Choosing Crop Insurance
Wild 2010 growing season underlines the benefits of coverage
One Sonoma County vineyard owner summed up the situation in six words: “All that was missing were locusts.” He was speaking, of course, about the 2010 California growing season, labeled by The (Santa Rosa, Calif.) Press Democrat as “the worst harvest ever.” Early anecdotal reports indicated that crop yields in Mendocino, Lake County, Napa and especially Sonoma were down by 35% or more.
Battered by perverse weather—copious spring rains lasting until early summer, a frigid July and August that saw chilly nights and days suddenly yielding blistering heat—grape clusters suffered severely from mildew at one extreme and sunburn at the other.
Winemaker Greg La Follette of La Follette Wines explains that during an ideal summer, a grape’s skin slowly “tans,” just as ours does, and gradually builds up protection against sunburn. Since cold weather prevented grapes from becoming properly acclimated, their skins lacked the pigmentation compounds needed to defend against the fierce sun and 108°F temperatures of late August and September. They fried, melted and shriveled.
“It’s like me with my white skin suddenly ripping off my shirt on the hottest day of the year. I’d blister and be seared beet red,” LaFollette says.
When such calamities befall vineyard owners, whom do they call? Not Grapebusters. No, they call their insurance agents, and they try to remember whether they elected for full crop coverage—now up to 85%—at contract varietal prices for a higher premium; lower county average grape prices for less money; or if they took the cheapest option, Catastrophic Coverage (CAT for short), for a $300 flat fee per variety per vineyard, independent of acreage. A grower with three varieties planted in a 3-acre vineyard pays $900 total, and another grower with three varieties planted in a 30-acre vineyard also pays $900 total. CAT is a safety valve during good years and proved to be a costly mistake for many in 2010, when flat-fee coverage penciled out to reimburse barely half of growers’ real losses. (Some growers purchase CAT insurance primarily to qualify for USDA supplemental disaster insurance under the SURE program; they hope to recoup losses from a devastating event like the 2008 spring frost.) These coverage levels and conditions are determined and strictly regulated by the federal government’s Risk Management Agency. RMA contracts with crop insurance companies (approved insurance providers), who in turn contract with property casualty licensed agents.
Mitigate nature’s effects
In essence, crop insurance has one objective: to mitigate the effects of nature. When locusts shear tall stands of corn to their nubs in minutes, when spiraling tornadoes fell entire orchards of cherries or walnuts, crop insurance helps mop up the mess. Many years back, federally subsidized crop insurance was instituted to protect farmers against such natural disasters—“acts of God” in the parlance of the trade. California crop insurers like Rain & Hail, NAU Country, ProAg and ARMTech are required to write policies that follow federal guidelines to the letter. For winegrape growers, vines must mature to their fourth growing season or third year after grafting, and there must be a minimum yield of two tons per acre in one of the past three years. Maximum coverage cannot exceed 85% of average yield.
From personal experience leasing an acre of Pinot Noir in Sebastopol, Calif., that delivered no grapes worth picking in 2010—after producing nearly four tons of delicious berries in 2009—I learned that filing an insurance claim goes well beyond a simple recitation of the facts. It entails consultating with your agent and making a wise decision about available options long before bud break. The deadline for filing a new policy is Jan. 31 of the insured year. Growing Russian River Valley fruit exclusively for my Segue Cellars label, nobody was less informed than I about how to protect my investment. I sought out Chris Maloney and her staff at Chris Maloney Crop Insurance Services in Petaluma, Calif., and trusted her counsel.
Maloney dispelled a few common misconceptions. There are no specific irrigation requirements, she explained. As a grower, your best-practices obligation is to employ farming methods that promise to bring your fruit to full ripening. You can dry farm if you choose. Also, you don’t need to have a contract for your grapes in place before you file a claim. Another agent, Greg Merrill, director of crop insurance services for Pan American, who handles the crop insurance program for the California Association of Winegrape Growers, added that premium rates do not rise or fall based on whether or not you’ve filed claims. And they both pointed out that RMA insurance rates for grapegrowers dropped dramatically in 2010—25%-65% in California, with variations driven by location—and that they will drop an estimated 9%-10% on average for 2011. Those lowered costs strengthen the argument for buying up—that is, paying for more than basic CAT coverage at 50%, and 55% of maximum price election. Federal subsidies cover a major portion of grower premiums, but they vary depending on the coverage level selected. That makes crop insurance a terrific deal, whether you’re buying coverage from 50% or 85% of your approved average yield.
Maloney suggested that I buy coverage based on the contract price for my Pinot Noir: $4,525 per ton. It’s capped at 200% above county average (in this instance, $2,650 per ton). That added about a 20% increase to my premium, but with federal subsidies picking up more than half the cost, the policy came to $210 at 70% coverage. My grapes were conventionally grown; if the vineyard happened to be certified organic or in transition, there would have been a 5% surcharge. And if I had an organic vineyard but didn’t specify that on my policy and later filed a claim, the insurance would not pay out damage from insects, weed infestation or plant disease.
Set the process in motion
So much for clauses, subparagraphs and boilerplate fine print. Like marriage vows, insurance contracts bear a well-intentioned but sketchy relationship to what transpires in the real world. The rudder that actually steers any crop insurance claim isn’t the policy on paper, it’s often the personal connection between grower and insurance adjustor. One man’s rotting worthless fruit can be another man’s select late-harvest Zin. As a grower, you don’t get to make the call. That’s the adjustor’s job. Yours is to set the process in motion earlier than later by contacting your agent when things begin to go awry, and to assemble all the required information—weight tags and so forth—in a neat, accessible package. “Handing in a stack of tags that are crumpled, oddly sized and occasionally illegible, that’s going to delay the process for sure,” Merrill says. He suggests “scanning every document into your computer, and keeping up with technology by creating PDFs of relevant data. Practically all crop carriers seem to operate best with electronic records vs. hard copies.”
“What growers don’t often understand,” said my adjuster, C.J. Jensen, who was hired by Rain & Hail Insurance Service in Fresno, Calif., “is that I’m on the side of the grower.” He was affable, helpful and in no way obstreperous, but seriously overworked. I soon saw that my job was simply to make sure Jensen didn’t slough off my tiny vineyard while trying to cope with his enormous workload. He didn’t. He visited the vineyard three times from early September through mid-October. As part of the process he was required to pull sample clusters from various blocks to submit with his appraisal to the claims department. “I could barely find any,” he told me. “Yours is about the worst vineyard I’ve seen. Maybe you could get a third of a ton out of there, maybe, but I’m appraising it as zero.”
There was one incident that crystallized the humungous volume of wine-grape crop insurance claims filed during the 2010 harvest. Jensen asked me by e-mail for a letter under my Segue Cellars letterhead explaining that, as both grower and buyer, the grapes were intended to go into my own label’s Pinot Noir program. Not a problem, but I’d already responded to this same request by e-mailing him that letter two weeks earlier. When I said this during a phone call, Jensen replied, “Steve, mind sending me it again and this time I’ll stay on it? At my house right now I’ve got five rooms filled to the brim with claim reports and all the paperwork that goes with them.”
In my mind’s eye I walked through the front door of C.J. Jensen’s house and immediately bumped into towering columns of thick manila folders stretching off to the horizon, wall to wall and floor to ceiling, with barely any room to squeeze past. Grapevines may grow in neatly pruned rows, but insurance claims aren’t always so well organized and deftly managed. If not properly shepherded, they can potentially collapse under their own weight and disappear into a sinkhole. By law your agent isn’t allowed to intrude on the interaction between grower and adjuster unless there’s a significant discrepancy. “We look down from 30,000 feet and come in for a landing to keep the process moving or mediate if there’s a problem,” Merrill says. Due to this regulation, you can’t assume your agent will be involved on a daily basis as your claim unfolds.
All of this focuses attention on making the right choice in choosing an agent and carrier. There are no differences in rates or rules, those are all set by the RMA. So, too, is the range of coverage that is offered, whether you’re growing corn or Cabernet Sauvignon. What’s left is the level of personal service, and that can vary. “I treat all my growers the same, whether it’s a half-acre grower or a 200,000-acre grower. The time I spend may not be equal,” says Shannon Antonini from the Chris Maloney Agency, “but they have the same importance. We go out and see our growers every year and hand-deliver checks when there’s a need.”
In the wake of one of the most difficult harvests in recent memory, many growers have experienced that need. While recouping vineyard costs, don’t supplant lost revenues from wine sales; insurance payments at the very least ensure that there’s cash on hand for the coming year. “You may not come out ahead,” Maloney says, “but with the right policy, you’ll still come out whole. And that’s exactly what the government wants to guarantee with its RMA program.”
Stephen Yafa produces limited release Pinot Noir in the Russian River Valley for his winery, Segue Cellars, seguecellars.com.
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