A New York distillery’s $2.5 million whiskey loss is at the center of a key insurance dispute after racks holding dozens of barrels collapsed last December. Vale Fox Distillery, based in Poughkeepsie, saw sixty barrels fall when metal supports gave way in their distilling room. Fifty-two barrels broke, and the lost whiskey would have been worth over $2.5 million if sold. The collapse also caused damage to a nearby storage room wall.
The distillery reported the incident the same day to their insurer, Central Mutual Insurance Company. Vale Fox held an Industrial Processing insurance policy, which promised to cover sudden physical loss or damage to certain property on the premises. This included “Stock,” covering merchandise held for sale or storage, like the whiskey barrels.
The dispute revolves around the policy’s “Additional Coverage – Collapse” section. This clause limits coverage to abrupt collapses of a building or its parts caused by specified reasons, such as defective construction methods combined with the weight of people or property. It also offers coverage if personal property collapses on its own inside a building, under certain conditions.
Central Mutual denied the claim after its engineer found the racks collapsed due to faulty welds between metal parts. These “defective” welds, along with the weight of the barrels, led to the fall. The insurer pointed to exclusions in the policy related to wear and tear, corrosion, and hidden defects as reasons to reject the claim.
However, a federal judge ruled differently. The court agreed the collapse was caused by defective welds and the barrels’ weight, and that the insurance’s collapse coverage should apply. The judge said the policy’s mention of “construction” referred to the collapsed racks themselves, not just the building. The general exclusions did not override this collapse coverage.
While the court sided with Vale Fox on coverage, it did not settle how to value the lost whiskey. The policy’s wording about finished stock was unclear, so the court left that for further proceedings. This case shows how important clear insurance language is and how courts interpret collapse and exclusion clauses in property insurance claims.