Blog By: Stephanie Gonzalez
If you find yourself sipping on the occasional glass of wine, it was likely produced on the United States’ West Coast, where 90% of America’s wine is produced.[i] Not only is the West Coast commonly known for its earthy wines, but also its unpredictable wildfires.[ii] Should you be so unfortunate to sip wine made with smoke taint grapes, it may taste like a toasty campfire.[iii] This displeasing taste results from compounds contained within wildfire smoke that permeate the thin skin of grapes, ultimately altering their flavor.[iv] The United States government offers federal crop insurance to American farmers, intending to provide relief from natural disasters; however, this insurance fails to cover smoke taint grapes as a cause of loss.[v] The Federal Crop Insurance Corporation (FCIC) must include coverage of smoke taint grapes moving forward.
The FCIC defines “cause of loss” as protection against unavoidable, naturally occurring events.[vi] FCIC’s Grape Crop provision lists fire and other physical damages as a cause of loss, but the provision intentionally omits coverage for the inability to market and sell grapes permeated by smoke.[vii] However, smoke is an unavoidable and naturally occurring event consequent to forest fires, thus resulting in “physical damage” to the grapes.
California Senator Alex Padilla proposed The Smoke Exposure Crop Insurance Act of 2023.[viii] The Act intends to protect grape growers in California, Washington, and Oregon against wildfire smoke damage by providing more inclusive crop insurance via amending the FCIC’s current Grape Crop provision to insure wine grapes against losses due to smoke taint.[ix] This proposed Act helps address the problematic choice winegrowers must make: whether to harvest the grapes knowing they may be unusable for wine or take an indemnity for what could be perfectly good wine grapes.[x] The typical farmer is not likely to discover smoke taint damage until the end of grape growth and the beginning of harvest.[xi] The unpredictability of smoke taint damage makes it difficult for farmers to determine whether to harvest the grapes or take an indemnity.[xii]
In 2020, $601 million of California wine grapes went unharvested due to smoke exposure concerns.[xiii] The wine industry suffered substantial losses amounting to $3.7 billion.[xiv] These losses were the result of both immediate fire-related damages and the impact on future sales due to smoke exposure concerns of unharvested grapes.[xv] That same year, winemakers were forced to cancel over $600 million in contracts with grape growers due to the fear of smoke taint grapes potentially producing unsellable wine.[xvi]
The Californian winemakers are not the only ones taking a hit from the wildfires; crop insurers also take staggering blows.[xvii] Over the last 25 years, the monetary costs of wildfires outweighed the revenues and created a negative profit for the insurers.[xviii] In response, crop insurers dropped thousands of customers, leaving many winegrowers uninsured.[xix] After the 2017-2018 wildfires, private crop insurers refused to renew insurance plans of existing customers, creating an all-time high of non-renewals.[xx] In 2017, insurance companies canceled 118 fire policies that covered wineries in California. By 2020, that number jumped to 616 canceled policies.[xxi] The losses for insurance companies totaled more than $20 billion.[xxii] In 2021, California crop insurance had a 71% loss ratio for wine grapes.[xxiii] As wineries lose grapes to smoke taint, this loss is distributed to wine consumers, making your occasional glass of wine more expensive.[xxiv]
The Federal Crop Insurance Act must be amended to reflect Senator Padilla’s Smoke Exposure Crop Insurance for Wine Grapes Act of 2023. The current policies in place leave many winegrowers uninsured due to the negative impacts of forest fire claims on insurance companies. The proposed amendment to FCIC’s Grape Crop provision, covering smoke taint grapes as a cause of loss, provides the much-needed relief that both grape growers and crop insurance companies seek.
[i]Andrew Selsky, Inside Scientists’ mission to save America’s wine industry from climate change. U.S. News (Sept. 23, 2023), https://www.tampabay.com/news/business/2023/10/02/inside-scientists-mission-save-americas-wine-industry-climate-change/ [https://perma.cc/LT5V-PGZA].
[ii]Id.
[iii]Id.
[iv]Tim Stephens, Chemical analysis reveals effects of wildfires smoke on grapes and wines. Newscenter (Mar. 11, 2023), https://news.ucsc.edu/2022/03/smoke-taint-wines.html#:~:text=Volatile%20compounds%20in%20the%20smoke,wines%20made%20from%20affected%20grapes. [https://perma.cc/GKP9-FMCH].
[v]London T. Weston, Smoke Wine Variety: How Federal Crop Insurance Hinders Grape Growers Affected Wildfire Smoke, 9 Tex. A&M J. Prop. L. 391, 398 (2023).
[vi]Id. at 398.
[vii]Id.
[viii]Supra note v.
[ix]Id.
[x]Id.
[xi]Supra note v.
[xii]Id.
[xiii]Jacklyn D. Kropp & Maria Amarante De Andrade, Wildfires and Smoke Exposure Create Contracting and Crop Insurance Challenges for California’s Wine Industry. Choices Magazine, Vol. 37. Quarter 2.
[xiv]Supra note v.
[xv]Id.
[xvi]Jerimiah Oetting, Can Winemakers salvage grapes tainted by wildfire smoke? Marketplace (June 7, 2022), https://www.marketplace.org/2022/06/07/can-winemakers-salvage-grapes-tainted-by-wildfire-smoke/ [https://perma.cc/TB52-8AF4].
[xvii]Jake Bittle, As Wildfires Worsen, more California farms are deemed too risky to insure. Grist (July 28, 2021), https://grist.org/agriculture/as-wildfires-worsen-more-california-farms-are-deemed-too-risky-to-insure/ [https://perma.cc/77WK-ESDA].
[xviii]Id.
[xix]Id.
[xx] Id.
[xxi]Id.
[xxii]Sarah Hubbart. In the Face of fire risk, insurance options for California growers are changing. Ceres imaging (Nov. 15, 2022), https://www.ceresimaging.net/blog/vineyard-insurance-wildfire-risk-fair-plan [https://perma.cc/984Q-9XF8].
[xxiii]United States Dep’t of Agric., A Risk Mgmt. Agency State Profile, California Crop Insurance (2022).
[xxiv]Id.