LaGrange distiller tries to collect $2.5M for spilled whisky

Last December, Vale Fox Distillery encountered an economic calamity: racks of barrels of single malt whisky collapsed and spilled spirits worth $2.5 million.

Fortunately, Vale Fox had purchased a policy from Central Mutual Insurance Co. that covered such losses, according to the  distillers. Or so they thought.

“Central Mutual stated (that) … coverage for collapse of personal property did not apply,” the distillery says in a June 3 complaint filed in U.S. District Court, White Plains, “despite the fact that its own engineer’s report checks every box required for the collapse coverage to apply.”

Vale Fox operates on Noxon Road in LaGrange, Dutchess County. It was formed in 2017 and licensed by New York in 2018, according to state business and liquor records. Eral Gokgol-Kline, of Greenwich, Connecticut, is the founder, and Livens Aquam LLC is the majority owner.

In 2019, it produced its first product, Tod & Vixen’s Dry Gin 1651.

Then it concentrated on distilling single malt whisky and placing it in barrels to age for three to four years.

The first batch of Curium (named for the the rare element named after scientist Marie Curie), was released last year and sold for $150 a bottle. Demand was so great, according to the lawsuit, that most of the bottles were sold directly through its tasting room rather than to wholesalers.

More batches were set aside to age for three to four years, for bottling and sale in 2024. Barrels were stored on metal racks in the distilling room.

On Dec. 19, the manager discovered that the racks had collapsed. Sixty barrels fell to the floor, and 52 broke and whisky leaked out.

Based on the price of Curium, the complaint states, the spilled spirits would have been worth more than $2.5 million.

Vale Fox says it had a $5.7 million insurance policy with Central Mutual that covered losses from abrupt collapses.

Central Mutual hired J.S. Held Engineering Services to assess the cause of the collapse. Vale Fox officials also submitted documents, allowed site visits, and sat for examinations under oath, according to the complaint.

On Feb. 2, J.S. Held reported that age-related degradation caused the failure, and not a manufacturing defect such as bad welds.

A Feb. 7 addendum clarified that the weight of the barrels did not cause the racks to fail, according to the complaint. “The racks appear to have been utilized in accordance with the manufacture’s recommendations, but failed as a result of long-term, hidden damage to the metal cross frames.”

On April 8, J.S. Held issued another report, based on metallurgical testing of samples from the damaged racks. This time, the engineers determined that weak welds did contribute to the collapse.

On May 9, Central Mutual denied insurance coverage, concluding, in part, that the losses were excluded because the collapse was caused by wear and tear or by rust and corrosion.

The denial letter, according to the complaint, makes no reference to the J.S. Held reports, documents provided by the distillery or interviews.

Vale Fox claims the Central Mutual investigation was designed to deny the claim, “even though its investigation did not reveal the facts necessary to deny the claim.”

The distillery accused the insurer of breach of contract and breach of the implied covenant of good faith and fair dealing. It is asking the court to require Central Mutual to pay the claim.

Central Mutual, of Van Wert,  Ohio, did not reply to an email asking for its side of the story.