Betts Patterson Mines

Court Shanks Hole-in-One Insurance Coverage Decision

In Servco Pacific Insurance v. AXIS Insurance, No. C15–0563, 2015 WL 5178031 (W.D. Wash. Sept. 4, 2015 ), the federal court in Seattle failed to enforce unambiguous policy language. Instead the court “reformed” a policy that didn’t need it.

This case arose from the denial of a claim under a specialized policy covering the value of prizes awarded to golfers making holes-in-one during a tournament. In Servco Pacific Insurance, a sponsor of a charity golf tournament purchased insurance covering the value of four prizes awarded to golfers scoring holes-in-one on four designated holes. The tournament said it would award a new Acura, valued at $30,000, for a hole-in-one on the “Target Hole” and considerably less valuable prizes for making holes-in-one on the three “Bonus Holes.”

For an award valued at more than $25,000, the policy required two witnesses to see the hole-in-one. For prizes whose value was equal to or less than $25,000, the policy required only one witness. So the Target Hole, with a $30,000 Acura on the line, required two witnesses.

The policy required holes where prizes would be awarded to be a minimum length. But the policy also allowed the insured considerable discretion in setting the lengths of the holes where prizes would be awarded, so long as the insurer knew what the length would be. The policy required the Target Hole and the Bonus Holes to be at least 110 yards long for female contestants and130 yards long for male contestants. The insured represented in its application that the Target Hole would be 140 yards long for female tournament participants and 150 yards long for male participants. The policy stated the Target Hole’s length was what the insured said it would be in its application. Thus, for women, the Target Hole had to be 140 yards long for the policy to cover a prize exceeding $25,000 in value.

Gigi Jacobsen made a hole-in-one on the Target hole. According to the court, Gigi said “excitement ensued” after her ball dropped in the hole. Her excitement was undoubtedly dampened by subsequent events.

Unfortunately for Gigi, things did not go as planned on the day of the tournament. The host club placed the women’s’ tee box on the Target Hole 112 yards from the cup, and only one witness saw Gigi’s ball plop to the bottom of the cup. Hence the insurer would not pay because:

  1. Gigi’s successful shot was 112 yards long, and to cover a prize worth more than $25,000 (the new Acura), the policy required the hole-in-one to be made from 140 yards.
  2. Only one witness saw Gigi’s shot, but the policy required two witnesses on a hole where the prize exceeded $25,000.

Perhaps sympathizing with Gigi, the Honorable John C. Coughenour ruled against the persnickety insurer. Expounding on insurance’s risk-sharing purpose, the court reasoned that the insurer admitted it would have charged more in premium if the Target Hole had been 112 yards rather than 140 yards. Plus 112 yards was still more than the minimum 110 yards the policy required for coverage of any prize money. Also, the insurer covered prizes worth less than $25,000 if one witness were present. So the court ordered that the insurer should pay no more than $25,000 (the value of a used Accord, perhaps?) offset by the higher premium the insurer would have charged to cover the value of a prize on a 112-yard hole.

In deciding against the insurer, the court said it was reforming the hole-in-one insurance policy. The court cited one case defining contract reformation: Denaxas v. Sandstone Court of Bellevue, L.L.C., 148 Wn.2d 654, 63 P.3d 125 (2003). Correctly quoting from the Denaxas case, the court said reformation brings “a writing that is materially at variance with the parties’ agreement into conformity with that agreement.” Id. at 132.

The court should not have reformed the policy because it didn’t need it. The policy didn’t vary from what the insured and insurer agreed to. The insurer said it would pay for a prize worth more than $25,000 if a female contestant made a hole-in-one on a 140-yard hole, and two witnesses were present. Gigi made a hole-in-one on a 112-yard hole with one witness. The facts didn’t meet what the policy requires for the insurer to pay the value of a prize worth more than $25,000.

Perhaps displaying all-too-human (and understandable) sympathy for a player making one of golf’s most coveted shots, the court seemed to impose “rough justice” rather than just apply the law (and the policy language) to the facts. This case also proves the cliché that hard facts make bad law.

After over forty years of trying, I still haven’t done what Gigi did. So I can’t conclude without congratulating her. But I must also add that that I’d rather have a hole-in-one than a new Acura.

Mark Mills*

*With much appreciated editorial assistance from fellow bloggers Matt Munson and Jeremy Schulze