Crawford Chevrolet, Inc. v. National Hole-In-One Ass'n

• Decision Date: 01 April 1992
• Docket Number: HOLE-IN-ONE,No. 19954,19954
• Parties: CRAWFORD CHEVROLET, INC., a New Mexico corporation, Plaintiff-Appellee, v. The NATIONALASSOCIATION, a Texas insurer, Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 952

828 P.2d 952

113 N.M. 519

CRAWFORD CHEVROLET, INC., a New Mexico corporation, Plaintiff-Appellee, v. The NATIONAL HOLE-IN-ONE ASSOCIATION, a Texas insurer,

Defendant-Appellant.

No. 19954.

Supreme Court of New Mexico.

April 1, 1992.

Campbell, Carr, Berge & Sheridan, Annie Laurie Coogan, Santa Fe, for defendant-appellant.

Rubin, Katz & Alley, Owen Rouse, III, Santa Fe, for plaintiff-appellee.

OPINION

MONTGOMERY, Justice.

On July 9, 1990, the City of Santa Fe and Quail Run Association, Inc., sponsored a pro-am golf tournament at the Quail Run Golf Course in Santa Fe. Plaintiff Crawford Chevrolet, Inc. ("Crawford"), a Santa Fe automobile dealership, agreed to provide a new vehicle to any participant who scored a hole-in-one on a certain hole during the tournament. Crawford obtained insurance through defendant National Hole-in-One Association ("Hole-in-One"), a company that insures golf tournament sponsors, such as Crawford, against the risk that a player will score a hole-in-one and the sponsor will have to deliver the prize.

The application for insurance required Crawford to designate certain "Target Hole Data": the target hole (for which Crawford would award a prize to any player scoring a hole-in-one on that hole), the yardage to the target hole green, and the number of "shots" to be taken on the target hole. Accordingly, Crawford filled in the following information: Hole: "#9," yardage: 165, and shots: 65. Crawford listed the value of the prize vehicle as $19,736.00.

The back of the application contained a provision requiring Crawford to notify Hole-in-One prior to the tournament of any change in the number of shots. It stated:

NUMBER OF SHOTS

Each category of shots specified on this Certificate permit[s] a 10% variance, plus or minus (+ or -), without a change in the certificate fee. Shot variance greater than 10% must be reported to NHIO prior to tournament. Certificate fee adjustment will be billed after the tournament. IMPORTANT: The prize value will be prorated downward if a Hole-in-One occurs and the number of shots has been understated by more than the allowed 10% variance. (Example: Number of shots insured divided by number of shots taken times the prize value = Amount Paid.)

After Crawford completed the application, Hole-in-One sent Crawford a "Certificate Of Participation," along with a letter dated July 6, 1990, reminding Crawford to inform Hole-in-One before the tournament of "any variance in the number of players." Accordingly, on the following day Crawford faxed a letter to Hole-in-One, informing it that the number of players would be 60 rather than 65.

Sixty players participated in the tournament on July 9. The course was a nine-hole course, which was played twice, for a game of eighteen holes. Don Zamora, a professional golfer from Albuquerque, scored a hole-in-one on physical hole #9, but on his second time around the course--i.e., on the eighteenth hole in the tournament. Crawford delivered the prize vehicle to Zamora and made a claim to Hole-in-One for coverage.

Hole-in-One denied coverage on the ground that the hole-in-one occurred on hole #18, which was not the target hole designated in the insurance application. It claimed that the contract only provided coverage for a hole-in-one scored on physical hole #9 when that hole was being played the first time around the nine-hole course; it did not provide coverage for a hole-in-one scored the second time around on hole #9.

Crawford brought an action against Hole-in-One on September 11, 1990, alleging breach of contract. It argued that the meaning of "hole #9" was ambiguous and should therefore be construed in favor of the insured so as to provide coverage. Both parties filed motions for summary judgment. The trial court ruled in favor of Crawford, awarding it $19,796.00 in damages and costs.¹

On appeal, Hole-in-One argues that the contract is unambiguous. It contends that there is clearly no coverage because the hole-in-one occurred on the eighteenth hole, while the contract only insures against a hole-in-one on the ninth hole. In the alternative, Hole-in-One argues that, if we find coverage here, we should reduce the damages awarded by the trial court because Crawford understated in its application the number of shots actually taken on the target hole.

This case, while raising a seemingly straightforward issue of contract interpretation, has been surprisingly difficult to resolve. The issue has provoked controversy between golfers and nongolfers, both in the general public and on this Court. However, after thoroughly reviewing the record, we believe that the contract provides coverage under the facts in this case.

In determining whether an ambiguity exists in an insurance contract, we CONSIDER the policy as a whole. See Ivy Nelson Grain Co. v. Commercial Union Ins. Co., 80 N.M. 224, 226, 453 P.2d 587, 589 (1969). We begin by reviewing the "Target Hole Data" on the application. Hole-in-One argues that these data--consisting of the designated target hole, the yardage on the target hole green, and the number of "shots"--clearly show that the contract, considered as a whole, only provides coverage for a hole-in-one scored on hole #9 on a player's first time around the course. Its strongest point is that Crawford only specified 60 shots on the application. Arguably, if Crawford had intended to purchase coverage for a hole-in-one scored on the first or second round of the course, it would have specified 120 shots (60 golfers each playing the ninth hole twice). Hole-in-One also relies on a warranty provision on the back of the application, which states: "TARGET HOLE--Only one predesignated hole may be used on the target hole green. Nine (9) hole courses must specify which hole(s) will be eligible during the official insured round. Insurance does not apply unless prize is offered on the EXACT target hole as specified in this certificate."

On the other hand, Crawford argues that the contract is ambiguous because "hole #9" is subject to at least three different interpretations: physical hole #9, on either the first or second round of the course; physical hole #9, but only the first time around the course; and the ninth hole played, regardless of whether it is physical hole #9. (The players in this tournament started at different holes.) According to Crawford, because the contract is ambiguous, it should be construed in favor of the insured so as to provide coverage for Zamora's hole-in-one.

We agree with Crawford that the contract is ambiguous, but for a different reason. We believe that the term "shots" is ambiguous because it could mean either the number of attempts to score a hole-in-one on physical hole #9 (in this tournament, 120) or the number of golfers playing physical hole #9 (in this tournament, 60). If "shots" has the latter meaning, the contract would insure against Zamora's hole-in-one because coverage would not be restricted to a hole-in-one scored on the players' first round on the nine-hole course.

The existence of this ambiguity does not result in an automatic decision in favor of the insured. The rule of construction that an ambiguity in an insurance contract should be construed against the insurance company which drafted the form, see King v. Travelers Ins. Co., 84 N.M. 550, 555, 505 P.2d 1226, 1231 (1973), is just that--a rule of construction that courts may use in interpreting policy language. It does not preclude a court from examining the facts of a case to determine what the parties intended the contractual language to mean.² See 2 George J. Couch, Couch Cyclopedia of Insurance Law Sec. 15:74, at 357 (2d ed. rev. vol. 1984) ("The rule, moreover, that an insurance policy will be strictly construed against the insurer does not apply when the barrier against parol evidence has been removed by an ambiguity in the contract, and the parties thereto, by their acts, have placed a construction on the contract showing what was in fact intended.").

Unfortunately, "shots" is not defined in the application, and the parties have not directed our attention to any possibly applicable definition...