A storage problem

Post by **DRT** » 11:45 Sun 28 Jul 2013

I am currently reviewing my storage solutions and stumbled across this.

Their storage problem is currently worse than mine

g-man · Post by **g-man** » 15:56 Sun 28 Jul 2013

funny thing is, they took the basement of the building which got flooded

I took the 2nd floor of the building which didn't get flooded

/phew

Post by **DRT** » 16:58 Sun 28 Jul 2013

I don't think they would agree with the use of the word funny in this context

uncle tom · Post by **uncle tom** » 17:44 Sun 28 Jul 2013

If the American storage facilities have the same insurance arrangements as the British ones, there will be inadequate insurance cover for this type of eventuality.

The cover these places have is limited to day to day mishaps only, and not a major loss, such as this.

I'm pretty sure that most fine wine in UK storage is effectively uninsured against major calamities such as flood, fire or large scale fraud/theft.

The proprietors say they have insurance, but the owners fail to read the small print, and mistakenly believe that they don't need to separately insure their holdings..

Post by **DRT** » 17:58 Sun 28 Jul 2013

uncle tom wrote:I'm pretty sure that most fine wine in UK storage is effectively uninsured against major calamities such as flood, fire or large scale fraud/theft.

The proprietors say they have insurance, but the owners fail to read the small print, and mistakenly believe that they don't need to separately insure their holdings..

One example that perhaps challenges Tom's assertion:

[url=http://www.seckfordwines.co.uk/storage-terms.asp]Here[/url] Seckford Wines wrote:INSURANCE

Seckford agree to purchase extended insurance coverage for its liability for Customer's goods whilst in their custody or control for 'All Risks' of accidental physical loss and or damage, subject to standard policy terms conditions and acceptance. This insurance is intended to cover a Customer for loss of stock incurred during 'day to day' business activities and through natural catastrophe (such as flood). Specifically excluded from this insurance are loss and or damage and or expenses:

Caused by depreciation other than as a result of damage forming the subject of a valid claim hereunder;
Caused by inherent defect, wear and tear, nature of the subject-matter insured gradual deterioration, atmospheric or climatic conditions, or the action of light;
Which is a consequence or war, invasion, act of foreign enemy, hostilities (whether war is declared or not) or acts of terrorism.
Which is due to confiscation, requisition, detention or destruction by or by order of any government, public or local authority.
Discrepancies found in unopened cases not purchased from Seckford.

Seckford's liability shall be limited to the replacement or market value of the goods, whichever shall be the lower.

'All Risks' cover is conditional upon the Customer not breaching Seckford's payment terms. In the event of a breach of Seckford's payment terms 'All Risks' cover will automatically cease without any notice to the Customer.

CaliforniaBrad · Post by **CaliforniaBrad** » 18:43 Sun 28 Jul 2013

uncle tom wrote:If the American storage facilities have the same insurance arrangements as the British ones, there will be inadequate insurance cover for this type of eventuality.

The cover these places have is limited to day to day mishaps only, and not a major loss, such as this.

I'm pretty sure that most fine wine in UK storage is effectively uninsured against major calamities such as flood, fire or large scale fraud/theft.

The proprietors say they have insurance, but the owners fail to read the small print, and mistakenly believe that they don't need to separately insure their holdings..

The one storage locker I had had a very nice proprietor that clearly spelled out that my wine needed to be insured separately and the only major coverage they carried was negligence and theft.

g-man · Post by **g-man** » 19:51 Sun 28 Jul 2013

NY, and acutally most of the US carriers don't provide flood as defacto and typically the owner is required to get separate flood insurance.

Not sure about chelsea wine storage in this particular case but I've had many friends and clients who didn't realize that a "blanket" coverage didn't include flood when big storm Sandy came around

Post by **DRT** » 20:03 Sun 28 Jul 2013

g-man wrote:Not sure about chelsea wine storage in this particular case but I've had many friends and clients who didn't realize that a "blanket" coverage didn't include flood when big storm Sandy came around

Oh dear. Sections 3 and 5 make this situation grim for anyone without their own cover.

uncle tom · Post by **uncle tom** » 20:11 Sun 28 Jul 2013

Derek,

Note the words 'day to day'

This means that they are covered for the loss of a case or three, but not a major catastrophe.

Their insurers limit their liability to a single event to a small fraction of the total value. This is reflected in the fact that their storage charges are the same per case irrespective of value.

If they were fully insured, a case of first growth claret would cost more to insure than they currently charge for storage.

Post by **DRT** » 20:47 Sun 28 Jul 2013

uncle tom wrote:Note the words 'day to day'

This means that they are covered for the loss of a case or three, but not a major catastrophe.

Tom,

It really isn't helpful to quote only part of the sentence.

Seckford Wines wrote:This insurance is intended to cover a Customer for loss of stock incurred during 'day to day' business activities and through natural catastrophe (such as flood).

Emphasis added by me so that it isn't missed

g-man · Post by **g-man** » 20:50 Sun 28 Jul 2013

uncle tom wrote:Derek,

Note the words 'day to day'

This means that they are covered for the loss of a case or three, but not a major catastrophe.

Their insurers limit their liability to a single event to a small fraction of the total value. This is reflected in the fact that their storage charges are the same per case irrespective of value.

If they were fully insured, a case of first growth claret would cost more to insure than they currently charge for storage.

my current place is like that

storage fees 300$/half year

insurance premium on that storage 800$/half year =T

tho maybe i should start storing stuff in the uk

djewesbury · Post by **djewesbury** » 22:13 Sun 28 Jul 2013

Fine + Rare Wines, [url=http://www.frw.co.uk/FR_storage-terms.pdf]here[/url], and delightfully vaguely, wrote:7. Insurance
7.1 We will ensure that each item of wine is covered by insurance against loss or damage by the nominated warehouse keeper. We will account to you within 28 days for any proceeds of any insurance claim but will otherwise have no liability to make any payment in respect of any loss or damage unless this has been caused by a failure on our part to deliver the service. You will be responsible for providing any evidence of your loss required by insurers. We will use reasonable endeavours to assist your claim but will not be obliged to incur any costs to pursue it.

Post by **DRT** » 22:21 Sun 28 Jul 2013

FRW are a broker, so are not always in possession of the wines they sell. It would be unreasonable to expect a broker to insure someone else's stock.

djewesbury · Post by **djewesbury** » 22:25 Sun 28 Jul 2013

DRT wrote:FRW are a broker, so are not always in possession of the wines they sell. It would be unreasonable to expect a broker to insure someone else's stock.

That's in the terms for their storage accounts: I have one myself.

Post by **DRT** » 22:40 Sun 28 Jul 2013

Do FRW still use London City Bond (now merged with Vinoteque)?

If so, your full conditions are here.

djewesbury · Post by **djewesbury** » 22:50 Sun 28 Jul 2013

DRT wrote:Do FRW still use London City Bond (now merged with Vinoteque)?

If so, your full conditions are here.

They are still at LCB, but in a separate facility that they call The Chamber, to which only they have access:

FRW, [url=http://www.frw.co.uk/fine-rare-wine-storage.aspx]here[/url], wrote:As one of the world's leading fine wine dealers we take wine storage very seriously. That is why we have created The Chamber.

This self-contained, secure, solid walled 'chamber' warehouse sits within the heart of a larger 420,000 square foot, fully insulated, modern warehouse in the Port of Tilbury operated by London City Bond - one of the UK's leading HM Customs approved bonded warehousing and logistics operations.

Our own dedicated cellar team expertly oversees your fine wine storage needs (receiving, checking and racking away your wines within The Chamber) and, supported by our high quality internal monitoring systems, we are confident in claiming our service is second to none.

Post by **DRT** » 22:52 Sun 28 Jul 2013

But do you inherit LCB's terms through FRW? If so, you have no cover.

djewesbury · Post by **djewesbury** » 22:57 Sun 28 Jul 2013

DRT wrote:But do you inherit LCB's terms through FRW? If so, you have no cover.

No. Otherwise the clause in their terms cited above would be meaningless. They wouldn't set up a facility of their own and give T&Cs to their customers only to have them voided by an overarching agreement.
I rather like their arrangement. I can store and remove odd bottles, and I'm charged by the bottle rather than the case. These make the arrangement more flexible than Seckford's. If I want to take some bottles from a case and not have to take on responsibility for storage of the remainder at home (which obviously would mean that they wouldn't last long), I can do so.

uncle tom · Post by **uncle tom** » 08:35 Mon 29 Jul 2013

From Seckford's T&Cs:

" Seckford agree to purchase extended insurance coverage for its liability for Customer's goods whilst in their custody or control for 'All Risks' of accidental physical loss and or damage, subject to standard policy terms conditions and acceptance. This insurance is intended to cover a Customer for loss of stock incurred during 'day to day' business activities and not a major loss caused by some catastrophic occurrence. "

Post by **DRT** » 09:12 Mon 29 Jul 2013

I'm not sure where you got that from, Tom, but I took my quote from here: http://www.seckfordwines.co.uk/storage-terms.asp

It clearly says that catastrophic loss is included.

uncle tom · Post by **uncle tom** » 09:18 Mon 29 Jul 2013

Here - the full terms and conditions..

http://www.seckfordwines.co.uk/storage-terms-full.asp

Post by **jdaw1** » 09:22 Mon 29 Jul 2013

Would it be worth drawing Seckford’s attention to this thread?

uncle tom · Post by **uncle tom** » 09:32 Mon 29 Jul 2013

- there's quite a discrepancy between the two texts; however the bottom line is that if a storage contractor was to offer full insurance, their underwriters would need to know the total value of goods stored, in order to calculate both their maximum possible liability, and the premium to charge.

The fact that they never ask for a valuation of the goods consigned for storage, demonstrates that professional storage providers are not fully covered.

If an insurer were asked to quote for this, I would expect a rate of around 0.3% to be levied, depending on the excess; making a case worth £1k cost around £3 p.a. to insure. This is too big an expense to be included in the storage charges.

djewesbury · Post by **djewesbury** » 09:53 Mon 29 Jul 2013

uncle tom wrote: The fact that they never ask for a valuation of the goods consigned for storage, demonstrates that professional storage providers are not fully covered.

I guess the fact that FRW automatically values my storage portfolio (since the storage facility is linked to the brokerage) means that they can insure it more easily.

Post by **DRT** » 12:57 Mon 29 Jul 2013

jdaw1 wrote:Would it be worth drawing Seckford’s attention to this thread?

Done.

LGTrotter · Post by **LGTrotter** » 13:10 Mon 29 Jul 2013

Does the same hold true for Berrys? There was a fullness to the assurances when I signed up that I thought it watertight.

uncle tom · Post by **uncle tom** » 13:25 Mon 29 Jul 2013

The full detail of Berry's storage terms and conditions do not appear to be online.

However, a case of Latour '82 would cost about six times more to insure than they currently charge for storing it.

- Best to read the paperwork very carefully..

Post by **DRT** » 14:01 Mon 29 Jul 2013

There is mention of the insurance here with no specific exclusions but as Tom says it would be best to ask.

benread · Post by **benread** » 18:08 Mon 29 Jul 2013

uncle tom wrote:The full detail of Berry's storage terms and conditions do not appear to be online.

However, a case of Latour '82 would cost about six times more to insure than they currently charge for storing it.

- Best to read the paperwork very carefully..

Tom,

I am by no means an expert in the insurance of wine, but do work in the insurance industry. A whole back I established that my former employer was actually insuring some wine storage risks in the US, much to my surprise. Whilst I learnt little about wine insurance, a common concept in the industry is one of 'maximum probable loss' whereby an aggregated risk is assumed to be very unlikely to be a total loss and the premium reflects that. So if you insured said case of Latour '82 in isolation I am sure it would be a very expensive premium. But as part of a much larger insured risk, the premium would be much smaller. Hopefully that makes sense!

Ben

uncle tom · Post by **uncle tom** » 18:31 Mon 29 Jul 2013

'maximum probable loss'

A really odd concept, given that non-life insurance is founded on the principal of covering improbable calamities.

Do they presume that these places could never be devastated by fire, or in the case of the New York store, flood?

Glenn E. · Post by **Glenn E.** » 18:37 Mon 29 Jul 2013

uncle tom wrote:Do they presume that these places could never be devastated by fire, or in the case of the New York store, flood?

No, they employ actuaries to calculate the probability of such a catastrophe and charge accordingly. Insurance is essentially legal gambling at a corporate level.

Flood insurance is more expensive (if not completely unavailable) in flood zones because loss due to flooding is much more likely than in non-flood zones. Similar calculations can be done for fires, earthquakes, tsunamis, or whatever other kind of catastrophe you care to insure against.

Post by **DRT** » 19:14 Mon 29 Jul 2013

Which is possibly why Seckfords (hopefully) provide flood insurance because all of the stock is stored above ground level so the risk of flood is exceptionally low. Cellars on a flood plane that are 40 ft underground would not get the same premium.

I'm no expert in insurance, but I work with lots of actuaries and know that they do not value individual risks. That would be easy and you then wouldn't need actuaries

- but every premium for every risk would become too expensive so no one would be able to insure anything unless it was as good as certain that the risk would never occur.

And, just as actuaries can estimate the liabilities of a pension fund, insurance product etc, I am quite sure that experienced cellar managers can estimate the value of the stock they hold on behalf of their customers to within an acceptable tolerance without asking the customers for a value.

djewesbury · Post by **djewesbury** » 17:55 Wed 31 Jul 2013

Clarification:

Fine + Rare Wines, in an email, wrote:If anything happens to your wine whilst in our storage chamber, it is covered by our insurance policy to full market value.

uncle tom · Post by **uncle tom** » 23:20 Wed 31 Jul 2013

Essentially, this is a scandal waiting to happen, and the flood in NY might provide the kickoff point.

These stores are clearly not fully insured in the normal sense of the word, and the careless wording on some merchants websites could well come back to haunt them in the courts, potentially bankrupting some of them - even the most venerable.. - in the event of a major loss.

Fire and flood are the most obvious perils to wine in storage, but it does not take a great leap of imagination to see the scope for a massive fraud, Madoff-style..

- Suppose you have fifty single case holdings of Lafite '05, and steal and sell ten of them. When owners of the stolen cases seek to withdraw them, you switch labels with another holding.

- You repeat the exercise with a hundred other, 'popular' top wines, netting tens of millions over time. When a wine gets 'overdrawn' you report a handling accident, or buy in stock to cover the shortfall.

- When you can't cover up any longer, you engineer a catastrophic disaster for your store that will conceal the shortfall, or simply vanish to warmer climes that are beyond the reach of the law..

- It's just too easy...

CaliforniaBrad · Post by **CaliforniaBrad** » 01:34 Thu 01 Aug 2013

uncle tom wrote:Essentially, this is a scandal waiting to happen, and the flood in NY might provide the kickoff point.

These stores are clearly not fully insured in the normal sense of the word, and the careless wording on some merchants websites could well come back to haunt them in the courts, potentially bankrupting some of them - even the most venerable.. - in the event of a major loss.

Fire and flood are the most obvious perils to wine in storage, but it does not take a great leap of imagination to see the scope for a massive fraud, Madoff-style..

- Suppose you have fifty single case holdings of Lafite '05, and steal and sell ten of them. When owners of the stolen cases seek to withdraw them, you switch labels with another holding.

- You repeat the exercise with a hundred other, 'popular' top wines, netting tens of millions over time. When a wine gets 'overdrawn' you report a handling accident, or buy in stock to cover the shortfall.

- When you can't cover up any longer, you engineer a catastrophic disaster for your store that will conceal the shortfall, or simply vanish to warmer climes that are beyond the reach of the law..

- It's just too easy...

Hmmm I might just need a new career path...

Anyone want to store some wine? I've got great rates!

g-man · Post by **g-man** » 01:37 Thu 01 Aug 2013

uncle tom wrote:Essentially, this is a scandal waiting to happen, and the flood in NY might provide the kickoff point.

These stores are clearly not fully insured in the normal sense of the word, and the careless wording on some merchants websites could well come back to haunt them in the courts, potentially bankrupting some of them - even the most venerable.. - in the event of a major loss.

Fire and flood are the most obvious perils to wine in storage, but it does not take a great leap of imagination to see the scope for a massive fraud, Madoff-style..

- Suppose you have fifty single case holdings of Lafite '05, and steal and sell ten of them. When owners of the stolen cases seek to withdraw them, you switch labels with another holding.

- You repeat the exercise with a hundred other, 'popular' top wines, netting tens of millions over time. When a wine gets 'overdrawn' you report a handling accident, or buy in stock to cover the shortfall.

- When you can't cover up any longer, you engineer a catastrophic disaster for your store that will conceal the shortfall, or simply vanish to warmer climes that are beyond the reach of the law..

- It's just too easy...

that's actually what happened in california

http://www.sfgate.com/bayarea/article/V ... 564984.php

http://www.marinij.com/marin/ci_5477055

Post by **DRT** » 12:13 Thu 01 Aug 2013

DRT wrote:
jdaw1 wrote:Would it be worth drawing Seckford’s attention to this thread?
Done.

In an email to DRT today John Ireland of Seckford Wines wrote:Hi Derek,

Thank you for bringing this to my attention. It appears there were two versions of our T&C's on our website which have now been amended to read:

'This insurance is intended to cover a Customer for loss of stock incurred during 'day to day' business activities and through natural catastrophe'.

I hope this clarifies the position.

Regards,
John

Phew!

Post by **jdaw1** » 14:15 Thu 01 Aug 2013

By email, John Ireland wrote:Thank you for bringing this to my attention. It appears there were two versions of our T&C’s on our website which have now been amended to read:

‘This insurance is intended to cover a Customer for loss of stock incurred during ‘day to day’ business activities and through natural catastrophe’.

I hope this clarifies the position.

In a later email John Ireland wrote:We’ve asked our insurers to draw a customer friendly version of our policy so customers can view the specific details online.

Post by **Alex Bridgeman** » 15:07 Fri 02 Aug 2013

uncle tom wrote:Essentially, this is a scandal waiting to happen, and the flood in NY might provide the kickoff point.

These stores are clearly not fully insured in the normal sense of the word, and the careless wording on some merchants websites could well come back to haunt them in the courts, potentially bankrupting some of them - even the most venerable.. - in the event of a major loss.

Fire and flood are the most obvious perils to wine in storage, but it does not take a great leap of imagination to see the scope for a massive fraud, Madoff-style..

- Suppose you have fifty single case holdings of Lafite '05, and steal and sell ten of them. When owners of the stolen cases seek to withdraw them, you switch labels with another holding.

- You repeat the exercise with a hundred other, 'popular' top wines, netting tens of millions over time. When a wine gets 'overdrawn' you report a handling accident, or buy in stock to cover the shortfall.

- When you can't cover up any longer, you engineer a catastrophic disaster for your store that will conceal the shortfall, or simply vanish to warmer climes that are beyond the reach of the law..

- It's just too easy...

This is exactly what happened with Mayfair Wines about 5 years ago. Under these circumstances, even robust insurance purchased by the company is unlikely to protect the owner of the goods since this is a wilful act by the directors, who are also the insured parties. The only way the wine owner can protect themselves under these circumstances is to buy their own insurance - or only use a company which is run honestly, by people who are trustworthy and which operates good systems of internal control.

However, when Tom flagged up his concerns over insurancea few years ago, I did some due diligence. At that time (and I have not checked since) I had wine stored with Seckfords, Berry Brothers, Private Reserves, Corney & Barrow and Farr Vintners. All these companies charged storage rates that included the cost of insurance at replacement cost for events that were both day to day handling errors and also full loss catastrophe. Big Yellow does require the wine owner to purchase their own insurance cover.

Like Ben, I work in the insurance field and part of my business is to insurance warehouses full of stuff, sometime that stuff includes wine and spritis. I have to insure against full replacement cost on an all risks basis and I do not pay rates which are anywhere near 0.3% of the value - most recently I placed a policy to cover £500m of goods and am paying less than 0.08%. That would be £8 per year for the case of Latour 1982 that Seckfords store for me (I wish!) and 4p per year for the case of Croft 2004 LBV they hold. Provided they know roughly what mix of high end and low end wines everyone holds, they can quickly assess whether £9 per year is a fair rate to charge for storage in a part of the country where land is cheap, labour is cheap and insurance is a sizeable but not overwheming part of their operating costs.