While a majority of property insurance claims involve homeowners or commercial property owners whose buildings are damaged by hurricanes, floods or windstorms, it is not unheard of for a golf course to sustain damages as result of these types of perils. This subject matter is of particular interest to me because of my golf background. Prior to my becoming an attorney, I played collegiate golf at Notre Dame and also competed professionally on a developmental tour for the LPGA. During my golf career, I was fortunate to have the opportunity to travel and play some of the most challenging golf courses in the country.
For those of you who may not be avid golfers, the difficulty of a golf course is determined by a course and slope rating which is calculated for each set of tees. These ratings are not only important in calculating a golfer’s handicap for the course but are also considered by those who rank the top golf courses.
My blog today will focus on whether a carrier will provide coverage when a windstorm damages a golf hole, and a re-design is necessary in order to return the hole to its same level of difficulty prior to the storm. One federal district court in Massachusetts analyzed this very issue. In Crestview Country Club, Inc. v. St. Paul Guardian Insurance. Company,1 a 75 foot tall tree, nicknamed the “Poltergeist Tree,” located on the left side of the 13th hole of the Crestview Country Club, was destroyed in a windstorm. The tree had branches that overhung the fairway and was located approximately 210 yards from the tee box in the anticipated landing zone of a typical tee shot. The owners submitted a claim to its insurer in the amount of $18,178 for damage to the tree. The insurer paid this claim in full, however the owners also submitted a claim where it sought reimbursement in the amount of $137,512 for a redesign of the 13th hole as it claimed that the loss of the tree changed the hole’s “character, challenge, rating, slope and psychology.” The insurer denied the owners’ claim on the basis that it was not a covered loss pursuant to the following provision in the policy’s Golf Facilities Property Endorsement:
Covered Causes of Loss
We’ll cover direct physical loss or damage to golf course grounds covered by this endorsement that’s caused by any of the following causes of loss:
. . . . .
Wind or hail. We’ll cover loss or damage caused by wind or hail.
In this case, the insurer argued that the phrase “direct physical loss or damage” does not pertain to the “ephemeral” changes to the 13th hole. In response, the owners argued that because the policy defines “golf course grounds” as including “greens, tees and fairways; practice putting greens, practice driving areas; fairways, rough, sand traps, bunkers, and other outdoor grounds at the premises described, specifically designed and maintained for the game of golf; plants, trees and shrubs,” the course should be viewed in its entirety under the policy. The owners also argued that because the term “direct physical loss or damage” was not defined in the policy, it was ambiguous. The Court looked at the plain meaning of the word “physical” which is “material” and reasoned that an intangible loss in the value of a golf course because of a change in its slope rating or difficulty does not fit within the meaning of the phrase “direct physical loss or damage.” The Court referred to similar interpretations of the phrase “direct physical loss or damage” by other courts and reasoned:
The theme of these decisions . . . is as follows: once physical damage is fixed and paid for by the insurer, any diminution in value, income or use is not ‘physical damage’ and, hence, not recoverable under language similar to the clause at issue here.2
Therefore, in Crestview, the Court found that coverage for “direct physical loss or damage” to a golf course caused by wind or hail did not include costs of redesigning or modifying hole to restore its difficulty, and stated:
The only ‘physical’ damage to the thirteenth hole was the harm to the Poltergeist Tree itself, a claim which has been paid. Plaintiff’s present claim, in contrast, encompasses work necessary to return the hole not to its former physical appearance, but to the same subjective level of difficulty. The policy is not designed for such coverage. . . .3