Merrimack Mut. Fire Ins. Co. v. Dufault

• Decision Date: 17 October 2008
• Docket Number: No. 2007-196-Appeal.,2007-196-Appeal.
• Citation: 958 A.2d 620
• Parties: MERRIMACK MUTUAL FIRE INSURANCE COMPANY v. Ronald H. DUFAULT et al.
• Court: Rhode Island Supreme Court

958 A.2d 620

MERRIMACK MUTUAL FIRE INSURANCE COMPANY v. Ronald H. DUFAULT et al.

No. 2007-196-Appeal.

Supreme Court of Rhode Island.

October 17, 2008.

Kathryn Hopkins, Cranston, for Plaintiff.

Wayne Resmini, Providence, for Defendants.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

Justice GOLDBERG, for the Court.

This case came before the Supreme Court on September 29, 2008, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After hearing arguments of counsel and examining the memoranda submitted by the parties, we are of the opinion that cause has not been shown and we shall decide this appeal without further briefing and argument. We vacate the judgment of the Superior Court.

Facts and Travel

This case arose as a result of an insurance coverage dispute between the defendant, Frank Beauparlant (Beauparlant or defendant), who allegedly was injured in an automobile collision, and the plaintiff, Merrimack Mutual Fire Insurance Company (Merrimack or plaintiff), an insurance company that issued a homeowner's policy to Ronald H. Dufault, Sr. (Ronald Sr.) and his wife, Pauline Dufault (collectively Dufaults). Merrimack's policy, which commenced on May 27, 1990, included a personal umbrella liability policy (policy). The policy provided insurance to the insured for an amount in excess of its required minimum underlying insurance, which for automobile liability was $250,000 each person/$500,000 each occurrence for bodily injury; $100,000 each occurrence for property damage; or a combined single limit of $300,000 for each occurrence. Significantly, the policy extended coverage to relatives of the named insured who lived in the same household and owned a car, motorcycle, motor home, or recreational vehicle. The policy defined "insured" as "you or any relative of yours," and "relative" as "a person who lives in your household and is * * * related to you[.]"

On February 4, 1999, Beauparlant was involved in a motor vehicle accident with the Dufaults' son, Ronald H. Dufault, Jr. (Ronald Jr.).¹ The record discloses that at the time of the collision, Ronald Jr. was driving a 1979 Chevrolet pickup truck that he owned and insured with Travelers Insurance Company, with single-limit-liability coverage of $75,000. It is also undisputed that Ronald Jr. was residing with his parents. Although the policy was in effect at the time of the accident, whether it extended to Ronald Jr. is the subject of this case.

After the collision, Beauparlant filed suit against Ronald Jr., Travelers Property Casualty, and Quincy Mutual Fire Insurance Company. The plaintiff subsequently instituted this action against Beauparlant, the Dufaults, and Ronald Jr., seeking a declaratory judgment reforming the policy to exclude coverage for Ronald Jr. for the applicable policy period, or in the alternative, rescinding the policy as to him.

The case was assigned to the nonjury trial calendar. The parties submitted to the trial justice an agreed statement of facts and memoranda.² According to the agreed statement of facts, Merrimack biannually sent renewal questionnaires to the Dufaults, who were asked to list the members of their household and the operators of any vehicles. In the renewal questionnaire in effect at the time of the alleged injury to defendant, neither Ronald Jr. nor his vehicle was listed; instead, only the Dufaults and their two vehicles were included in the response. The parties also agreed that Ronald Jr. was not included because Ronald Sr. "intended that the personal umbrella liability [policy] only appl[y] to his own vehicles." Furthermore, the parties agreed that, if Merrimack knew that Ronald Jr. was a member of the household and owned a motor vehicle that fell short of the minimum coverage required by the policy and that Ronald Sr. did not intend to provide his son with umbrella insurance, the carrier would have issued a restricted endorsement that would have excluded Ronald Jr. It is noteworthy, however, that the renewal questionnaire was not part of the original insurance contract, nor was it incorporated into the policy by reference.

Additionally, although it was not included in the stipulated facts, the trial justice addressed Beauparlant's argument that in the renewal questionnaire for the period of May 27, 1992 through May 27, 1993, Ronald Jr. was listed as a driver who was living in the household. The trial justice reasoned that, because Ronald Jr. was not listed in the three intervening questionnaires supplied between 1993 and the time of the injury, Beauparlant's argument that Merrimack knew or should have known that Ronald Jr. was a relative residing in the household was misplaced.

The trial justice issued a written decision in which she found a mutual mistake between the parties concerning whether the policy's coverage extended to Ronald Jr.³ She granted Merrimack's request to reform the policy, effective May 1, 1998. A judgment directing plaintiff to issue a restricted endorsement excluding Ronald Jr. from the policy, retroactive to the time of the accident, subsequently was entered. The defendant filed a notice of appeal to this Court.⁴

Standard of Review

This Court reviews with deference a Superior Court decision granting or denying declaratory relief. Providence Lodge No. 3, Fraternal Order of Police v. Providence External Review Authority, 951 A.2d 497, 502 (R.I.2008) (citing Fleet National Bank v. 175 Post Road, LLC, 851 A.2d 267, 273 (R.I.2004)). In a declaratory judgment action, the trial justice, sitting without a jury, makes findings of fact that are entitled to great weight on appeal and "will not be disturbed absent a showing that [he or she] overlooked or misconceived material evidence or was otherwise clearly wrong." Id. (quoting Casco Indemnity Co. v. O'Connor, 755 A.2d 779, 782 (R.I.2000)). This Court affords the same deference to the "resolution of mixed questions of law and fact, as well as the inferences and conclusions drawn from the testimony and evidence * * *." Id. (quoting Wickes Asset Management, Inc. v. Dupuis, 679 A.2d 314, 317 (R.I.1996)). Determinations of questions of law, however, are reviewed de novo. Id. (citing Casco Indemnity Co., 755 A.2d at 782).

Analysis

Before this Court, defendant asserts that the trial justice erred in finding a mutual mistake of fact, arguing that because Ronald Jr. was insured according to the clear and unambiguous terms of the policy, the trial justice should not have referred to extraneous material—specifically, the renewal questionnaire—in making her decision. Next, Beauparlant argues that even if the trial justice properly considered extrinsic evidence, her finding of a mutual mistake, by clear and convincing evidence, was erroneous. We agree and hold that it was error for the trial justice to look to extraneous material in deciding this case and that she clearly erred in finding a mutual mistake of fact.

The terms of an insurance policy are construed in accordance with the rules of construction applicable to contracts. Children's Friend & Service v. St. Paul Fire & Marine Insurance Co., 893 A.2d 222, 229 (R.I.2006) (citing Gregelevich v. Progressive Northwestern Insurance Co., 882 A.2d 594, 595 (R.I.2005) (mem.)). Furthermore, as with other written agreements, an insurance policy may be equitably reformed. Hopkins v. Equitable Life Assurance Society of the United States, 107 R.I. 679, 684, 270 A.2d 915, 918 (1970) (citing Ferla v. Commercial Casualty Insurance Co., 74 R.I. 190, 195, 59 A.2d 714, 716 (1948)). "For a contract to be subject to judicial reformation, the court must first find a mutual mistake." Gorman v. Gorman, 883 A.2d 732, 740 (R.I.2005) (citing Yates v. Hill, 761 A.2d 677, 680 (R.I.2000)).

This Court has defined mutual mistake as "one that is `common to both parties wherein each labors under a misconception respecting the same terms of the written agreement sought to be [reformed].'" McEntee v. Davis, 861 A.2d 459, 463 (R.I.2004) (quoting Rivera v. Gagnon, 847 A.2d 280, 284 (R.I.2004) (emphasis added)). When a mutual mistake is manifest in the agreement at the time it is entered into, the agreement "fails in a material respect correctly to reflect the understanding of both parties." Id. (quoting Rivera, 847 A.2d at 284). A mutual mistake is not merely the existence of a common error, but rather involves a shared misconception relating to the parties' intent. Id. (citing Nunes v. Meadowbrook Development Co., 824 A.2d 421, 425 (R.I.2003)). A party seeking reformation of an agreement must prove a mutual mistake of a material term of the agreement by clear and convincing evidence. Id. (citing Rivera, 847 A.2d at 284).

Extrinsic Evidence

We first address whether it was proper for the trial justice to consider the renewal questionnaire in issuing her decision to reform the policy. The trial justice found that Merrimack's mistake was clear from the record; that Merrimack "relied on the renewal questionnaire[] and in doing so was under the belief that the household to be covered by the [p]olicy consisted of only two parties—the Dufaults—and covered only two vehicles[.]" However, it is crucially important to bear in mind that the express language of the insurance contract neither refers to nor incorporates the renewal questionnaire into its terms; the questionnaire is an extrinsic factor not within the four corners of the policy and may be utilized only in accordance with our settled rules of contract interpretation. We also note that there is nothing in the record that suggests that the questionnaire is a subsequent modification of the express terms of the umbrella policy. See Lisi v. Marra, 424 A.2d 1052, 1056-57 (R.I.1981) (the parol-evidence rule does not bar the admission of subsequent agreements between the parties that modify their original written contract) (citing Industrial National Bank v. Peloso, 121...