The Pickett Fire began on August 21, 2025, in Northern Napa, California’s primary
Wine-growing regions across the globe are being increasingly impacted by wildfires, and it’s essential to understand the potentially disastrous impact of smoke on wine. In this article, we review how smoke tainted wine is identified and valued for insurance purposes and discuss potential coverage complications and new developments in the wine insurance industry.
Napa is no stranger to major wildfires, having been scorched by the Tubbs Fire in 2017, and the LNU Lightning Complex Fires and Glass Fire both in 2020. In both instances, after the initial claims for destroyed wine and grapes were submitted, there was a secondary and more substantial wave of claims for wine impacted by smoke. Preliminary estimates for the 2025 Pickett Fire show agricultural losses of over $65 million; however, this number will likely increase as wine growers evaluate the impact of smoke on their wine.
Smoke taint can occur as a result of direct contact with smoke residue or through contact with aroma compounds released by fires. These aroma compounds, called volatile phenols, penetrate grape skins and attach to grape sugars, forming glycosides. These glycosides themselves lack a smoky scent, but during fermentation, and later while aging in barrels, they break apart, releasing the phenols that produce smoky flavors. Because of this delayed breakdown, smoke taint might not become noticeable until months or even years after the exposure event.
Although there is no evidence that smoke-tainted wine is harmful to consumers’ health, smoke tainted wine will have an undesirable smoky taste with an ashy aftertaste. The taste can be very noticeable for heavily smoke tainted wine or more subtle if the wine was further away from the fire. Insurers often engage wine tasting experts who specialize in identifying smoke taint to assess the wine. The wine can also be tested in third-party laboratories for six volatile phenols that can lead to the smoke taint. However, the absence of these phenols does not necessarily mean the wine is not impacted by a subtle smokey taste.
In some instances, the impacted wine may still be sellable, especially if there is only a mild impact on the taste. It may be possible for the insured to use the wine in a low value wine program or sell the wine on the bulk market.
In most instances, the following steps can be taken to value the impacted wine.
Verify the Existence & Volume of the Wine
During a normal harvest, after grapes have been picked from the vine, they will be taken to a weigh station, and a weighmaster certificate (commonly known as a “weigh tag”) will be produced, showing information such as the weigh date, grape varietal and appellation, and net weight (see Fig. 1).
The weighing process is heavily regulated, and weigh tags are mandated for all California wineries by both the Alcohol & Tobacco Tax & Trade Bureau (“TTB”) and the California Alcoholic Beverage Control. As such, weigh tags are a vital piece of documentation that can be used to verify both the volume of wine and the grape varietal.
It is also important to review inventory records and tank reports to verify the existence, location, and volume of the wine. If the winery is unable to sell the wine and it is disposed of, U.S. wineries will need to report this to the TTB, and the applicable 5120 form can be used to verify the gallons of wine lost. Similarly, if the wine is sold on the bulk market, the invoice for the wine sale should show the gallons of wine sold.
Determine the Impacted Wine Program
To establish the projected sales value of the wine, it is necessary to identify the program to which the wine would have been allocated. The “wine program” is the term for what you see on the label of the wine and will often specify the vineyard, if the wine is sourced from a single vineyard, or may have a blend name if the wine is sourced from multiple vineyards.
The wine program can be identified by scrutinizing the insured’s projected allocation to see if it is consistent with:
Calculate Sales Value and Unincurred Costs
Inventory/stock policies for wine typically dictate that the wine should be valued at projected sales value less unincurred costs.
Once the program allocation has been identified, the sales records for the applicable wine program can be reviewed to calculate the selling price of the wine and the sales channel (direct to customer or wholesale).
The applicable unincurred costs will depend on the status of the wine, but often include:
In smoke taint losses, the most common valuation complication centers on whether the wine falls under “crop” coverage (lower value) or “inventory/stock” coverage (higher value).
Determination of value is often ascertained by identifying whether the grapes were on the vine vs. picked when the smoke taint occurred. To identify when the smoke taint occurred, an analysis of the grape weigh tags allows for an approximation of the date that the grapes were picked. Following this, a comparison can be made to the period when the winery was significantly impacted by smoke.
Smoke taint has been recognized by insurers as a significant risk for wineries as the frequency and intensity of wildfires increase worldwide. The Pickett Fire will not be the last to hit Northern California, and wine growing regions around the world are feeling the heat. A few recent examples include:
The industry has responded to the growing threat of smoke taint, with some agricultural insurers now providing a specific Smoke Taint Parametric Insurance where coverage is triggered specifically based on laboratory testing results for the volatile phenols that lead to smoke taint.
In 2025, the U.S. Department of Agriculture Risk Management Agency introduced the Fire Insurance Protection – Smoke Index Endorsement (FIP-SI) that can be attached to a crop insurance policy to provide additional protection if an area experiences significant smoke.
However, even with these developments, finding affordable coverage for wine growers can be challenging, especially those in California, with many wineries defraying costs by taking on high deductibles and self-insuring. Ongoing wildfires have resulted in significant increases in policy rates, particularly for large, high-end wineries with extremely valuable inventory.
Before 2019, the California wine industry had looked to Lloyd’s of London for inventory throughput policies. However, in July 2019, Lloyd’s announced that it would no longer be underwriting these policies because of the annual risk to wine production and storage caused by wildfires. The move by Lloyd’s has put pressure on the domestic markets to respond.
Wine-growing regions around the world are increasingly at risk from wildfires. Due to the nature of wine and its susceptibility to smoke taint, this poses a significant risk for wineries and their insurers. Smoke taint can be identified by wine tasting experts, alongside laboratory tests for volatile phenols, and impacted wine can be valued using the steps outlined above. Developments in the wine insurance market mean wineries can obtain specific smoke taint coverage; however, finding affordable insurance can still be a challenge, especially for those in California.