If you have ever played in a charity golf tournament, you have surely come across a par 3 hole where they have offered a prize, such as a car or cash, for hitting a hole in one. It has been my experience that the holes selected are quite difficult and have to be a minimum yardage. This is because an insurance policy indemnifies the payment.

There is a pending dispute I have been reading about in the news involving a hole in one contest at the 2015 PGA tour event, the Greenbrier Classic.1 Insurer Certain Underwriters at Lloyd’s London and its representative HCC Specialty Underwriters Inc. wrote a policy for the golf course operating non-profit, Old White Charities, to cover a hole in one contest at the 18th hole at the tournament. The $2.3 million policy was to cover any loss from the hole in one contest as fans seated in the grandstands were promised $100 for the first hole in one and $500 for a second hole in one. If you would like a visual of the par-3 18th hole, click here.

It measures 175 from the black tee markers. There were 2 holes in one during the 2015 event, costing Old White approximately $200,000. Old White had the insurance policy in place so it would not incur the $200,000 expense. However, the insurer Lloyds, disputed making the payment. Lloyds sued Old White Charities in the U.S. District Court of West Virginia. First, it claims that non-profit did not make the required premium payment. Second, it claims that the aces happened closer to the hole than the distance set forth in the insurance policy. Lloyds claims that for them to pay back to the tournament, the holes in ones had to happen at a minimum distance of 170 yards from the tee box. Both holes in one were shots of less than 140 yards.

The complaint alleges the preprinted application included a condition that the hole be at least 150 yards and that Old White stated in the application that the yardage on the 18th hole averaged about 175 yards. An addendum allegedly indicated, however, that the insured had no control over or knowledge of where the PGA would put the hole on the green each morning of the tournament. Lloyd argues that subsequent discussions resulted in the policy bind indicating that the hole in one must be at least 170 yards from the tee.

Old White filed a third party complaint against Lloyds, and the agents and broker who acted on behalf of the insurers, alleging that the 175 yards was only an estimate and that it informed the insurers that the actual location of the hole was determined by the PGA. The number then was dropped to 170 when the policy was written.

In a recent order, the court characterized the “broker” as the “agent” of the insurers which meant that that the broker could be held liable for breach of contract in connection with the dispute. The judge indicated that Old White’s claim against the broker did properly allege that it could be held liable because of a “narrow exception in West Virginia law permitting an insured party to bring a cause of action for breach of contract against an agent. . . where the agent, along with the insurer, have created a reasonable expectation of insurance coverage.” The insurers have filed a motion for reconsideration of the order alleging that the broker sought to help Old White by giving it “guidance. . . on how to make a claim against the policy without revealing that the 18th hole played significantly shorter than the minimum yardage of 170 yards.”

The Greenbrier Classic has been making headlines in the news the past few weeks due to the torrential rains and flooding in West Virginia. Unfortunately, this year’s PGA Tour event has been cancelled because of the devastating flooding. The Old White TPC suffered extensive damage from the flooding and is beyond reasonable repair to conduct the tournament. In fact, the resort has opened its doors to provide shelter for numerous flood victims.

1 Talbot 2002 Underwriting Capital Ltd. et al. v. Old White Charities Inc., No. 5:15-cv-12542, complaint filed (S.D. W. Va. Aug. 19, 2015).