California to Pilot Crop Insurance with ‘Smoke Taint’ Coverage for Wine Grapes

In a major development for the wine industry, the U.S. Department of Agriculture’s Risk Management Agency this summer plans to try out new crop insurance coverage in California to protect growers against losses from wildfire smoke exposure.

The “fire insurance protection smoke index“ will be available as an optional add-on to individual grape crop insurance policies starting in the 2025 crop year, an agency official said at the West Coast Smoke Damage Task Force summit earlier this month.

The pilot program will launch initially in 32 counties where crop insurance is available in the Golden State, with plans to potentially expand to other smoke-prone regions in the future.

“We want to develop something really simple, something that can quickly respond to smoke events or smoke damage at the end of the insurance period, and provide indemnities quickly without minimal interaction,” said Jeff Yasui, agency regional director.

Wildfire smoke compounds can be absorbed into wine grapes and be released during the winemaking process, leaving smoky, ashen or muted flavors that result in wines that can be unfit for sale. In 2020 alone, an estimated 165,000 to 325,000 tons of California winegrapes were lost due to actual or perceived smoke damage, with financial losses of over $600 million.

The smoke-taint add-on or endorsement is designed as an area-based plan, meaning payouts will be triggered if the required number of “eligible smoke days” are recorded in the insured county during the coverage period, rather than requiring individual growers to document losses, Yasui explained during the task force online summit.

The extra insurance is meant to cover the liability for smoke damage between the grape policy’s coverage level and 95% of the crop price. Most of the premium costs will be subsidized by the government.

“The nice thing about it, too, growers don’t have to do lab tests. They don’t have to prove they had losses. It’s just whether or not the area had a loss,” Yasui said. “Indemnities can be issued under either or both policies.”

This new insurance option aims to provide a straightforward way for growers to be compensated for smoke-related damage without extensive documentation requirements. It comes after years of advocacy by the wine industry and research efforts to better understand and mitigate the impacts of wildfire smoke on winegrapes.

“We’re hoping the program is popular and resolve some issues,” Yasui said. “It was a big group collaborative effort, it was a big success.”

The smoke taint coverage rollout, a announced amid other coverage changes for other crops from the USDA agency Thursday comes just over a year after the introduction of a House bill (H.R. 4801) that seeks to study and develop such coverage for California, Oregon, and Washington.

“Winegrapes are essential to California’s economy,” Rep. Mike Thompson, D-St. Helena, one of the bill sponsors, said in a statement Thursday. “Yet growers in our state have been struggling to recover after smoke exposure damages their winegrapes. I’ve long advocated for strengthening crop insurance for winegrowers to better capture the risks associated with growing in smoke- and wildfire-prone regions. RMA’s announcement is an essential step toward that goal.”

Natalie Collins, president of California Association of Winegrape Growers, called smoke-damage coverage a “critical need” to the “significant threat” of wildfires.

“This new policy is a significant step forward in protecting the livelihoods of growers and the industry as a whole,” Collins said in a statement Thursday.

Policy coverage for smoke “became a top federal priority” in public policy advocacy for trade group Napa Valley Vintners.

“Today’s announcement that the Department of Agriculture will begin offering smoke insurance policies is a huge win for the Napa Valley wine Industry,” said Rex Stults, vice president of industry relations for the Napa Valley Vintners on Thursday.

Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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