The Office of General Counsel issued the following opinion on March 18, 2003, representing the position of the New York State Insurance Department.
Is hole-in-one insurance a type of insurance which is encompassed within an authorized kind of insurance in New York State pursuant to N.Y. Ins. Law § 1113(a) (McKinney Supp. 2003)?
Yes. Hole-in-one insurance is encompassed within "Prize indemnification insurance" under N.Y. Ins. Law § 1113(a)(27) (McKinney Supp. 2003), which "means insurance against financial loss by reason of payment of any sum or item awarded to a participant in any lawful contest or sports related event."
The inquirer inquired whether "hole-in-one insurance is legal in New York State." The inquirer did not provide any facts.
As the Department understands it, hole-in-one insurance provides indemnification to the sponsor of a golf tournament for expenses incurred in awarding a prize to a golfer who achieves a hole-in-one.
N.Y. Ins. Law § 1113(a)(27) (McKinney Supp. 2003) states: "(27) 'Prize indemnification insurance,' means insurance against financial loss by reason of payment of any sum or item awarded to a participant in any lawful contest or sports related event."
New York State Senate Bill S. 3655-A, approved and effective July 29, 1997, which was enacted as Chapter 294 of the Laws of 1997, amended Section 1113(a) of the Insurance Law to include prize indemnification insurance as an authorized kind of insurance under N.Y. Ins. Law § 1113(a)(27) (McKinney Supp. 2003). The legislative history of S. 3655-A provides a foundation for the conclusion that prize indemnification insurance encompasses hole-in-one insurance.
The New York State Senate Memorandum in Support of S. 3655-A stated in pertinent part:
Prize indemnification coverage is a type of insurance that is authorized in other states. Typically, the sponsors of numerous golf tournaments and charity events offer a prize for participants or contestants who accomplish an unusual or difficult specified act relative to the event, e.g.; achieving a hole-in-one in a golf tournament. Currently, insurance to indemnify the sponsor for the cost of awarding such a prize must be obtained by insureds from outside the state, and New York-licensed brokers are prohibited from servicing such clients by procuring prize indemnification coverage for them. While nothing in New York's Insurance Law specifically forbids insureds from obtaining this coverage in other states, there is nothing to authorize the coverage either, so insureds and brokers turn to other state licensed entities for the coverage.
The New York State Insurance Department's July 2, 1997 comments to the Counsel to the Governor concerning S. 3655-A provided no objection to the Bill, but stated in pertinent part:
Prize indemnification insurance is authorized in other states and covers the accomplishment of an unusual or difficult specified act by a participant in a lawful contest or a sports related event, such as achieving a hole-in-one in a golf tournament. Prize indemnification insurance does not come within any of the existing definitions of kinds of insurance set forth in Section 1113(a), and the Department has interpreted the current law as not authorizing such insurance.
Accordingly, hole-in-one insurance is encompassed within "Prize indemnification insurance under N.Y. Ins. Law § 1113(a)(27) (McKinney Supp. 2003).
For further information you may contact Senior Attorney Robert Freedman at the New York City Office.