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Vol. 6, Iss. 1
January 11, 2017

Make An Ace, Bring A Case: Court Says No Coverage Owed For Hole-In-One Prize

The next time I hear someone prattling on about the significance of Marbury v. Madison on the legal system I am going to interrupt and say, “Excuse me, have you ever read a case about a dispute over a hole-in-one prize? . . . Yeah, I didn’t think so.”

It is not unusual for a golf tournament, such as a charity or corporate event, to offer a large prize, say $25,000, a trip or a new car, to the first person to make a hole-in-one on a designated par 3. While the sponsor running the event wants to use the hole-in-one contest to generate excitement, and entice more players to participate, it also probably doesn’t want to have to (and, no doubt in plenty of cases, can’t afford to) give away the green.

The sponsor has two choices. It can take its chances that nobody will make a hole-in-one (and secretly place hexes on the players as they approach the hole) or, for a nominal sum compared to the value of the prize, purchase an insurance policy for the risk of someone actually making a hole-in-one. If someone does, the prize is paid by the insurance company.

The concept of a hole in one is simple. But, like many simple things, add money, and watch what happens. So it is no surprise that the promise of a hole-in-one prize has resulted in disputes. And, in several instances, judicial intervention has been required to put the matter to rest (plus, for every case with a judicial opinion, no doubt there are other hole-in-one disputes that didn’t get that far). The June 5, 2013 issue of Coverage Opinions took a look at some cases involving disputes over hole-in-one prizes. They are fascinating and entertaining. It is one of my all-time favorite articles in CO.

Most hole-in-one prize disputes center around whether the ace was properly witnessed or the manner in which it was achieved, such as, from the right distance or on the correct hole or on the right day of the week, etc. Do you win the prize if you get a hole-in-one on a mulligan? Wow! Good question. That should be on the bar exam. See Wright v. Spinks (Ind. Ct. App. 2000) for the answer.

Even though many hole-in-one prizes are the subject of insurance, many of the prize dispute cases are not about the insurance. But then along comes Talbot 2002 Underwriting Capital Ltd. v. Old White Charities, Inc., No. 15-12542 (S.D.W.Va. Jan. 6, 2017), involving a hole-in-one contest -- at a professional golf tournament, no less -- and a coverage dispute. It is an insurance coverage embarrassment of riches.

The Greenbrier Resort hosted the Greenbrier Classic and Pro-Am in July 2015. Greenbrier promised to pay fans, seated in the 18th hole grandstands, $100 if a player hit a hole-in-one at the 18th hole and $500 for a second hole-in-one [and $1,000 for a third, but that’s not relevant]. To insure these possible payouts, Old White Charities, Inc., a non-profit affiliated with Greenbrier, purchased insurance from certain insurers that would pay it $150,000 for the first hole-in-one, $750,000 for the second hole-in-one [and $1,400,000 for the third, but not relevant, hole-in-one].

Two golfers hit holes-in-one at the 18th. Greenbrier paid fans, seated in the 18th hole grandstands, “roughly $200,000.”

[The court didn’t say it, but I went the extra mile for you, dear reader, and found out that the golfers were George McNeil (first) and Justin Thomas (second). There are pictures on the internet of fans being handed their cash by Greenbrier owner Jim Justice (who, incidentally, will be sworn in as Governor of West Virginia a week from now) and the story made ESPN. Incidentally, Danny Lee won the tournament in a playoff. That also wasn’t included in the opinion, but CO knows no bounds when it comes to the level of service that it provides to its readers – despite them paying nothing, zip, nada, not even postage and handling, for this publication.]

The insurers refused to make payment to Greenbrier for its hole-in-one payouts. The dispute centered around the fact that both holes-in-one were hit from 137 yards. However, the application for the policy required that the insured hole be a minimum of 150 yards. The insured stated on the application that the hole in question would play an average of 175 yards. The policy contained a provision requiring that the 18th hole be at least 170 yards from the tee.

Based on all this, the court concluded that no coverage was owed. The opinion is kinda lengthy, and some of it not very exciting, and the case was decided as this issue was being put to bed. So I’ll just set out, verbatim, the main reasons for the court’s decision:

“[T]he provisions of the insurance policy contract were clear and unambiguous. It is undisputed that Bankers filled out an application for an insurance policy with the Plaintiffs at the request and guidance of Old White. Gene Hayes, an employee of Bankers who completed the application on behalf of Old White and then forwarded the application to Old White to be executed, testified that he knew the application contained a minimum yardage requirement of 150 yards concerning the covered hole, and stated on the application that the hole in question would play an approximate average of 175 yards. The application for insurance completed and executed by Old White clearly contained this provision, and it is undisputed that Old White knew about this warranty in the application. Further, the policy binder sent to both Bankers and Old White contained a warranty maintaining that the designated hole covered by the insurance policy must be at least 170 yards from the tee. Additionally, Robin Lang, who was Vice President of HCC at the time the policy was bound, testified by sworn affidavit that the distance of the hole was a specific factor for underwriters in contemplating whether to write hole-in-one insurance. Ms. Lang testified that, had the minimum yardage requirement in the policy been less than 170 yards, the premium would have been higher; and, had HCC or the Plaintiffs known that the hole would only play 137 yards, the policy would not have been issued at all. These undisputed facts clearly indicate that the terms of the insurance contract between the Plaintiffs and Old White were unambiguous.”

The court also rejected Greenbrier’s attempt to use reasonable expectations to overcome its sticky problem that 137<150: “Whether a reasonable expectation of coverage exists depends on the facts alleged in the pleadings, and under West Virginia law, traditionally required a showing of ambiguity in the language of the contract. However, the rule has been extended to cover situations where statements or actions by an agent created a misconception regarding the coverage provided by the policy. . . . The Court finds that Old White has not presented any evidence whatsoever that the Plaintiffs or their agents included ambiguities in their negotiations or failed to effectively communicate the policy restrictions. Employees from both Bankers and Old White testified to knowing about the 150-yard minimum placed in the application executed by Old White, and Old White has presented no evidence to the contrary. Old White has provided no evidence of any ambiguities, acts or statements by the Plaintiffs’ agents that would have created a misconception.”


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