Tuesday Morning Insurance Tidbit - Anniversary & ABC

[InsuranceMan]

Happy Anniversary and Good Tuesday Morning Dearest ADI’ers,

 

     Today marks the one-year anniversary of my return to the forums and my transformation from InsuranceMan to the new and improved InsuranceMan 2.0!!! that you have all come to love and adore.  There will be cake at the end of this post in recognition of this day, so stick around.  Well, as you have probably noticed, it is actually Wednesday, and no, I have not used my superpowers to reverse the rotation of the earth, go back in time and write this post for you.  Although I am indeed an insurance superhero, I am not completely infallible and I have succumbed to some sort of superbug and have been a bit under the weather lately.  Alas, it will not keep me from performing my super-duties so I present to you the latest installment of the TMIT!

     Today we are going to touch upon a topic that really will only pertain to about 17 states in this great country, but it should be worth the read for all of you.  I will even make it pertain to several more of you in the end, since the overarching topic does affect many in the marketplace.  So, what am I talking about?!?!?!  None other than the notorious “ABC” states.  Not to be confused with the “Notorious B.I.G.”  That is something TOTALLY different.  Anyway, if you are not in one of these states you have probably at least heard of them.  An “ABC” state is an “Alcoholic Beverage Control” state.  Clever, eh?  Alcoholic Beverage Control = ABC.  Somebody was really thinkin’ when they came up with that one!

     ABC states really developed out of a long and sorted history having to do with pre-prohibition laws, prohibition, and the repeal of national prohibition on December 5^th of 1933.  A day we should all celebrate, by the way!  Under the ratification, the Twenty-first Amendment (which by the way is still the only amendment to the constitution that repealed a prior amendment.  Use that in your tasting room trivia games.  You’re Welcome!) control was given to the states over the sale, manufacturing, distribution, or continued prohibition of alcohol.  OK, enough history lesson, but I thought you should know if you didn’t already.  Here is a map off all of the ABC states, just in case you were wondering.

 

 

     “OK, great, InsuranceMan 2.0!!!, but what in the word does any of this have to do with insurance?!?!??!”  I am glad you asked.  Each ABC has its own set of rules that they operate under but the “gist” of the rules go something like this …  A monopolistic system is set up whereby a manufacturer of Alcoholic Spirits is prohibited from direct distribution of said beverages.  Alcoholic products must be shipped to state run facilities and distributed from said facility to state run or privately licensed retail operations.  So again, what does this have to do with insurance?  EVERYTING!!!!!! 

     You make your product, and then you are required by law to ship your product to a state-run facility, either a “bailment” situation, or some other state-run facility where it will wait to go out for distribution.  Well, what happens to that product if it is damaged while in the “Care / Custody / or Control” (a.k.a. CCC) of the state-run facility?  Who covers the loss to your precious product?  The answer is … it depends.  Don’t you just love that answer?  So vague, so mysterious.  Well friends, I DO NOT LOVE THAT ANSWER and that is why I am here and writing this for you today.

     So, how do you know if you are supposed to insure your product, or if the state is supposed to insure it, or is it insured if it is off your premise?  It all boils down to “contractual obligation”.  What does your contract say?  Do you know?  Do you have a contract?  Most of you that reside in an ABC state do or should have a contractual document outlining what the rules are, shipments, and insurance provisions.  Go to the contract and find out.  What you find may surprise you.

     Most of you may find that you are still technically liable for any damage that occurs to your product while in the CCC of the state-run facility.  “How can that be?”, you may ask.  “It is not in my control, and if some dufus hits it with a forklift, how is that my problem????”   Again, look at the contract.  In many instances not only are you still responsible to insure your product while in the CCC of the state, but you may also have waived you rights of subrogation to the state as well as a “hold harmless” agreement.  Basically, what this means is that the insurability of your product is your responsibility even if some dufus ruins it without you being party to it.  Seems pretty stupid, doesn’t it?  Well, it may be exactly the situation you are in.

     If your insurance carrier is not aware of this situation, you may not have coverage.  THAT IS WHAT ALL THIS HAS TO DO WITH INSURANCE!!!!!  You may be paying a premium for a policy that is not going to cover the largest stock exposure that you have.  That is no bueno for sure.  If you are in an ABC state and you are not familiar with what your insurance obligations are then your agent and carrier probably have no idea either.  That can leave you in an insurance-wasteland and that is not where you want to find yourself, EVER! 

     There are ways to insure your product while offsite and in the CCC of others, but you need to know that you need to have that type of coverage and report it to the agent …  Or, you could turn to an expert in the industry and I … I mean “they”, should know to ask these hard-hitting questions.  If you reside in one of these states and you have not had this conversation, well, my number is listed below.  You better call me.

     I had said that I will make this relatable for more folks than just the “ABCer’s” out there and we have come to that point, so here you go.  Maybe you are a contract distiller/bottler for someone else, or maybe you have an arrangement for offsite storage at someone else’s facility.  Trust me, I have seen a lot of different setups over all my years of doing this.  If so, who is responsible for what, where, and when?  If you contract out to someone else, is it their responsibility to insure their branded product while at your facility, or is it yours?  Again, what does the contract say?  You are a “Contract” distillery/bottler after all …  WHAT?!?!!?  There is no formal contract?!?!?!!?!!  My super-nerves are sensing a HUGE potential issue.  If this is not spelled out in writing there could be some serious ramifications if a loss were to occur.  Furthermore, without a formal written contract it may be impossible for one or either of you to procure insurance on this product.  Or even possibly worse, you (the contract distiller/bottler) may have to increase your insurance to protect someone else’s product thereby driving up your cost that you either have to “out-of-pocket”, or pass it on to the people you are contracted with which drives down their profits. 

     Either way it is an insurability nightmare if you do not have a formal written contract between you and the other party.  Whether it is a contract distiller situation, bottler, or with the state.  You HAVE TO KNOW what is in the contract and who’s responsibility the insurance is.  If there is no contract, then it DEPENDS, and you know how much I love that!!!!!

     I highly suggest that if you are in one of these states, or in a situation where someone else has CCC of your product, or if you have the CCC of someone else’s product, you get in touch with me, InsuranceMan 2.0!!! so that we can hash out the details and make sure that if the day comes where the unforeseen is seen, we know that you will be made whole again in the way you are supposed to.

     With that my friends, as promised, here is your anniversary cake in honor of the one-year mark of me being back on the forums.  ENJOY!!!!

and until next time dear reader,

 

Stay Vigilant,

Aaron Linden

a.k.a. InsuranceMan 2.0!!!

307-752-5961

aaron@roaringforkins.com      or       insuranceman2.0@yahoo.com