When a catastrophe occurs and a golf course sustains direct physical loss or damage, there may also be an associated loss of use and interruption to its business. As with any loss, when analyzing coverage, the first thing is to make sure that the property is listed as a covered premises in the policy.

The Ormond Country Club filed suit against its insurer seeking damages in the amount of $200,000 for the loss of income it sustained when Hurricane Katrina caused damage to the golf course.

The insured’s policy stated that the suspension of operations must have been caused by “direct physical loss of or damage to property at premises which are described in the Declarations and for which a Business Limit of insurance is shown in the Declaration.”

The Coverage Schedule in the Declarations extended business income coverage to the club house, storage building, poolside cabana, pumphouse, and two course shelters, but not the golf course.

The Eastern District of Louisiana district court granted partial summary judgment in favor of the insurer and dismissed the claim for business income damages attributable to closure of the golf course:1

The golf course is not listed in the policy declarations. Thus, damages to the golf course are not covered. Halpern v. Lexington Ins. Co., 558 F.Supp. 1280 (E.D.La.), aff’d, 715 F.2d 191 (5th Cir.1983)(building not listed in the declarations not covered); In re McDermott, 875 So.2d 863 (La.App.4th Cir.2004)(personal property not shown on declarations page not covered); Soundview Associates v. New Hampshire Ins. Co., 215 A.D.2d 370, 625 N.Y.S.2d 659 (1995)(golf course not listed in the declarations pages of policy not covered).

The court indicated that the golf course was also excluded from coverage,

 [B]ecause elsewhere, the policy unambiguously states that ‘Covered property does not include … [l]and (including land on which the property is located) … or lawns.’

For golf course or country club owners, this decision serves as an important lesson to make sure that the golf course is listed on the declarations page of the policy, or that the policy does not contain a similar definition of covered property as stated above, to avoid the same outcome that occurred in this case.
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1 Ormond Country Club v. James River Ins. Co., No. CIV.A. 06-11376, 2008 WL 859482 (E.D. La. Mar. 27, 2008).

  • One problem with reviewing decisions like this is that we do not have a copy of the Declarations page nor a full copy of the policy forms in question. Assuming ISO language (which the cited form language includes), business income coverage hinges on “direct physical loss of or damage to property at premises which are described in the Declarations and for which a Business Limit of insurance is shown in the Declarations.”

    If the premises on the Declarations page consists of an address and that address is legally associated with the entire property, then it probably follows that the golf course is included as part of the premises. In addition, a business income limit was indicated…normally such a limit is not restricted to a particular building or type of property. If this is the case, then all that is needed to trigger coverage is (1) direct physical loss at the premises to (2) property by (3) a covered peril. Presumably windstorm is a covered peril for business income coverage.

    The court seems to confuse “Covered Property,” a defined term, with the undefined term “property” that is in the insuring agreement for business income coverage. Using ISO forms as the model, the coverage form for direct damage to Covered Property (e.g., ISO CP 00 10) is a separate insurance contract from the business income coverage form (e.g., ISO CP 00 30). The business income form only requires direct damage by a covered peril to “property,” not necessarily “Covered Property.”

    To illustrate, I’ve been involved in two golf course claims. In one, the golf course was shut down for several months due to windstorm damage to huge trees all over the golf course. Trees are “property” and damage to them by the covered peril of windstorm was sufficient to trigger business income coverage. It did not matter that trees were listed as Property Not Covered with a limited Coverage Extension for a handful of perils, none of which included windstorm. The policy provisions in the CP 00 10 Building and Personal Property Coverage Form had no bearing on the coverage provided by the CP 00 30 Business Income With Extra Expense form.

    In the other claim, the golf course was shut down due to damage to the greens caused by high temperatures and dryness. The insurer cited exclusions for this in the policy, but the exclusions cited only applied to direct damage to personal property, not nonexcluded damage to real property under the business income form. Even though the green were not Covered Property under the property form, that language had no bearing on the business income form which contained its own insuring agreement.

    So, without examining the Declarations page and policy forms in their entirety, it’s impossible to say for sure if this decision was incorrect. But it does seem clear that the court misunderstands that the business income coverage applies to damage to any kind of property whether it’s Covered Property or not.

    • shirley heflin

      Speaking of Golf Courses, my cousin and I were driving down the street and heard a loud “bang” – like a bomb going off!! I looked in my rearview mirror & noted that the (huge) back window (Chevrolet Suburban) had been knocked out! Investigation revealed it was knocked out by a golf ball and we’d just passed a Golf Course! The Manager told me it wasn’t their problem because we weren’t on their property when the golf ball shattered our vehicle’s window!! You know, we were just innocent people driving on a public highway. Thoughts please!

  • Scott deLuise, CCIM, SPPA

    Years ago, we handled a claim at a resort property for damages to a new golf course caused by a gigantic rain event that washed out numerous greens, fairways, ponds and cart paths. The carrier denied coverage, however the manuscript policy specifically included flood coverage and endorsed the “golf course” as insured property. Our position was that the “land” exclusion as insured property was overridden by the language in the policy, and that the improvements to the land, which were very costly, were insured under the inclusion. The loss was well over $2mm.

    Unfortunately, the risk manager played golf with the “broker”, who convinced him that the policy would not be renewed if they pursued the claim. Another sad case where the broker was really an “agent” for the carrier, and more concerned with his commissions than indemnification of his “customer” (not client). Get the distinction?