Cheperuk v. Liberty Mut. Fire Ins. Co.

• Decision Date: 15 July 1999
• Citation: 263 A.D.2d 748,693 N.Y.S.2d 304
• Parties: Stanley CHEPERUK et al., Appellants-Respondents, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 304

693 N.Y.S.2d 304

Stanley CHEPERUK et al., Appellants-Respondents, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Respondent-Appellant.

Supreme Court, Appellate Division, Third Department, New York.

July 15, 1999.

Lewis & Stanzione (Ralph C. Lewis Jr. of counsel), Catskill, for appellants-respondents.

Bouck, Holloway, Kiernan & Casey (Daniel P. Mulligan of counsel), Albany, for respondent-appellant.

Before: CARDONA, P.J., CREW III, YESAWICH JR., PETERS and GRAFFEO, JJ.

GRAFFEO, J.

Cross appeals from an order of the Supreme Court (Connor, J.), entered January 13, 1999 in Greene County, which denied plaintiffs' and defendant's motions for partial summary judgment.

Plaintiff Stanley Cheperuk contracted with defendant to provide a homeowner's insurance policy for residential property in Greene County. At the time the policy was issued, Union Bank was the holder of the mortgage and therefore named as the mortgagee on the policy. In March 1995, Union Bank assigned the mortgage to Union Deposit Loan and Investment Bank, but defendant was not instructed to modify the policy to reflect this change in the named mortgagee. Thereafter, the mortgage was assigned to First Union Home Equity Bank.

After their home was destroyed by a fire in February 1996, plaintiffs filed a proof of loss in support of their claim for fire damages. After its investigation, defendant denied the claim alleging that plaintiffs may have been involved in causing the fire. Rejection of the claim prompted plaintiffs to commence this breach of contract action contending, inter alia, entitlement to proceeds under the terms of the insurance policy. In their amended complaint plaintiffs interposed a second cause of action seeking reformation of the insurance policy to correct the name of the mortgagee from Union Bank to First Union. Plaintiffs moved for partial summary judgment on the second cause of action and defendant cross-moved for summary judgment dismissing the second cause of action on the basis that First Union was not a party to the contract and that the claim was untimely. Supreme Court denied both motions finding that a question of fact existed with respect to plaintiffs' alleged role in setting the fire. This appeal by both parties ensued.

A party is entitled to reformation where "the writing in question was executed under mutual mistake or unilateral mistake coupled with fraud" (Leavitt-Berner Tanning Corp. v. American Home Assur. Co., 129 A.D.2d 199, 201-202, 516 N.Y.S.2d 992, lv. denied 70 N.Y.2d 609, 522 N.Y.S.2d 109, 516 N.E.2d 1222; see, Keiser v. Goetz, 235 A.D.2d 689, 652 N.Y.S.2d 153). Where it is apparent that an innocent mistake occurred with respect to a named insured and it is evident that the parties intended to cover the risk, the error may be deemed mutual for purposes of reformation even though the insurer was not aware of the error (see, Court Tobacco Stores v. Great E. Ins. Co., 43 A.D.2d 561, 349 N.Y.S.2d 8; Matter of Lipschitz v. Hotel Charles, 226 App.Div. 839, 840, 234 N.Y.S. 513, affd. 252 N.Y. 518, 170 N.E. 127). Here, it is clear that the parties intended to cover the risk and the failure to change the name of the mortgagee on the policy was inadvertent. Moreover, defendant does not claim that it would have discontinued coverage had it been informed of the change of mortgagee. Because the identity of the mortgagee was relatively unimportant, we conclude that under these circumstances, plaintiffs were "entitled to equitable reformation of the policy to correct the obvious inadvertent misidentification" of the named mortgagee (New York Cas. Ins. Co. v. Shaker Pine, --- A.D.2d ----, ----, 691 N.Y.S.2d 601; see, Anand v. GA Ins. Co. of N.Y., 228 A.D.2d 397, 398-399, 643 N.Y.S.2d 661; Crivella v. Transit Cas. Co., 116 A.D.2d 1007, 1008, 498 N.Y.S.2d 627; see also, De Santis v. Dryden Mutual Ins. Co., 241 A.D.2d 916, 661 N.Y.S.2d 395; Fahy v. Security Mut. Life...