Declarations and Exclusions

Regulators Find Fine Fined Wines Must Warn

"Fining" has been a part of the winemaking process for centuries.  When grapes ferment, the process does not result in the clear sparkling fluid one wants to admire in the glass.  Leftover proteins and other yeast and grapeskin byproducts, while not harmful or necessarily offensive in themselves, leave the wine cloudy and visually unappealing.  The answer to the problem is fining: introducing an agent in to the wine that will snag the unwanted components and sink to the bottom, after which the newly brightened wine can be drawn off.  Or, as defined on the site of the Robert Mondavi winery, fining is:

The traditional method of clarifying wine. Insoluble substances bind with wine components and precipitate to reduce tannin or remove unstable proteins.

Historically, egg whites have been the most common fining agent.  Other options include the mineral compound bentonite, gelatin, the fish byproduct isinglass, and the milk protein casein.  The point of fining is that the fining agent itself, along with the various unwanted compounds to which it binds, will be left behind and not present in the final beverage.

Nevertheless, Insurance Journal reports that proposed federal regulations will require winemakers who fine their wine to attach allergen warning labels:

Vintners have been using byproducts from milk, eggs, wheat and even fish guts in the winemaking processes for centuries.

But a new federal proposal could require American wineries to disclose such unsavory items -- used as 'fining' agents to remove grit -- as ingredients.  The proposal, which could be passed by the end of the year, would require companies to redesign the labels on every bottle to protect people who are allergic to certain foods.

    * * *

The FDA adopted the Food Allergen Labeling and Consumer Protection Act in 2004.  It requires labels on every food or drink that contains one of eight major food allergens: milk, eggs, fish, crustacean shellfish, tree nuts, peanuts, wheat and soybeans.

The act came after Harvard University scientist Christine Rogers petitioned the government to add an allergen warning to alcoholic drinks.  Rogers, who is allergic to eggs, said she would notice reactions whenever she tipped a glass of wine.

Oddly, given that wine is for the most part consumed and enjoyed by adults, the article cites the statistic that allergies affect 2 to 5 percent of children, and concludes with a quote from Ms. Catharine Alvarez of Fremont, California, who "supports the proposal [apparently because her] 4-year-old son is allergic to eggs, and her 7-year-old daughter is allergic to peanuts."

U.S. wine labels are already required to include the warnings of health risks associated with alcohol, and the medically questionable warning that the wine may contain sulfites.  (For more on the array of  information that is required to appear on every bottle, see this anatomy of a wine label.)

U.S. beverage regulators are not the first to consider allergy-related warnings on wine labels.  The New Zealand website of the international wine and spirits firm Pernod Ricard, for example, includes a statement on "Issues with fining agents for allergy sufferers and vegans" that demonstrates that allergen labeling, if it needs to be done at all, can be presented in a factual and non-hysterical fashion:

Allergen statements can be found on the back labels of all of our wines warning possible allergy suffers of the substances that have been used in the fining process of wine in accordance with the Australia New Zealand Food Standards Code.

Red Wine - 'This wine was clarified the traditional way, using egg whites. Traces may remain.'

White Wine and Méthodes/Sparkling - 'This wine was clarified the traditional way, using dairy and fish products. Traces may remain.'

That page also includes an informative description of what fining is, why it is done, and the relatively low likelihood that any allergy-causing residue remains in the wine you are drinking.

[Fining photo (look at all those eggs!) via Merryvale Vineyards.]

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For Further Reading:

Insurance Journal is unusually focused on wine today.  In addition to the labeling story, it also reports on fine wine as a tempting target for burglary.  More on my personal weblog, here.

I Left My Art in San Francisco

Arts journalist Lee Rosenbaum, on her consistently interesting CultureGrrl weblog, points to a fresh story in the San Francisco Business Times on the high cost of insuring high art.  The primary thrust of the story is the problems of the  San Francisco Museum of Modern Art (SFMOMA) in a post-Katrina world in which the highly cyclical business of insurance underwriting has had its mind focused on the fact that the public and private art world of San Francisco, sitting atop a well-documented seismic powder keg, is a classic case of concentration of risk.  As the Business Times article sums it up nicely:

The problem is that there is so much wealth, so many art collectors and so many museums in a fairly small city, giving San Francisco a great concentration of art value in an area prone to devastation from a single natural event.

SFMOMA finds itself hoist on the twin horns of a tightening insurance market and the scheduling of two simultaneous high-profile exhibitions, with their attendant high potential for loss if (heaven forfend) some regional loss event should come calling.

'Brice Marden' comes to SFMOMA from MoMA [New York's Museum of Modern Art], and 'Picasso and American Art' from the Whitney Museum in New York.  With two major shows at once, SFMOMA had to buy additional layers of insurance, and from carriers who do not want to write new coverage in San Francisco.

'It was never the case when we put a traveling exhibition together that insurance would be the single-largest budget item,' said Ruth Berson, deputy director for exhibitions and collections at SFMOMA.  'Now we're looking at a situation where the insurance sold could be as much as half the cost of the exhibit or more. It's completely out of whack.'

Berson said that most curating museums have been willing to assume some of SFMOMA's greater insurance costs.  Others, like MoMA, say it is a local problem. MoMA has refused to share the $1 million cost.

There are suggestions in the article that the insurance industry is turning a blind eye to the fact that many San Francisco museums are of recent construction with the latest in seismic protections -- the completely rebuilt de Young Museum in Golden Gate Park is referred to in the article as "the 'Fort Knox' of museum" -- and is making underwriting decisions based on location without consideration of the particulars of each facility.  And, inevitably, there is the suggestion that the answer lies in a broad-based public subsidy:

Recognizing the threat of surging insurance costs, Benezra, Buchanan and Sano have joined colleagues from the Getty, L.A. County Museum and Museum of Contemporary Art in Los Angeles to plead their case at the annual meeting of the Association of Art Museum Directors at the end of this month. They say this is an industry-wide problem that demands an industry answer.

They want AAMD to lobby Congress to extend federal indemnification to domestic loans, among other things.  There is also talk about approaching Gov. Schwarzenegger regarding a California state indemnity coverage for domestic loans of art.

Given the perception of art as an elitist luxury -- a proposition the author of this weblog would reject, but the majority view nonetheless -- it seems unlikely that public underwriting of the risk of art loss would be embraced by state or federal legislators even if it were an objectively wise policy.   Absent the nation's art museums receiving a sudden bequest of pixie dust, it would seem they are left with few options but to find the private donor funding to cover the premiums or forego some exhibitions.  Not a happy choice, but a realistic one.

[Query: Shouldn't the insurance costs be highest in Atlanta at the High Museum?  Just asking.]

Asbestos Liability "Occurs" Again and Again and Again and . . . .

State Farm is having a bad day in Mississippi, and David Rossmiller is on the case at Insurance Coverage Blog.  First, a federal magistrate ruled that State Farm's parent company may be sued over Katrina damage even though the policies were issued by its separate subsidiary.  Then, a Mississippi trial court judge directed a $223,000 verdict against State Farm on a Katrina claim, to which the jury promptly applied the maximum ten-times multiplier the Constitutional [apparently] permits and awarded an additional $2.5 Million in punitive damages.  Stay tuned to Mr. Rossmiller for further developments.

State Farm, however, is not the only major insurer in the country, and Katrina not the only catastrophe.

Slower moving but every bit as devastating, asbestos injury claims continue their slow trudge to resolution and insurers continue their efforts to contain their exposure to those claims.  One insurer that has been in the thick of this issue is Truck Insurance Exchange, one of the Farmers Insurance companies.  Truck has already paid out more than $50 Million to satisfy injury claims brought by persons exposed to asbestos products produced by Truck's insured, Kaiser Cement and Gypsum Corporation.  Truck thought that it had established that its available limits of coverage have been exhausted, but this week California's Second District Court of Appeal concluded otherwise, reversing an earlier order of the Los Angeles Superior Court that had ruled in favor of Truck.  The Court of Appeal writes:

This petition for writ of mandate presents an issue of first impression in this state: The meaning of 'occurrence' in a commercial general liability (CGL) policy as applied to bodily injuries caused by exposure to asbestos.  We conclude that, as used in the policies at issue, 'occurrence' means injurious exposure to asbestos, not the manufacture and distribution of those products.  Accordingly, we grant the writ and direct the trial court to vacate its summary adjudication order.

(Emphasis added.)

Truck provided liability insurance coverage to Kaiser for almost twenty years, from 1964 to 1983.  Each of the Truck policies issued over that period specified that it would provide coverage up to a stated amount "per occurrence."  The definition of "occurrence" changed over the course of twenty years, but Truck argued successfully in the lower court that Kaiser's manufacture and distribution of asbestos throughout that period should be considered a single "occurrence."  Truck persuaded the court that its $50 Million-plus in payments to date exceeds the total limits of all of its policies issued to Kaiser, so that it has fully performed its obligations and owes nothing further. 

• Kaiser, for its part, agreed with Truck, principally because the policies also required Kaiser to pay a deductible also calculated on a "per occurrence" basis.  As the appellate court notes, "Kaiser’s share of the total asbestos liability increases as the number of occurrences increases. . . . [and] if each claim is treated as a separate occurrence, Kaiser may have no
  coverage for a substantial number of claims."  Kaiser was thus in the unusual position of trying to reduce the number of "occurrences" in order to reduce the amount it must pay in deductible, even though the result would also be to reduce the total amount of insurance provided to Kaiser by Truck.
  

The upshot of Truck's position would not be to leave Kaiser -- or injured claimants -- altogether without access to insurance.  Truck's coverage was only the first layer of several.  Once Truck's limits are exhausted, financial responsibility for the claims passes to the insurers who issued various excess policies of liability insurance to Kaiser.  Not surprisingly, it is those excess insurers -- a group referred to collectively as the London Market Insurers -- who disagreed with the trial court's ruling and petitioned the Court of Appeal to overturn it.

The Court of Appeal's 30-page opinion is worth reading in its entirety for its application of the First Three Rules of Insurance Policy Interpretation:

1. Read the Policy,
2. Read the  Policy, and
3. Read the Policy.

After parsing through the definitions of "occurrence" in each of the Truck policies, the Court of Appeal emphasizes that while Truck may have wanted or subjectively intended that term to carry a meaning under which twenty years of production and distribution of asbestos products constitutes a single "occurrence," the language it actually used will not sustain that interpretation.  That language compels the conclusion that an "occurrence" must refer not to what was done by the insured (Kaiser) but to what happened to the claimants/victims who were injured by the insured's actions.

Having come to its conclusion, the Court of Appeal overturns the trial court's grant of summary adjudication in Truck's favor.  Truck may ultimately be able to show that its limits have been exhausted, even under the Court of Appeal's expansive construction of "occurrence," but it will not be able to do so via the shortcut that the lower court elected to follow.

• Given that this issue is an important one, and that the Court of Appeal's decision here is the first to attempt to decide it under California law, it will not be surprising if Truck petitions the California Supreme Court for further review.

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The Court of Appeal's decision in London Market Insurers v. Superior Court (January 9, 2007), Case No. B189000, can be accessed at these links in PDF and Word formats.

[Note: The links will expire in approximately 120 days; the opinion should still be accessible thereafter by substituting "archive" for "documents" in the URL.]

Answer the Door, It's Blawg Review #89

The anonymous editor of Blawg Review has taken the reins of this week's Blawg Review #89 to produce a survey of the legal weblog world that is international in scope and optimistic at heart as we embark on 2007.  This edition boasts the added virtue of a truly inspired theme, that of "the Lone Mummer" traveling through the winter dark to call on these many distant points of legal light.  The accompanying illustrations, from the work of Newfoundland artist David Blackwood, are a pleasure in themselves.

Altogether, a particularly fine Blawg Review and well worth the time involved in reading it and in following through its numerous links.

The intrepid Editor is also granting a boon of sorts to the many law-related weblogs that are included in this edition: the proprietor(s) of each such site will be permitted, with limitations, to pose three yes-or-no questions that may lead to said editor's identity.  Since both of my own sites are linked, I suppose I might assert a right to ask as many as six questions, but I will not presume to do so.  In fact, I am quite content with the editor's air of mystery, and will likely pose no questions at all rather than break the spell.