November 19, 2019

November 18, 2019

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Golf Course Sunk by Faulty Follow-Through in Hole in One Insurance Dispute

As an update on a previous article published in the Summer 2016 edition of Three Point Shot, Old White Charities ("OWC" or "Old White") – the nonprofit group responsible for the Greenbrier Classic in White Sulphur Springs, West Virginia – has found itself stuck in the rough after a lengthy legal battle with its insurance underwriters. To recap, when OWC hosted the Classic back in 2015, it promoted a hole in one contest on the 18th hole. OWC promised to pay each fan seated in the grandstands $100 for the first hole in one and $500 for the second (and even $1,000 for the third). OWC attempted to avoid any hazards by obtaining an insurance policy totaling $2,300,000 for the contest. Exciting for fans, but not for OWC, two PGA golfers managed to shoot aces on the 18th hole during the tournament, requiring the owner of the Greenbrier to pay out roughly $200,000 in prize money.

OWC filed a demand for $900,000 in insurance coverage on the policy, but faced a major setback when its claim was denied. The underwriters subsequently brought suit for a declaratory judgment of noncoverage concerning the hole in one prize indemnity policies because OWC allegedly made incorrect statements in its application for coverage and otherwise deviated from the policy's provision that the 18th hole be at least "170 yards from the tee" for the covered hole in one contest. (Talbot 2002 Underwriting Capital LTD v. Old White Charities, Inc., No 15-12542 (S.D. W. Va. filed Aug. 19, 2015)). The main driver of the suit was that OWC had breached the minimum yardage requirement of the policy when the 18th hole on the day in question played at 137 yards, far shorter than OWC's alleged approximation of 175 yards. The underwriters claimed that the application for the insurance policy contained an actual minimum-yard requirement of 150 yards, which was later negotiated to 170 yards in the final policy binder. The underwriters also argued that OWC did not pay the policy premium prior to a July 1 deadline.

Hoping they could remain in contention, OWC filed a counterclaim against the underwriters and a third-party complaint for breach of contract, bad faith, negligence and fraud against several more underwriters and brokers involved in the transaction. (Talbot 2002 Underwriting Capital LTD v. Old White Charities, Inc., No 15-12542 (S.D. W. Va. filed Sept. 11, 2015)). OWC argued that it was unaware that the 170-yard minimum was added to the policy. It also noted that it had no control over the course's yardage (as the PGA was responsible for pin placements), and that it had placed language in the application that specified the 18th hole played at an "average" of 175 yards. After some of the underwriters filed motions to dismiss, the court let the bad faith claim fade, but determined that the underwriters could still be on the hook for the remaining breach of contract and related claims.

The legal proceedings continued until early January, when the court finally granted the underwriters' motions for summary judgment and dismissed OWC's counterclaim and third-party complaint. (Talbot 2002 Underwriting Capital LTD v. Old White Charities, Inc., No 15-12542 (S.D. W. Va. filed Jan. 6, 2017)). Ultimately, the minimum yardage requirement proved to be the albatross that prevented OWC from obtaining relief. While there may have existed a discrepancy between the 150-yard requirement in the application and 170-yard requirement in the final policy binder, the court found "there is no dispute that the 150-yard minimum in the application was known and agreed to by Old White and its agent." Moreover, the court rejected the arguments that the underwriters' actions created a reasonable expectation of coverage, ruling that OWC was aware throughout the negotiations that the underwriters wanted a minimum yardage requirement, and OWC "provided no evidence of any ambiguities, acts or statements by the Plaintiffs' agents that would have created a misconception." The court then dismissed OWC's breach of contract claims against the underwriters on similar grounds.

Although it may seem par for the course, the court's final judgment serves as an important reminder for insureds that careful review of material insurance policy provisions is essential prior to hosting any covered event. While OWC may have had the foresight to purchase insurance for not one but two holes in one on the same hole during the same competition (even if the odds of such an occurrence appear to be roughly 32,000 to 1), its failure to abide by the policy provisions means that OWC and the Greenbrier are now the ones left carrying the bag … and the bill.

© 2019 Proskauer Rose LLP.


About this Author

L. Robert Batterman, Labor, Management, Sports, Attorney, Proskauer, Law Firm

A partner since 1974, Bob Batterman has considerable experience representing both individual employers and multi-employer groups in union relations and collective bargaining. Much of Bob’s time is spent in day-to-day contact with clients, often in “crisis” situations where a rapid resolution of union-related problems is vital.

Bob is a senior member of our nationally recognized Sports Law Group, serving as labor counsel to the National Hockey League, Major League Soccer and the National Football League. He has extensive experience in collective...

Michael Cardozo, Commercial Litigation Attorney, Proskauer, Law Firm

Michael A. Cardozo is a Partner in Proskauer’s Litigation Department and the former Corporation Counsel for the City of New York. As the city's 77th and longest serving Corporation Counsel, he was the city’s chief legal officer, headed the city's Law Department of more than 700 lawyers, and served from 2002 through 2013 as legal counsel to Mayor Michael Bloomberg, elected officials, the city and its agencies.

Michael’s experience managing large litigations in both the private and public sectors provides him with unique insight into litigation assessments, risk management and mitigation issues. In his role as head of the New York City Law Department, he effected numerous changes that resulted in significantly increased efficiency. He achieved this by greatly expanding the use of technology and statistical data allowing for effective risk/cost analysis of cases.

Robert L. Freeman, Technology, Media, Sports, Attorney, Proskauer, Law Firm

Robert E. Freeman is a Partner in the Corporate Department and a member of the Sports Law Group and Technology, Media & Communications Group.

Rob began his career as an intellectual property litigator before shifting the focus of his practice to intellectual property-related transactions. Today, he helps lead a team of media, sports and entertainment attorneys representing clients such as Time Warner Cable, Discovery Communications, the WTA, the Orlando Magic, Scripps Networks, Armstrong Cable, the PAC-12, Insight Communications and CBS Sports. Rob’s work for these clients...

Howard Ganz, Sports, Employment Attorney, Proskauer, Law Firm

Howard Ganz is co-head of the Sports Law Group and former co-Chair of the Labor & Employment Law Department.

Howard represents and counsels clients with respect to a wide variety of labor and employment matters, such as employment discrimination, sexual harassment, wrongful discharge, defamation, breach of contract, discipline, and large-scale reductions-in-force. His litigation experience has run the gamut, from single plaintiff lawsuits to major class actions, in federal and state courts in New York and elsewhere. The clients Howard has represented include the National...

Wayne D. Katz, Finance, Sports, Attorney, Proskauer, Law Firm

Wayne D. Katz is a Partner in the Corporate Department, specializing in the sports industry.

Wayne's experience includes the representation of the National Basketball Association and National Hockey League in their various corporate matters, including team ownership transfers and team financings. Major transactions he has worked on for the leagues include the NBA’s purchase and sale of the New Orleans Hornets; the NBA's grant of expansion franchises to Toronto, Vancouver and Charlotte; the NHL's grant of expansion franchises to Nashville, Atlanta, Columbus and Minnesota; the NBA’s $...