Talbot 2002 Underwriting Capital Ltd. v. Old White Charities, Inc., CIVIL ACTION NO. 5:15-cv-12542

TALBOT 2002 UNDERWRITING CAPITAL LTD, et al., Plaintiffs, v. OLD WHITE CHARITIES, INC., Defendant.

CIVIL ACTION NO. 5:15-cv-12542

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA BECKLEY DIVISION

January 6, 2017

MEMORANDUM OPINION AND ORDER

The Court has reviewed Plaintiffs and Third Party Defendants HCC and Underwriters' Motion for Summary Judgment (Document 193) and Memorandum of Law in Support (Document 196), and Third Party Defendant All Risks, Ltd.'s Motion for Summary Judgment (Document 197) and Memorandum of Law in Support (Document 198). The Court has also reviewed the Response of Old White Charities, Inc. in Opposition to Motions for Summary Judgment (Document 199) and Bankers Insurance LLC's Omnibus Response to Motions for Summary Judgment (Document 202). Additionally, the Court has reviewed Third Party Defendant All Risks Ltd.s Reply in Support of its Motion for Summary Judgment (Document 203) and the Reply in Support of Plaintiffs and Third Party Defendants HCC and Underwriters' Motion for Summary Judgment (Document 206). For the reasons set forth herein, the Court finds that the motions for summary judgment should be granted.

PROCEDURAL HISTORY AND FACTUAL BACKGROUND

A brief review of the claims giving rise to the present case is beneficial to effectively address the pending motions. The Plaintiffs, Talbot 2002 Underwriting Capital Ltd., White Mountains Re Sirius Capital Ltd, and Markel Capital Limited (collectively, the "Underwriters" or "Plaintiffs"), brought suit against Old White Charities, Inc. ("Old White") on August 19, 2015. The Plaintiffs seek a declaratory judgment on obligations arising under prize indemnity insurance policies issued by the Plaintiffs to Old White. Old White is a non-profit corporation affiliated with the Greenbrier Resort. The insurance policies in question were in effect from June 30, 2015, through July 7, 2015, and proposed to compensate Old White for any losses incurred in a "hole-in-one" contest offered by the Greenbrier Resort and hosted on the 18th hole of Old White TPC golf course during the Greenbrier Classic and Pro-Am, which took place from July 1, 2015, through July 5, 2015. Under the terms of a promotion offered by the Greenbrier Resort, the Hole-In-One Fan Jackpot (the "promotion"), the Greenbrier promised to pay fans seated in the grandstands $100 for the first hole-in-one, $500 for the second hole-in-one, and $1,000 for the third. To insure against these payouts, the insurance policies in question issued by the Plaintiffs pledged to pay Old White $150,000 for the first hole-in-one made by a golfer, $750,000 for the second, and $1,400,000 for the third, for a total aggregate insurance value of $2,300,000. Among the exclusions and limitations in the policies was a provision requiring that the 18th hole be at least "170 yards from the tee." (Pl. Complaint at ¶14.) During the tournament, two golfers hit a hole-in-one at the 18th hole. The owner of the Greenbrier, James Justice, allegedly paid fans seated in the grandstands around the 18th hole "a total of roughly $200,000." (Id. at ¶24.) It is undisputed that both holes-in-one were hit from a distance of only 137 yards. It is further undisputed that,when completing and executing the application for the insurance policy, both Old White and its agent knew the application contained a 150-yard minimum on the hole to be covered. (Pl. Sum. Judg. Motion Ex. F at 29:16-19.)

Old White enlisted Bankers Insurance, LLC ("Bankers") to procure the insurance coverage in question, and Bankers requested that All Risks Ltd. ("All Risks") serve as its broker. HCC Specialty Underwriters ("HCC") served as the representatives of the Plaintiffs in issuing the policy to Old White. In their complaint, the Plaintiffs alleged that Old White, in seeking insurance for the promotion, indicated that the yardage on the 18th hole was "[a]pprox 175 [yards] [a]verage," and warranted that "[t]he [i]nsured Hole-In-One must be taken from a distance of at least 150 yards for all competitors." (Id. at ¶32.) The Plaintiffs further alleged that HCC and All Risks negotiated the final policy language requiring the 18th hole to be at least 170 yards from the tee. The Plaintiffs also alleged in their complaint that, while the policy was issued, "neither Old White nor any of its agents" ever paid the required premium payments. (Id. at ¶48.) Old White subsequently made a demand for $900,000 in insurance coverage on the policy, and the Plaintiffs brought this suit shortly thereafter. The Plaintiffs seek declaratory judgment on the grounds that (1) the policy at issue did not provide coverage for Old White's losses based on Old White's failure to satisfy minimum yardage requirements; (2) the Plaintiffs may rescind the policy based on material and/or incorrect statements made by Old White in its application for coverage; (3) coverage was excluded based on material deviation from the information provided to the Plaintiffs by Old White; (4) coverage is excluded based on Old White's failure to pay the policy premium; and (5) the policy was void based on the failure of Old White and the Plaintiffs to reach a meeting of the minds as to a material term of the policy.

On September 11, 2015, Old White answered the Plaintiffs' complaint and simultaneously filed a Counterclaim (Document 13) against the Plaintiffs, and at the same time brought a Third Party Complaint (Document 14) against HCC, All Risks, and Underwriters at Lloyd's London ("Lloyd's"). Therein, Old White alleges that HCC and All Risks acted as agents for Lloyd's and the Plaintiffs in procuring the insurance policies at issue in this case.¹ Old White claimed that in applying for these policies, Bankers and Old White "explained all the conditions" for the promotion, including "the fact that Old White had no control over the distance the pins were set because the PGA had sole and exclusive control over the pins." (Old White's Third Party Complaint, at ¶13.) Specifically, Old White alleged that it placed in the application the following language:

Old white Charities requests hole-in-one coverage for all five days of their tournament . . . The hole to be considered for Hole-in-One Coverage is #18 which plays an average of 175 yards. 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.

(Id. at ¶14.). Old White claimed that it was "never advised" by HCC, All Risks, or Lloyd's that insurance was unavailable due to its inability to control the distance. (Id. at ¶15.) Old White alleged that it was contacted by Bankers on June 26, 2015, and informed that the insurance was bound for the promotion, and it then "overnighted the premium of $112,684.12 to Bankers," after which it was told the insurance was in effect for the tournament. (Id. at ¶16-17.) After two golfers hit holes-in-one during the tournament, Old White claimed that the Plaintiffs, All Risks, "and/or HCC all wrongfully refused to pay the claims, even though they had bound the coverage and accepted the premium without advising Old White that there was any change to the conditionsof the application." (Id. at ¶23.) Old White claimed that it was entitled to the insurance proceeds in the policies, and that "[t]he first time Old White was aware of the alleged 170-yard limit was when they received the reservation of rights letter from HCC." (Id. at ¶26.)

Based on those allegations, Old White sought recovery under West Virginia Law for breach of contract by HCC, All Risks, and Lloyd's, as well as punitive damages, pre-judgment and post-judgment interest, as well as fees and costs. Old White also sought recovery for breach of the implied covenant of good faith and fair dealing, alleging that the Plaintiffs' claim that Old White failed to pay the policy premium caused reputational damage to itself, the Greenbrier, and James Justice. Additionally, Old White brought a tort claim of negligence and a claim of fraud.

On October 13, 2015, HCC moved to Dismiss Old White's third party complaint. In an April 19, 2016 Memorandum Opinion and Order (Document 95), this Court granted HCC's motion to dismiss the third party complaint as to Old White's bad faith claims under the West Virginia Unfair Trade Practices Act and for common law bad faith, but denied the motion to dismiss on all other grounds. On November 13, 2015, All Risks separately moved to Dismiss Old White's third party complaint for reasons similar to those argued by HCC. In a May 5, 2016 Memorandum Opinion and Order (Document 99), this Court also granted All Risks' motion to dismiss the third party complaint as to Old White's statutory and common law bad faith claims, but denied the motion to dismiss on all other grounds. As a result, Old White's third party claims of breach of contract, negligence, and fraud still stand.

On September 15, 2016, the Plaintiffs, HCC, and Lloyd's moved for summary judgment as to the Plaintiffs' claims for declaratory judgment and the remaining claims in Old White's third party complaint. On September 15, 2016, All Risks also moved for summary judgment on theremaining claims in Old White's third party complaint. Old White responded in opposition to both summary judgment motions on September 30, 2016. Bankers, as an intervening defendant, submitted an omnibus response in opposition to the summary judgment motions on September 30, 2016. All Risks, HCC, Lloyd's, and the Plaintiffs all filed replies on October 6, 2016. The motions for summary judgment are ripe for review.

STANDARD OF REVIEW

The well-established standard in consideration of a motion for summary judgment is that "[t]he 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." Fed. R. Civ. P. 56(a)-(c); see also Hunt v. Cromartie, 526...