Whiskey and Collapse Insurance (USA)

Whiskey lovers will be distraught reading the facts of this case.

The insured plaintiff was the distiller of American single malt whiskey, which it placed in barrels to age for 3 to 4 years. The barrels were stored on metal racks in the distillery.

Racks that were holding dozens of barrels of whiskey that had been aging for at least 3 years collapsed, causing a large number of barrels to break and the aging single malt whiskey to leak out. The lost whiskey was allegedly worth more than $2.5 million.

The relevant expert reports concluded that the racking did not fail as a direct result of the weight of the barrels, but the weight of the barrels did figure in the applied loads that caused the defective racks to fail.

The dispute related to the reference in the policy to “abrupt collapse” happening inside the building which required the “abrupt collapse of personal property”. The plain meaning of that provision specifically provided coverage to the whiskey in barrels as damaged personal property.

The court debated the valuation of “finished stock” covered under the policy but could not decide without evidence whether whiskey still being aged was “finished stock”. The issue was raised whether the word “finished” meant aging whiskey; or whiskey that had completed its aging process or whether “finished stock” means whiskey that is bottled and ready for sale. Because the term was ambiguous, the court referred the matter for further evidence and made no decision on the value of the stock that could be recovered under the policy.

The court was however satisfied that an insured event had occurred, and the policy was required to respond. Some relief for whiskey lovers in the end.

The Vale Fox Distillery LLC v Central Mutual Insurance Company