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If your company, firm, or nonprofit, ever hosts golf outings, or sponsors golf tournaments, or runs contests, there is a big lesson to learn from the All Risks v. Old White Charities case. That lesson involves reading and following the terms of your contest's insurance policy, particularly when it comes to a hole-in-one contest with exposure into the hundreds of thousands.
Also, in case you didn't know, apparently you can buy insurance for hole-in-one contests. But, if you do dare hold one, you should read on to learn from another charity's technical and costly failure.
A Birdie in Hand
During the 2015 Greenbrier Classic and Pro-Am, Old White Charities sponsored a hole-in-one giveaway contest. Basically, if a pro hit a hole-in-one, everyone in the crowd would get $100. If a second hole-in-one got hit, everyone in the crowd would get $500. Unfortunately for the charity, two golfers hit holes-in-one, costing the charity $200,000. And compounding the charity's misfortune, their insurer refused to pay the claim because of a significant technical failure.
According to the terms of the insurance application, the distance between the golf tee and the hole needed to be a minimum of 150 yards. According to the policy and the binder document, the minimum distance needed to be 170 yards. During the actual tournament, the hole was 136 yards from the tee. The insurer based their denial of the claim on the breach of the terms of the policy.
Going the Distance
After being denied, the charity filed an action in federal court seeking declaratory relief, and claiming bad faith and breach of contract.
But, both the federal district court, and the Fourth Circuit Court of Appeals, refused the charity's claims of bad faith and breach of contract, and declared the insurer was in the right to deny the claim. The courts reasoned that the terms of the policy and binder were clear and unambiguous. Additionally, even if the yardage requirement was only the 150 yard minimum stated in the insurance application, the charity still would be in breach as the hole was closer than that.