Mountain Creek sues Everest after warm-weather insurance doesn't pay off
Last winter was the worst ski season in decades, but the ownership of Mountain Creek, which just spent millions on a new lodge and other improvements, had a "Get out of jail free card" in its back pocket: an insurance policy against a warm Christmas season, worth up to $1.7 million.
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#1 May 20, 2012
This is an unfortunately case indeed. I wear both a weather insurance professional hat and a meteorologistís hat, and can provide some insight.
In my experience, weather insurance for ski resorts is particularly challenging because the resort prefers to use the weather observations at the resort, as that is where the risk lies. That's certainly understandable. The insurer however generally does not. Why? The insurer needs decades of quality data to properly underwriter the risk, and typically the observations from the resort fails the quality test. Too many different individuals measuring over the past 20 years, using different methods, different times of day, and different (sometimes low-quality) instruments. And when it comes to settlement, it's important to use the same data source that was used for underwriting for claims settlement. The moral hazard of using the resort's measurement may be considerable.
The best observations to use are those provided by the National Weather Service or another U.S. Government department. They generally have long histories of quality data, and observations are made with a relatively consistent protocol. However, as is common with ski resorts, the nearest NWS location may be 25 miles away and 1500 feet lower in elevation.
The goal is to create a data solution, for use in underwriting and settlement, to which both parties can agree.
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