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Despite efforts to overhaul California's workers' compensation system, premium costs for wineries and vineyards have continued to escalate during the past decade, as they have for most industries.

While state legislators debated various reform initiatives, the wine industry took matters into its own hands and focused its efforts on improving health and safety in and around the vineyard.

"If a winery is going to be profitable, it either has to expand its market share or control the costs that go into producing the product," he says.

Downing has worked with the "majors" of the industry, Sutter Home Winery and Kendall-Jackson Vineyard Estates, to reduce the wine-making giants' workers' comp costs by applying safety and ergonomics principles.

Downing says that in today's marketplace, most companies focus on controlling workers' comp after the claim is filed--with a majority of the dollars spent on treatment and management.

"What you often see is that only 2 percent of the total dollars spent on workers' compensation are spent on preventing the injury or claim," he says. "What companies like Kendall-Jackson have done is deviated from the status quo, with the thought that you can control workers' comp costs by preventing musculoskeletal disorders and other injuries by spending more upfront. That's the shift we are trying to promote."

Bill Mergot, vice president of ABD Insurance and Financial Services' office in Petaluma, Calif., says he's seen many wineries get serious about emphasizing worker safety.

"A lot of wineries are focused on workers' comp," he says. As the second largest insurance resource for California's North Bay wine industry, ABD's client list includes major producers such as E. & J. Gallo Winery, Robert Mondovi Winery and Kendall-Jackson.

There's good reason for this. The wine industry should know all about musculoskeletal disorders, given the backbreaking work involved in harvesting grapes. Some companies use advanced machinery to harvest their crops, but a majority of the wine-makers in California's Napa and Sonoma counties still rely on workers to handpick grapes from the vine, Downing says. These laborious, hand-intensive tasks can result in costly workers' comp-related back injuries.

"While there is some automation in the wine-making process, there is still a large amount of physical labor, sustained postures and repetitive activities," he says. "In addition, you have a large population of Hispanic workers performing the harvesting tasks. The language and seasonal-work barriers present problems with conducting safety training."

Chemicals common to winery operations, including sulfur dioxide, chlorine, caustics, citric acid, nitrogen and carbon dioxide, pose a risk to any worker. They can damage the skin and eyes, cause respiratory illness and create other health issues.

Wine-holding and fermentation tanks also present significant confined-spaces risks. The residual sulfur dioxide and carbon dioxide expelled during the fermentation process can lead to severe injury or death for individuals cleaning the empty tanks.

"At the winery, confined spaces is the issue that everyone's very concerned with," says Gary Waltz, senior risk control consultant with ABD Insurance's division in North Bay, Calif.

Waltz, who joined ABD in 1982, has senior-level experience in loss control management with various insurance carriers. He says wineries must assess their confined-spaces hazards or risk serious injuries or even death.

PUTTING THE SQUEEZE ON INJURY

Scott Stoner, facilities and risk management director at Kendall-Jackson wineries in Santa Rosa, Calif., began looking for ways to reduce Kendall-Jackson's rising workers' compensation costs when he joined the company in 1998.

Prior to joining Kendall-Jackson, Stoner, who has a degree in biochemistry from the University of California, Davis, spent nearly 25 years in the wine-making industry. Stoner, in collaboration with Downing, developed an approach to deal with the issue of increasing comp costs, with a special emphasis on providing the proper safety training for employees.

Downing says traditional safety training methods--videos, lectures and slide presentations--?just don't cut it in today's workplace. Employers must create a safety culture by empowering employees with the tools they need to control their own health, he says.

Downing and Stoner incorporated safety into every aspect of the company's operations. Kendall-Jackson implemented a train-the-trainer program, where an employee would become a safety expert and then go on to help his colleagues and create new trainers.

Stoner says the strategy paid off, helping the company reduce strain injuries by more than 40 percent--far below the industry average. The company's program has been such a success that it reached a milestone in 2004. Two of Kendall-Jackson's vineyards recorded no injuries, despite being the two most productive at the company.

Another key to the program's success has been the daily emphasis on safety by supervisors and management. "When you give the supervisors three times a day to talk about safety with their employees, it really starts getting people aware of all the elements," he says.

Stoner says the company also has been able to control costs by holding departments accountable for injuries and claims. Kendall-Jackson examines each area of the company for workers' compensation losses. When each department is reviewed, the supervisor must explain what they didn't do to reduce losses.

Responsibility for health and safety is then incorporated into the annual reviews of management. Stoner says 10 percent of a manager's salary increase is based on risk management. "Making it part of an annual review gets buy-in and compliance, because they know that at some point, someone would be talking to them about safety," he says.

Downing says wineries and vineyards are taking a more aggressive approach in addressing postinjury strategies by developing lasting return-to-work programs. In the case of Kendall-Jackson, says Stoner, the vineyard makes sure that the injured employees' physicians understand that the company wants them back on the job as soon as possible.

ABD's Waltz has also seen a strong push toward early return-to-work programs in recent years, which he attributes to the hardening of the California workers' comp market. However, return-to-work initiatives can be difficult to implement in vineyards, he says, because the number of Spanish-speaking employees makes creating light-duty and transitional jobs a challenge.

REPUTATION MANAGEMENT

With the wine glut still in existence, though on the decline, competition between vineyards, regions, states and countries is fierce, particularly in an industry where prestige and perception play such an important role. For many of these vineyards producing comparable wines, survival often boils down to a vineyard's reputation.

Paul Wagner, president of Balzac Communications and Marketing in Napa, whose clients include Canandaigua Wine Company, Seagram Chateau & Estate Wines Company and the Court of Master Sommeliers, says protecting the reputation of wine can be a bit more difficult than in other industries. It is unusual because each year, the industry produces new vintages, new blends--in essence, an entirely new set of products.

"Every winery faces the same primary risk ... the quality and integrity of the product has to be beyond reproach," he says. "I think everything else ultimately flows from that perception. If the distributor begins to doubt the quality of the product, there are far fewer options (for the winery)."

Even more damaging than a bad vintage for a winery is a bad year for an entire area. Wagner recalls some negative reviews a magazine gave the 1998 California cabernet sauvignons, which ultimately did have an effect on the market.

"Now people go back and taste those wines, and there's maybe a 5 percent or 10 percent difference in quality."

Another area of reputation management that is important for wineries is the concept of managed scarcity--the idea that good wines are hard to find.

Lisa Walter of Adams Walter Communications in Sonoma, says sustainability, consumer fairness and public awareness are big factors in reputation management for vineyards and wineries today.

Walter, whose clients include Ravenswood Winery, Matanzas Creek Winery and the Sonoma Valley Vintners & Growers Alliance, says the role she plays with her clients is to promote the environmentally sound farming practices used by her clients to grow and harvest the grape.

"The industry faces risks, among others, that it will be perceived as hurting the land ... and providing a product that can be abused," such as failure to promote moderation and help curb drinking and driving, she says.

PESKY SHARPSHOOTERS

Innovations in engineering, pesticides and other chemical agents have made it easier for vineyards to control the dangers posed by insects. However, one insect, the glassy-winged sharpshooter, has California wine-makers on edge. The sharpshooter is a carrier of Pierce's disease, which infects and kills vines.

State lawmakers have joined with wine makers and have poured millions of dollars into research and prevention strategies to stop this small dark-brown pest with yellow dots that grows to only half an inch long.

"The reason this is such a threat is because Pierce's disease has no known cures," says Hussey of Bend Vineyard. "In the course of a two-year period, Pierce's disease can completely kill a vine. This is a very serious problem and the biggest concern in the industry at the moment."

Southern California's Temecula Valley was the first wine-producing region in the state to see significant damage from Pierce's disease. An outbreak of the sharpshooter forced the removal of nearly 850 acres of the region's total 2,000 winegrowing acres, destroying an estimated $9 million in vines in the first year alone.

The counties of Napa, Sonoma, Solano and Marin are enacting aggressive policies to prevent a similar infestation from occurring. While pesticides can help, winegrowers have been hesitant to apply aerial pesticides because of a risk to vineyard workers and the environment.

"There are lots of different insects and pests that if not taken care of, can completely decimate a vineyard for the year," says Mark Battany, a viticulture farm advisor for University of California, Davis, at its cooperative extension offices in San Luis Obispo and Santa Barbara. "In this area, we have birds that like to feed on fruit. If birds land on your vineyard, they can cause significant damage to the crop and vines."

COVERAGE FOR ALL

Ed Kempkey of Kempkey Risk Management Services says many of his smaller winery clients don't have any form of accountability or consistency for safety in the winery.

To combat this risk, he says, much of his time spent with clients involves writing policy and procedure manuals and putting accountability systems into the winery, as well as monitoring claims to ensure they are not adversely affecting the employer.

Kempkey says he began offering a "winery package policy," underwritten by Golden Eagle Insurance, beginning back in 1987. The package pulled together what he feels were the appropriate features necessary to cover a range of wineries.

Kempkey insures about $15 million in premium volume for the North Bay wine industry, which includes Napa and Sonoma counties, and is one of only a few brokers offering a specific "winery package," which covers mishaps such as wine leakage and contamination, trellis and vine coverage, product-recall expense and agreed valuation for stock.

More insurers are beginning to target the industry and cater to its specific needs. "You are starting to see a lot of specialty programs," says Chuck Hussey, owner of Bend Vineyard in Alexander Valley, Calif., and member of the Sonoma County Winegrowers Association's board of directors.

"We're starting to see that wineries are evolving from the agricultural/art type of environment into more of a business environment," Kempkey adds. "We've seen an evolution from just wanting to have a winery to really beginning to have a business and act like a business."

ANGELA CHILDERS and JOSHUA CLIFTON are writers based in Chicago.

October 15, 2005

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