Insuring Against Bad Weather

I thought some of you might have an interest in an article I wrote that's been picked up by a lot of national media outlets about weather insurance. We talk a lot in this forum about how horrible the weather was this past winter. It looks like Mountain Creek's attempt to hedge against bad (read: warm) weather may not have been as successful as they may have hoped.

http://www.skiesq.com/2012/05/mountain-creek-sues-to-recover-under.html

The sad part is they had an insurance policy in place that was supposed to payout if the weather was too warm to make snow in advance of the Christmas vacation week. Turns out it was too warm to make snow, but the insurer is refuses to pay. Interesting case and regardless of the outcome could be the death nail for weather insurance going forward.

I think I may have seen this story somewhere (FTO)?  Based on the URL of your website, I'm assuming you're a lawyer. Did Mountain Creek have a lawyer review the policy?  Also 33 seems like a pretty high temp to specify because as you say it's hard to make snow above ~28 degrees.  It's very tough to beat an insurance company at their own game.  And with this kind of insurance, unlike say auto or homeowners, repeat business isn't that much of a factor. Any idea how much Mountain Creek paid into the policy over the life of the policy?

Hi Harv,

I am indeed a lawyer. I'm sure a company as sophisticated as Mountain Creek had a lawyer review the contract. The issue s that the algorithm was supposed to be the same as the temperature on the mountain. MC is alleging it actually read colder than the actual temps. And the 33 degree number is the average hourly temperature (as opposed to say an average temp based on averaging the high and low). It's a pretty sophisticated calculation, but I can easily see how the parties disagree. The letter of the agreement favors the insurer. The spirit favors the resort.

CUontheslopes131 wrote

 The letter of the agreement favors the insurer. The spirit favors the resort.

The conception of the agreement = no one seems willing to risk anything anymore.

Without reading the contract it all comes down to the location of the thermometer and the math to get your average.   I for one can't believe this was not clearly defined in the contract.   If it was not the case will go with mountain creek.   Its reasonable that a temp at the place you actually have to blow is better than somewhere off site.  Also averaging more data than less is better.   By averaging the high and low is much less accurate than say averaging a reading every 10 minutes.    Last night our low was 40 degrees but only for 30 minutes before the sun rise.   The high went to 81 but only for 1 hour.   That average would be 60, but I've real Ave temp through the 24 hrs was more like 65.  ...

My bet is that this was defined in the contract.   Mountain creek is wrong and does not like it....and the are suing to try and extort a settlement.   If the contract does not define the terms.  The ins Co should pay up and will likely be forced to.