reasonably accessible. Finally, don’t forget to consider spaces rented occasionally for special functions. I encounter this issue most often for barrel rooms or caves rented for weddings or corporate events. They need to be accessible. E.

The Low Hanging Fruit

Law Seminars International | Winery & Wine Distribution Law | 8/7/07 in Quincy, WA

Speaker 15: John A. McKinsey of Stoel Rives LLP

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In the course of evaluating your degree of compliance with the ADA, go after “low hanging fruit” immediately. These are the highly visible and not very expensive repairs you can make that greatly reduce your likelihood of being sued. For instance, change out door knobs and faucets for lever style ones, put the right signs in your parking lot, get your parking space re-striped, fix a simple but too high threshold. These repairs, especially those that are highly visible or very likely to truly block access, are the most valuable repairs you can make.

Law Seminars International | Winery & Wine Distribution Law | 8/7/07 in Quincy, WA