As proof that almost anything can be insured, hole-in-one insurance is available on the market. Coverage is granted for payments or awards (cars, cruises, golf trips, cash, etc…) given and can be obtained for the right premium whether you’re protecting against the risk of an “ace” by a professional or a hacker at a charity scramble event. Of course, there are also limitations defined by the terms, conditions, and exclusions in the policy.

During the 2015 Greenbrier Classic in West Virginia, an annual PGA Tour event, Justin Thomas and George McNeill aced the 18^th hole. The hole was playing 137 yards that day. The fans went particularly wild, largely because they took home approximately $200,000 from a tournament contest offering a cash prize to any spectator that witnessed a hole-in-one in person.

Those spectators might not have celebrated had they known their prize money would ultimately end up uninsured. At the end of 2017, the Fourth Circuit held there was no coverage for the payments made by Old White Charities because the policy required a longer hole — at least 170 yards (see All Risks v. Old White Charities).

The Fourth Circuit enforced that policy limitation under West Virginia law. Like other jurisdictions across the country, West Virginia enforces the plain language of the policy. The court also rejected arguments based on a shorter limitation (150 yards, so it wouldn’t have mattered anyway) in the policy application and Old White’s argument that it had a reasonable expectation of coverage despite the 170-yard minimum in the policy. Old White’s claims of negligence and fraud during the underwriting process also failed. In sum, the court saw no evidence that provided an exception to the plain language rule.

Two obvious takeaways here:

1. Many golfers never get the chance to see a hole-in-one in person, but there is nothing unusual about a court upholding a clear policy exclusion or limitation. Even policyholders that do not know the difference between a birdie and a bogey should heed this case as a reminder: The language in the policy matters, even when the result may be harsh. Absent a way around it (an ambiguity caused by other language, waiver, misrepresentation in the application process), an exclusion can produce a tough result inconsistent with the policyholder’s expectations.
2. This case is also a reminder about the need to manage risk even after insurance is in place. The best risk management programs account for the limitations in the company’s insurance portfolio. For example, some comprehensive property insurance programs contain limitations (e.g., no flood coverage for properties on a coast) on the location of scheduled properties purchased after the policy is bound. Failure to consider that limitation when a new property is acquired can lead to a significant uninsured loss.

I hated to see this result for Old White Charities and a golf tournament that I love to watch, particularly when the same tournament had to be cancelled due to the tragic flooding in that part of West Virginia in 2016. Here’s hoping the 2017 tournament was the start of a new stretch of good fortune for the Greenbrier Classic.