Summary
holding that insurance agency that failed to notify company of a change in coverage requested by insured lacked standing to seek reformation of insured's theft insurance coverage
Summary of this case from National Am. Ins. Co. v. Continental Western Ins. Co.Opinion
Docket No. 48161.
Decided March 3, 1981.
Provizer, Eisenberg, Lichtenstein Pearlman, P.C. (by Randall Phillips), for Ridgemont Insurance Agency, Inc.
Hibbs Lewis, P.C., for Wolverine Insurance Company.
This is an appeal by Ridgemont Insurance Agency, Inc. (Ridgemont), from the grant of summary judgment in favor of Wolverine Insurance Company by Macomb County Circuit Judge Hunter D. Stair.
In 1976, plaintiffs Biondo and Maniaci purchased a 1969 Case endloader and obtained theft insurance coverage by Wolverine through Wolverine's agent, Ridgemont. In May, 1977, plaintiffs replaced the 1969 Case loader with a 1977 Massey-Ferguson crawler-loader. Plaintiffs claimed that they requested Ridgemont to change the coverage from the 1969 loader to the 1977 loader. Ridgemont concedes that it is possible that plaintiffs did make such a request. However, neither plaintiffs nor Ridgemont informed Wolverine of the requested change.
It appears that the 1977 loader was stolen from the jobsite over the 1977 Labor Day weekend. Wolverine denied coverage on the 1977 crawler-loader, and plaintiffs filed suit against both Wolverine and Ridgemont.
During the litigation, Wolverine settled with plaintiffs and agreed to pay plaintiffs an amount roughly equal to the value of the 1969 endloader in exchange for dismissal of Wolverine from the action.
Following this settlement, Ridgemont sought to file a cross-claim against Wolverine for reformation of the insurance policy to include the 1977 crawler-loader and for indemnity, should reformation be granted. The court granted leave to file a cross-claim, and such claim was filed. Ridgemont's ground for reformation was based on a claim of innocent mutual mistake of fact in that plaintiffs' deposition testimony indicated that plaintiffs' representative had called Ridgemont on May 10, 1977, a day after the 1977 loader was picked up, and indicated to Ridgemont that the equipment had been acquired. The caller indicated that she had spoken with a "Sally", an employee of Ridgemont. There was, at the time of the call, a Ridgemont employee by that name. Prior to the theft, the plaintiffs made no follow-up call to determine if coverage had in fact been provided. Ridgemont apparently had no record of such a call and never requested Wolverine to issue a policy covering the 1977 equipment.
Wolverine's motion for summary judgment was bottomed, in part, on the contentions that Ridgemont was not entitled to have the insurance contract reformed to include coverage on the 1977 equipment because it was not a party to the contract of insurance, it did not have clean hands, and was negligent in its own right. Following oral argument on August 27, 1979, Wolverine's motion was granted.
The issue in this case is whether Ridgemont, the agent of Wolverine, has standing to seek reformation of the insurance contract existing between Wolverine and plaintiffs.
An insurance policy may be reformed by a court of equity in a proper case, such as where there is mistake or fraud. Heath Delivery Service v Michigan Mutual Liability Co, 257 Mich. 482; 241 N.W. 191 (1932), Flanagan v Harder, 270 Mich. 288; 258 N.W. 633 (1935). Reformation of an insurance contract on the ground of mutual mistake of fact will not be granted, however, unless it is established by clear and satisfactory evidence that a mutual mistake of a substantial and material fact has been made by the parties. 11A Callaghan's Michigan Pleading Practice (2d ed), § 85.56, p 143, Goldman v Century Ins Co, 354 Mich. 528; 93 N.W.2d 240 (1958). Reformation of written instruments may be had by the immediate parties and by those standing in privity with them. Callaghan, supra, § 85.58, p 146, 76 CJS, Reformation of Instruments, § 47, p 400, Citizens' Mutual Automobile Ins Co v Downing, 339 Mich. 434; 64 N.W.2d 660 (1954).
Because appellant was not an immediate party to the contract of insurance it desires to have reformed (the contract covering the 1969 equipment), and because it does not stand in privity with either of the parties to that contract, and because there was no mutual mistake of the parties to that contract, this Court concludes that appellant has no standing to seek reformation. If appellant were to have all of the facts alleged by it to be in dispute resolved in its favor, there would be no change in those facts essential to this determination.
Appellant's reliance upon Scott v Grow, 301 Mich. 226; 3 N.W.2d 254 (1942), and Flanagan v Harder, supra, is not well-founded. Scott would require privity and mutual mistake of the parties to the original instrument before reformation is available. Flanagan did not hold that all persons who may be adversely affected if reformation is not allowed are entitled to reformation. The case held that where an injured plaintiff obtained a sizeable judgment against an insolvent owner of an automobile, and where the circumstances were such that the owner of the automobile could have filed to reform his insurance contract (thereby providing a source of funds with which to pay the judgment), but the owner did not exercise such right, the judgment creditor (plaintiff) could sue for reformation. The facts in Flanagan are far afield from those involved in this case. (It is to be noted as well that in Flanagan the Court concluded that there appeared to be fraudulent conduct on the part of the insurance company in taking a release from the owner of the automobile one day prior to the entry of the judgment.)
Affirmed.
N.J. KAUFMAN, P.J., concurs in the result only.