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WINE IN TIMES OF COVID-19 :HOW TO SURVIVE AND THRIVE

WINE IN TIMES OF COVID-19 :HOW TO SURVIVE AND THRIVE

By: Emily Harris Gant

COVID-19 Requirements, Relief & Recommendations Washington Wine Institute & Washington Winegrowers AssociationFriday, April 10, 2020

This webinar contains educational information necessarily of a general nature and cannot be construed as legal advice.

How Does COVID-19 Impact My Contracts?

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Termination

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• Termination for convenience

• Termination for cause

• Survival of terms?

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Force Majeure

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A party may terminate this contract if events or occurrences beyond the party’s controlmake it illegal or impossible for the party to perform its obligations hereunder (a “ForceMajeure Event”). Force Majeure Events may include, but will not be limited to: acts of God;war; acts of terrorism in the city in which [Winery] or [Group] is located; governmentalregulation, including a pandemic, epidemic or quarantine of the [Winery] or [Group’s]location by a national, provincial, state or local governmental authorities with jurisdiction;disaster; fire; strikes (other than those involving the employees of the party seeking thebenefit of this section); civil disorder; or curtailment of transportation facilities which prohibit25% or more of attendees from attending [Group’s] event, provided that, and for clarity, ineach case, the listed event or occurrence makes it illegal or impossible for the applicableparty to perform its obligations hereunder.

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Force Majeure, cont.

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• Terminate without liability?

• Delay or excuse performance?

• Very dependent upon the specific language in the FM clause

• Clauses read narrowly

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Force Majeure, cont.

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Party seeking protections of FM must prove:

• Event in question caused the inability to perform

• Event in question is a “force majeure” event, under the specific language in the contract

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Extra-Contractual Defenses

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• Frustration of purpose

• Impossibility or impracticability of performance

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“Handshake” Agreements

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Under the statute of frauds, certain contracts must be in writing to be enforceable:

• To be performed in a period exceeding one year• Guarantees of the debts of another• Certain sale of goods over $500• Sales of an interest in real estate

Maximizing Insurance Recovery for COVID-19 Losses

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Potential Coverage

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Lost income for business interruption

• Sometimes called “business income with extra expense” or “time element” coverage

• Often requires “direct physical loss or damage” to covered property

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Potential Coverage, cont.

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“Contingent” business interruption coverage

• Covers BI losses resulting from physical loss or damageto your customers or suppliers

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Potential Coverage, cont.

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Civil Authority

• Covers losses if your operations are impaired by a government order

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Potential Coverage, cont.

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Supply chain coverage

• Similar to contingent BI coverage

• Does not require direct physical loss or damage

• Broader protections against supply chain disruptions

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Possible Responses from Insurance Carriers

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• Accept the “tender,” and pay claim

• Accept the “tender,” and issue a reservation of rights

• Deny the “tender”

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Possible Responses from Insurance Carriers, cont.

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Possible grounds for denial:

• Argument that viral contamination is not a “direct physical loss or damage” to covered property

• Exclusions for “fungus,” “virus,” “pathogen,” “biological agents,” “communicable disease,” “infestation” or “disease”

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Best Practices

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• Obtain a complete copy of your policy

• Document, document, document!

• Work with a skilled professional to prepare a claim

• Watch time restrictions

• Prepare for the long haul

Producing and Selling Wine in COVID-19 Times

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Market Trends

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Source: WineBusiness.com (last accessed on April 7, 2020)

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Production

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• Wine-making facilities are “essential” under “Stay Home, Stay Healthy” Order

• Tasting rooms closed, for on-premises tastings

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“To Go,” Curbside Service and Delivery

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• “To Go”: May sell manufacturer-sealed bottles “to go” from your tasting room

• Curbside Service: Request permission for curbside service through Added Activities form

• Delivery: Permissible, with submission of Added Activities form

(Photo source: Courier Post Online)

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Liquor License Renewals

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• Required, if premises is operational

• Temporarily not required, if premises is closed

• Late renewal fees waived through April 17, 2020

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Taxes, Fees and Penalties

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• Must timely submit sales reports

• Late penalties waived (February 29, 2020 – April 22, 2020)

• Request for penalty waiver: beerwinetaxes@lcb.wa.gov

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Product Returns

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• Distributors allowed to accept returns of beer/MB, and to provide credits or refunds

• Effective through April 17, 2020

• Wine and spirits not eligible for returns

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Emily Harris GantPrincipal, Seattleemily.gant@foster.com206.816.1454

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