It is not too often that the sport of golf and insurance intersect in an outrageous fashion. In Old White Charities Inc. v. Bankers Insurance,[1] a charity hosted a golf tournament and sponsored a hole-in-one competition. If a golfer hit a hole-in-one, each spectator in attendance would receive $100 in cash; if a second golfer hit a hole-in-one, each fan would receive $500. To guard against the possibility that golfers would hit holes-in-one, the charity hired a broker to place an insurance policy covering the competition.
The broker reviewed and filled out the application, then sent it to the charity to sign.[2] The application included a warranty requiring a minimum distance of 150 yards for the hole-in-one competition.[3] The broker did not strike out the minimum-distance requirement, but instead attached an addendum stating: The pins (as always in a PGA tour event) will be set in a new location each morning of the Greenbrier Classic by the PGA. The insured has no idea nor will have any influence as to where the pins will be set.[4]
The broker’s representative testified that he attached the addendum to negate or override the minimum-distance requirement.[5] During the competition, two golfers hit holes-in-one from 137 yards out.[6] The charity filed a claim for coverage under its policy, but the insurer denied coverage on the basis that the golfers hit the holes-in-one from a distance shorter than the minimum required.[7]
The Coverage Case
The insurer then filed a declaratory action against the charity, seeking a declaration that its policy did not cover the two holes-in-one because they came from less than 150 yards.[8] The U.S. District Court for the Southern District of West Virginia ruled in the insurer’s favor, holding that the policy did not cover the two holes-in-one because they came from a distance of less than 150 yards.[9]
The Broker Negligence Case
The charity then filed a claim against the broker for negligently failing to procure insurance covering the hole-in-one competition.[10] Because one of the charity’s representatives read and signed the application (including the 150-yard minimum-distance requirement), the district court held that the broker did not owe a duty to “secure an insurance policy outside the bounds of the application language.”[11]
In an unpublished opinion (issued without oral argument), the Fourth Circuit affirmed the district court’s summary judgment in favor of the broker.[12]
Analysis
The Fourth Circuit’s holding should give policyholders pause for several reasons. The decision resolved a disputed, genuine issue of material fact in favor of the broker, on a motion for summary judgement. When ruling on a motion for summary judgment, a court must not “weigh the evidence and determine the truth of the matter,” nor make credibility determinations.[13]
Instead, the court is only authorized to determine whether there are genuine issues of material fact in dispute.[14] If there are, the jury should decide them – not the court.[15] A court improperly weighs the evidence by failing to credit evidence that contradicts some of its key factual conclusions.[16]
Under West Virginia law, a broker has a duty to obtain the coverage requested by its client or inform the client of its inability to do so.[17] The broker negligence case thus presented the question of what coverage the charity requested from the broker. In its briefing in the negligence case, the broker claimed that the charity agreed to the 150-yard minimum distance.[18]
However, in sworn pleadings and discovery in the earlier coverage case, the broker’s representatives said the exact opposite, stating that the charity did not agree to a minimum distance for the competition.[19]
In its briefing in the negligence case, the broker also claimed that the charity never asked it to obtain a policy without a minimum yardage requirement.[20] However, in the coverage case, the broker representative who filled out the application testified that he spoke with one of the insurer’s representatives and told him about the charity’s “inability to state a yardage requirement because of the PGA rules that related to that.”[21] The broker’s claims in the negligence case thus belied its sworn testimony in the coverage case.
In addition, the charity’s leader testified that he met with the broker’s representatives well before the application was completed and explained that the charity could not agree to a minimum distance, because the PGA Tour controlled where the holes would be placed each day of the competition.[22]
The testimony of the broker’s representatives also confirmed that this meeting took place.[23] The charity’s coverage needs were also spelled out in the addendum, which stated that the charity could not agree to a minimum distance because it did not control where the pins were placed on each day of the tournament – the PGA Tour did.[24]
The district court’s decision thus seized on one fact (that one charity representative read and signed the application) while ignoring several others (the prior meeting between the charity’s leader and the broker; the broker’s own statements in its pleadings, sworn testimony and discovery responses in the coverage case; and the language of the addendum itself, which the broker prepared). The decision thus decided a contested, genuine issue of material fact in favor of the broker while failing to credit contradictory evidence.
In addition, the Fourth Circuit found that “the addendum did not contradict or otherwise negate the distance warranty.”[25] In the coverage case, the broker’s representatives testified that they drafted the addendum and attached it to the application to negate the minimum distance warranty.[26] The Fourth Circuit’s decision thus reveals the error of the broker’s approach, but penalizes the charity for the broker’s mistakes.
Finally, the decision fails to account for the practical realities of the insurance-placement process. The charity’s representative who signed the application was not an attorney or insurance broker.[27] This is the exact reason why organizations hire brokers: for their expertise in placing the coverage they need. The Fourth Circuit’s decision thus blames the client for its broker’s errors.
Key Takeaways
Putting aside the merits of the decision, there are several key takeaways that policyholders can take from this decision to prepare for the future. One takeaway is not to rely on your broker to place the correct coverage. If a broker makes a mistake in placing the coverage, that mistake may be imputed to the policyholder, even if the policyholder was relying on the broker’s expertise.
A second, obvious takeaway is to read your policy applications carefully. Statements made in policy applications have become one of the insurance industry’s favorite ways to deny coverage. But it goes beyond that: the Old White decision illustrates that a policyholder cannot rely on its broker’s expertise, because if the broker makes a mistake, the courts may hold the policyholder responsible for that error.
Consider hiring a coverage attorney to review all your proposed insurance policies and applications. If the insurer slips unfavorable language into your policy application, you may find yourself without coverage and without recourse against your broker, even if you explained in your application what coverage you needed and that you could not agree to certain conditions. When it comes to placing insurance, you’re on your own.
[1] Old White Charities, Inc. v. Bankers Ins. LLC , No. 18-1914 (4th Cir. Jan. 21, 2020).
[2] Pl.’s Mem. in Supp. of Mot. for Partial Summ. J. on Liab., Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375, at 6 (S.D. W. Va. Feb. 26, 2018), ECF No. 44 (“Q. And did — we’re going to get into some of the application, but did you complete the application? A. I did. Q. And it was your application, and then you sent it to Old White Charities to execute; is that right? A. Correct.”).
[3] Id. at 6.
[4] Id. at 6-7.
[5] Id. at 7 (“I did not make a change, but I attached a narrative that made it clear that that would not be a part of the consideration.”).
[6] The two golfers were Justin Thomas and George McNeil. Br. of Appellee, Old White Charities, Inc. v. Bankers Ins., LLC, No. 18-1914, at 9 n.10 (4th Cir. Mar. 6, 2019), ECF No. 49.
[7] Pl.’s Mem. in Supp. of Mot. for Partial Summ. J. on Liab., Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375, at 11-12 (S.D. W. Va. Feb. 26, 2018), ECF No. 44.
[8] Id.
[9] Mem. Op. & Order, Talbot 2002 Underwriting Capital Ltd. v. Old White Charities, Inc., No. 5:15-cv-12542, at 9 (S.D. W. Va. Jan. 6, 2017), ECF No. 246.
[10] Compl., Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375 (S.D. W. Va. Feb. 24, 2017), ECF No. 1.
[11] Mem. Op. & Order, Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375, at 12-13 (S.D. W. Va. June 27, 2018), ECF No. 165.
[12] Op., Old White Charities, Inc. v. Bankers Ins., LLC, No. 18-1914, at 4 (4th Cir. Jan. 21, 2020), ECF No. 56.
[13] Mem. Op. & Order, Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375, at 6-7 (S.D. W. Va. June 27, 2018), ECF No. 165 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)).
[14] Fed. R. Civ. P. 56(a) (“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”).
[15] The broker requested a jury trial. Compl., Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375 (S.D. W. Va. Feb. 24, 2017), ECF No. 1.
[16] Variety Stores, Inc. v. Wal-Mart Stores, Inc. , 888 F.3d 651, 659 (4th Cir. 2018).
[17] Wilson Works, Inc. v. Great Am. Ins. Grp. , No. 1:11-CV-85, 2012 WL 12960778, at *2 (N.D. W. Va. June 28, 2012).
[18] Bankers Ins., LLC’s Resp. to Old White Charities, Inc.’s Mot. for Partial Summ. J. on Liab., Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375, at 7 (S.D. W. Va. Mar. 12, 2018), ECF No. 50 (“Old White’s negligence claims fail because the undisputed evidence shows that Old White agreed to the 150-yard minimum.”).
[19] Def. Bankers Ins. LLC’s Answer & Cross-cls., Talbot 2002 Underwriting Capital Ltd. v. Old White Charities, Inc., No. 5:15-cv-12542, p. 14 ¶ 16 (S.D. W. Va. Nov. 17, 2015), ECF No. 120-2 (“[N]either Bankers nor Old White agreed to the alleged minimum distance requirements […]”).
[20] Br. of Appellee, Old White Charities, Inc. v. Bankers Ins., LLC, No. 18-1914, at 22
(S.D. W. Va. Mar. 6, 2019), ECF No. 49 (“Old White never requested Bankers to obtain a policy without a minimum yardage requirement.”).
[21] Dep. of Gene Hayes, No. 5:17-cv-01375, at 79:20–25 (S.D. W. Va. Feb. 26, 2018), ECF No. 43-6 (Q. Did you advise Mike Connatser at All Risks that the narrative was intended to override the distance requirement? A. We talked about the inability for us to state a yardage requirement because of the PGA rules that related to that.”).
[22] Pl.’s Mem. in Supp. of Mot. for Partial Summ. J. on Liability, Old White Charities, Inc. v. Bankers Ins., LLC, No. 5:17-cv-01375, at 5 (S.D. W. Va. Feb. 26, 2018), ECF No. 44 (“I’ve said repeatedly in the PGA, the PGA controls every bit of that. That’s why I said right off the get-go, we can’t stipulate yardage because we don’t know the yardage.”).
[23] Id. at 4.
[24] Id. at 6-7.
[25] Op., Old White Charities, Inc. v. Bankers Ins., LLC, No. 18-1914, at 5 (4th Cir. Jan. 21, 2020), ECF No. 56.
[26] Def. Bankers Ins. LLC’s Answer & Cross-cls., Talbot 2002 Underwriting Capital Ltd. v. Old White Charities, Inc., No. 5:15-cv-12542, p. 14 ¶ 16 (S.D. W. Va. Nov. 17, 2015), ECF No. 43 (“Neither Bankers nor Old White agreed to the alleged minimum distance requirements […]”).
[27] Reply Br. of Appellant, Old White Charities, Inc. v. Bankers Ins., LLC, No. 18-1914, at 5 (4th Cir. Mar. 20, 2019).