Over the course of this pandemic and shutdown, our country has adapted. Friends still meet up, but now they stay six feet apart and on the front lawn. Hollywood Squares-style video meetings have replaced the conference room. Home delivery services have gone into overdrive to fill the void left by retail closures. But no one has figured out how to replicate sitting down at an innovative local brewery and enjoying a freshly brewed beer shoulder-to-shoulder with complete strangers, all drawn together by their love of good craft and community.
And no one will. So the craft beer consumer has no choice but to wait until the dust settles and the taprooms reopen. That day is coming, as more and more states begin to restart local economies. This article explores the ways in which a brewery can position itself to thrive when the stay-at-home orders affecting its business are lifted.
Mitigate Losses Now
Before a craft brewery can plan for the future, it must lessen its economic bleeding. There are at least two things every brewery should do immediately.
First, review your insurance policies for possible business interruption protection or other coverage for your losses. Determining whether you have grounds for a claim will turn on the nature of the loss, what types of losses are covered, and what exclusions exist in your policies. Be prepared for coverage to be unclear. For example, some business interruption insurance is triggered only when business premises suffer physical damage; but some courts have held contamination may be sufficient to trigger coverage. Other policies are not so limited, and may provide coverage when businesses or supply chains are disrupted by government orders or other circumstances arise outside of your control. Policyholders may even have arguments that biological agent exclusions do not apply if the direct cause of the loss is not the virus itself but the government’s reaction to it. And some jurisdictions are considering bills that would force business interruption insurers to cover pandemic-related losses where their policies contain a broad virus exclusion.
Second, negotiate any necessary adjustments to contracts with suppliers and customers to conserve resources in the short-term while maintaining business relationships. Many commercial contracts contain force majeure (or Act of God) clauses which explicitly address circumstances like this one. But even in the absence of such a clause, breweries should consider whether the law in their jurisdiction gives them a hook to delay or seek relief from contractual obligations where performance is rendered impossible or impracticable, or the purpose of the agreement is destroyed, by unforeseen events outside their control — like a worldwide pandemic and unprecedented nationwide economic shutdown. (See, for example, California Civil Code section 1511, which excuses performance that is “prevented or delayed by an irresistible, superhuman cause”.)
Plan For Later Success
Before opening, every brewery should have a plan in place that maximizes the opportunity for a successful and sustained reopening by:
- Determining which employees should return to work first and in what manner should they return;
- Deciding on the types of workplace screening that will be implemented consistent with local employment laws, including providing notice to employees and maintaining employee confidentiality;
- Setting guidelines for maintaining a healthy workplace through safeguards (e.g., gloves, masks, sanitizers, distancing from patrons) and policies (e.g., protocols for when employees are sick and when infected/exposed employees can return to work);
- Setting guidelines for maintaining a healthy establishment both through safeguards and social distancing plans (e.g., changing seating and flow of customer traffic);
- Consider requiring some type of release from patrons before entering the premises;
- Reviewing existing insurance policies to make sure there is adequate workers’ compensation and premises liability coverage;
- Creating COVID-19 contingency plans for the possibility of future shutdowns or outbreaks.
The policies that are implemented should take into consideration CDC and state and local health authority recommendations for health and welfare (such as social distancing, hand washing, use of sanitizers, etc.), as well as local law. Breweries will also need to be flexible as the orders and health recommendations are constantly changing. Finally, each brewery should remember what makes it unique — crafting a plan that meets the law and upholds health and safety does not mean losing the identity that sets it apart.
MSK has helped guide companies in a wide range of businesses through the Covid-19 pandemic and is working with them now as their focus returns to a successful reopening. With more than 130 lawyers and offices in Los Angeles, New York, and Washington, D.C., MSK is often distinguished as a “go-to” firm by legal insiders, and has extensive experience in a wide range of legal services. Relentlessly innovative, our lawyers have developed groundbreaking legislation, established influential precedents, and shaped the legal landscape.
Now more than ever, we remain ready to guide you through present and future challenges. For more information, visit www.msk.com or contact: