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SAM Magazine—Vernon, N.J., May 15, 2012—Mountain Creek Resort has filed suit against Everest Indemnity Insurance Company in an attempt to force the insurer to pay a claim under the resort’s weather insurance policy. The court’s ruling could have a broad impact on how such insurance is written in the future.

The Mountain Creek policy was designed to protect against the sort of unseasonably warm weather that occurred in December 2011. The policy covered the 16-day period from December 12 to 27, the prime snowmaking window for the Christmas/New Year’s holiday. Under the terms of the policy, if the average temperature, as measured by a complex system, exceeded 33° F for more than 10 days, the policy would pay $284,970 for each subsequent day above 33°, up to a maximum of $1,710,000.

Mountain Creek claims that the average temperature exceeded 33° F for all 16 days, entitling it to the maximum payout. Everest asserts that only nine days exceeded that mark, and that Everest therefore owed nothing.

Methodology is at the heart of the issue, said attorney David B. Cronheim, author of the ski law blog Ski, Esq., and a member of the Norris, McLaughlin & Marcus law firm. Mountain Creek asserts that the actual temperature at the resort, averaged hourly, exceeded 33° F, and that Everest has "wrongly denied Mountain Creek's claim by relying upon hourly temperature measurements at other sites that are colder than the ski resort and do not represent what an actual weather station would record as the daily average of hourly temperature measurements for the exact site at Mountain Creek Ski Resort."

The key question, said Cronheim, is in how the temperature is determined: “Neither one wanted to go with a system that was entirely in control of the other." The contract assigned an independent firm, Weather Analytics, to calculate the temperature at the resort based on data recorded at nearby sites. Its calculations are now at the center of the dispute.

A decision in favor of Mountain Creek might well lead insurers to increase premiums or more narrowly define coverage. A decision in favor of the insurer might lead resorts to believe weather insurance is pointless. “After all, if 2011-2012 was not bad enough to collect under such a policy, what winter would be?” Cronheim asked.