Flooding Beer: A Fairytale or a Nightmare?
Current beer trends have resulted in an exponential increase in the number of breweries operating in the United States. The Brewers Association identified 89 domestic breweries in operation circa 1978 and as of January 2013, there are more than 2,300 domestic breweries currently in operation. The rising number of breweries is a result of the large number of craft brewers being established annually, particularly from 1990 to the present. Craft breweries produce a relatively small amount of beer, defined by 6 million barrels of beer (186 million gallons) or less per year. Craft brewers primarily consist of brewpubs and microbreweries, which together provide more than 100,000 jobs in the United States . The influx of craft breweries has consequently increased the quantity of insurance policies for brewers.
An Overview of Lost Product Claims
Historically, claims investigations regarding breweries have been limited to generic claims typical of any industry. These claims include: Property Insurance Claims due to structural issues or weather damage to the building, Casualty Insurance Claims due to accidents resulting in personal injury to workers at the brewery, and Liability Insurance Claims for claims regarding product sold by the brewer.
From the perspective of a new microbrewery operator, an unexpected type of claim in the brewhouse industry may be a loss of product claim. Imagine entering a brewery with more than 1,000 gallons of spilt beer covering the brewery floor, or approaching an overturned tractor-trailer on a highway littered with beer, cans, bottles, and kegs. Although the notion of a “lake” of beer may be a nice fantasy, the loss of product due to spilled beer leads to significant financial losses. There is the obvious lost income which results from the un-gained profit due to the inability to sell the product. Additionally, leaking beer can lead to lost income because of business interruptions or loss of property as a result of equipment damaged either directly or indirectly by the leak. Typically, product losses that occur within a brewery result from either operator errors or equipment failures which subsequently lead to product leaking from the fermentation tank. The loss of product represents a liability for insurance companies insuring the breweries.
A series of recent forensic claims investigations performed by Pie have involved loss of product due to beer leaking from fermentation tanks during the fermentation process. Each case resulted in substantial costs due to loss of product. As a result, the insurer explored subrogation potential against the tank and component manufacturers. Subrogation involves the insurance company’s efforts to recover expenses incurred by a claim where the manufacturer of such equipment is liable for a portion, if not all of the loss. Modern fermentation tanks are commonly constructed of stainless steel, having a conically shaped bottom paired with a cylindrical top. Typically, fermentation tanks contain two suspect locations for fermenting product to leak, including the tank manway and the bottom outlet hole. Both the tank manway and the bottom outlet hole are separate openings in the tank shell which exist for various practical applications.
Tank Manway Opening Leaks
A main cause of leakage involves the product breaching the opening of the tank manway. The manway is either a circular, oval, or rectangular opening that is manufactured into the shell of the tank just above the conical bottom. This manway allows personnel to access the inside of the tank for inspection and cleaning purposes. The operable door of the manway is closed while the tank contains fermenting product. Typical manway doors swing into the tank and are naturally held closed by the hydrostatic pressure of the liquid within the tank. A bar across the opening of the manway is used to lock the in-swinging door in a closed position against the inner shell of the tank. In-swinging manways sometimes leak while the tank is being filled with product at the beginning of the fermentation process. Typically, the operator is able to correct the alignment of the manway gasket and eliminate the leak. In certain applications, although less common than the traditional in-swinging configuration, the manway is installed to be out-swinging. These out-swinging manways contain two arms which are secured to the tank by a perpendicular bolt and corresponding wing-nut attached to the tank in order to secure the door. Out-swinging manways commonly leak due to either improperly seated gaskets or over tightened wing-nuts, which can crush the gasket or deform the cross arms of the door.
A recent forensic investigation involved a leak from the out-swinging manway of a 600-gallon fermentation tank. The operator reportedly discovered the leak on the morning following the filling of the tank with product. At the time of discovery, approximately 415 gallons of fermenting product had leaked from the tank. To seal the manway, the operator tightened the wing-nut by hand, which was threaded onto a lag bolt. The tightening of the nut effectively sealed the tank and stopped the leak, allowing the remaining product in the tank to be salvaged. In the time period between the leak and the observation, numerous batches of product had been fermented in the subject tank without issue. Based on information received during the site observation, it was apparent that the operator failed to fully seat the gasket when the manway was initially sealed prior to the tank being filled. In this case, subrogation was not pursued against the manufacturer of the tank because it was determined that the loss of product was due to operator error.
Bottom Outlet Hole Leaks
Another common cause of leaking product involves the outlet hole at the bottom of the conical portion of the vessel at the base of the tank. The bottom outlet contains a flanged opening, which is equipped for quick connection of various fittings at the bottom of the tank. Various other fittings also containing a flanged end are connected to the bottom outlet hole of the tank with a tri-clamp connection. Tri-clamps have two semi-circle arms pinned at one connection, and forks extending perpendicular to the arc of the arms at the other end. A bolt and wing-nut assembly spans between the forks to secure the connection of the tri-clamp. The tapered inner edges of a tri-clamp resist axial forces of the two pipe ferrules that are joined together. Tri-clamps are rated to relatively high pressures because the axial forces, which would cause separation of a flanged fitting, are offset by the tapered inner edges of the tri-clamp. The radial forces induced on the clamp, which would cause the tri-clamp to open, are negligible.
Another recent forensic investigation involved fermenting beer leaking from the bottom outlet hole at the conical vertex of a 40-barrel, or 1240 gallon fermentation tank. The bolt comprising the tri-clamp connection at the bottom outlet hole of the tank had failed, effectively causing the tri-clamp and accompanying reducer connection to separate from the tank. The entire contents of the tank leaked through the bottom outlet hole as a result of the bolt failure.
Typically, the bolt is not subjected to a significant amount of stress due to the fundamental design of tri-clamps. The axial force between the flanged connections at the bottom outlet hole is offset by the tapered inner edges of the tri-clamp, and the radial force induced on the bolt is negligible. The specific tri-clamp was pressure rated in excess of 200 pounds-per-square-inch (psi). The subject fermentation tank was rated to slightly more than 30 psi and contained a pressure relief valve designed to relieve pressure at 15 psi. Although there was not any evidence indicating an over pressurization of the tank, the pressure relief valve was tested and it functioned properly. . The bolt failed at the beginning of the threaded portion due to ductile overloading of the bolt in uniaxial tension. It was determined either over-tightening of the bolt or a collision of an unknown object with the tri-clamp caused the overload and failure of the bolt. Unfortunately, the wing-nut and corresponding section of bolt onto which the wing-nut was threaded was washed away in the flooding beer and could not be recovered, making it difficult to determine the specific cause of loss.
Lost Product Claims and Potential Liability
Fortunately, both breweries which suffered losses as discussed above contained adequate floor drain trenches which collected and drained the spilled product, thus preventing potential damage to the facilities. The resulting financial loss was due to lost income, the inability to sell the lost product. Current beer trends have rapidly increased the number of craft breweries, which has multiplied the potential for leaked product insurance claims to arise. Although the occurrence of leaking beer seems unlikely, it is anticipated that the number of annual fermenting product losses will be proportional to the amount of beer being produced. While the thought of beer leaking from a tank may invoke the dreamy idea of a “lake of beer” appearing inside a brewery, the loss of product and additional setbacks will quickly dampen this fantasy. With a growing number of domestic brewers collectively producing nearly $100 billion annually in retail sales, it is imperative to define various liabilities within a specific insurance policy that caters to the brewhouse industry.