Mike Occhiato Mercantile Co. v. Allemannia Fire Ins. Co., Civ. No. 3236.

• Court: U.S. District Court — District of Colorado
• Writing for the Court: Pershing, Bosworth, Dick & Dawson and Winston S. Howard, all of Denver, Colo., for defendant
• Citation: Mike Occhiato Mercantile Co. v. Allemannia Fire Ins. Co., 98 F.Supp. 888 (D. Colo. 1951)
• Decision Date: 14 June 1951
• Docket Number: Civ. No. 3236.
• Parties: MIKE OCCHIATO MERCANTILE CO. v. ALLEMANNIA FIRE INS. CO. OF PITTSBURGH.

98 F. Supp. 888

MIKE OCCHIATO MERCANTILE CO. v. ALLEMANNIA FIRE INS. CO. OF PITTSBURGH.

Civ. No. 3236.

United States District Court, D. Colorado.

June 14, 1951.

Sam Parlapiano, Pueblo, Colo., for plaintiff.

Pershing, Bosworth, Dick & Dawson and Winston S. Howard, all of Denver, Colo., for defendant.

WALLACE, District Judge.

This action was instituted in the United States District Court for the District of Colorado to reform a fire insurance policy and recover thereon as reformed in the amount of $9,653.46. The plaintiff, Mike Occhiato Mercantile Co., is a co-partnership consisting of eight persons, and is resident in Pueblo, Colorado. The defendant, Allemannia Fire Insurance Co., has its home offices in Pittsburgh, Pennsylvania, but is duly authorized to do business in the State of Colorado. Reformation granted and judgment for the plaintiff in the sum of $9,653.46.

On November 19, 1948, and extending for a term of one year, defendant issued, through Rachel Bensik, its Pueblo, Colorado agent, a fire insurance policy, No. OC 68738, to "Mike Occhiato, D/B/as Occhiato Merchantile Company", for the protection against loss by fire, of a quantity of bourbon whisky located at "Bonded Warehouse `A' of Kentucky River Distillery, District No. 45, situated Camp Nelson, Jessamine County, Kentucky."

A portion of the whisky owned by the plaintiff and stored in "Warehouse B" of the Kentucky River Distillery was destroyed by fire on October 20, 1949. Plaintiff seeks a reformation of the policy to include the whisky stored in "Warehouse B", and a recovery thereunder of the value of the whisky destroyed, $9,206.11, plus storage fees and taxes in the sum of $447.35, amounting to a total claim of $9,653.46.

Plaintiff contends that it was the intent of the parties to insure all of the whisky that it may have stored at the distillery; that it at all times relied on the representations of the defendant's agent, Rachel Bensik, that such whisky would be insured; that the designation in the policy of "Warehouse A" was occasioned by the mutual mistake of the parties, and; that the plaintiff was without knowledge of the existence of the second warehouse designated "Warehouse B".

In October, 1945, Carl Occhiato, the managing partner of the Mike Occhiato Mercantile Company, approached Rachel Bensik and told her that he had some bulk whisky stored at the Kentucky River Distillery at Louisville, Kentucky, and asked her if she could get him some insurance on it. Mrs. Bensik advised him that she wasn't sure, but would let him know later. Shortly thereafter, she called Occhiato and told him: "Carl, we can get you the policy. We have an agent at Louisville, Kentucky, and he can get all the insurance there and we'll issue a policy." Carl Occhiato thereupon directed her to procure a policy for $2,000. Mrs. Bensik obtained the policy from the defendant, through its Denver, Colorado agent, Reed Pennington. Defendant sent the policy to H. V. Davis, the Louisville, Kentucky agent, who countersigned the policy and returned it to the defendant. The policy was then forwarded to the Pennington Agency in Denver, which in turn transmitted it to Rachel Bensik in Pueblo. Rachel then mailed the policy to Carl Occhiato. The policy received by Occhiato designated the insured as "Mike Occhiato, D/B/as Occhiato Mercantile Company", and the location of the insured goods as "Bonded Warehouse A" of the Kentucky River Distillery. The original policy was followed by three renewal policies, each for an increased amount of coverage, and each styled in the same manner as the original policy. The third renewal is the policy upon which this action is predicated.

It is the defendant's contention that since the policy was issued to "Mike Occhiato, D/B/ as Occhiato Mercantile Company", the "Mike Occhiato Mercantile Company" is not a party to the insurance contract and cannot sue thereon. At the time that Rachel Bensik received this application for insurance, she had been an acquaintance of the members of the Mike Occhiato Mercantile Company for some fifteen years and had written numerous insurance policies for the firm. She possessed adequate knowledge that the policy was to protect firm property and not individually owned property. It was her intention to insure firm merchandise and it was through her error that the insured was not properly described. There is little room for dispute that Rachel Bensik was the agent of the defendant and that her knowledge will be imputed to the defendant as principal. One who solicits or receives an application for insurance on behalf of an insurance company, or transmits to that company an application for insurance, is the agent of the insurance company. 87 Colo.St.Ann. (1935) 19, par. 9; Merchants' Mut. Fire Insurance Co. v. Harris, 51 Colo. 95, 116 P. 143; Vertrees v. Head & Matthews, 138 Ky. 83, 127 S.W. 523. The knowledge of the agent under such conditions will be imputed to the principal. Weghorst v. County Fire Ins. Co., 96 Colo. 564, 45 P.2d 625; Universal Insurance Co. v. Arrigo, 96 Colo. 531, 44 P.2d 1020; Home Insurance Co. of New York v. Gaines, 74 Colo. 65, 218 P. 908.

It is further contended by the defendant that the policy insured only the whisky stored in "Warehouse A", and that there can be no reformation of the contract, for there is a want of mutual mistake, which is an essential condition for reformation. Reformation is an extraordinary remedy granted by the courts to afford to the parties the benefit of their contract as they actually intended it to be. It revises the express words of the contract to show the true intent of the parties. In order that reformation may lie, it must be found that the parties have made a mutual mistake, or that there has been a mistake by one of the parties and fraud or inequitable conduct on the part of the other. Columbian Nat. Life Insurance Co. v. Black, 10 Cir., 35 F.2d 571, 71 A.L.R. 128; Williston, Contracts, § 1554, p. 4355. It has been held that where the circumstances justify reformation, the court may in its discretion, without a preliminary decree of reformation, give effect to the transaction as if it had been reformed, even in an action at law. Hill v. Stanolind Oil & Gas Co., 119 Colo. 477, 205 P.2d 643. Further, the mere fact that the reformation is sought after an extended period of delay, or even after loss has occurred, will not operate to deny the courts' assistance. Home Ins. Co. of New York v. Gaines, supra; St. Paul Fire & Marine Ins. Co. v. Jones, 5 Cir., 98 F.2d 448, certiorari denied 305 U.S. 651, 59 S.Ct. 244, 83 L.Ed. 421; Cecil v. Kentucky Livestock Ins. Co., 165 Ky. 211, 176 S.W. 986; Commercial Casualty Ins. Co. v. Connellee, 156 Okl. 170, 9 P.2d 952; Davis v. Universal Ins. Co., 169 Okl. 593, 38 P.2d 932.

At the time that plaintiff took out his original policy, it was his intent, and also the intent of the defendant's agent, Rachel Bensik, to insure all of the whisky that plaintiff had stored at the Kentucky River Distillery. Mrs. Bensik testified at the trial that she had supposed that the policy was to cover all of the whisky stored at the distillery, and even stated that she was surprised to learn that there was not adequate coverage.

When the original policy was issued to plaintiff, there was only one warehouse in existence at the Kentucky River Distillery. That warehouse was designated "Warehouse 65". In September, 1947, a second warehouse was built and a re-designation of the warehouses then occurred. The old warehouse became known as "Warehouse 65A" or simply "Warehouse A", and the new warehouse became known as "Warehouse 65B" or simply "Warehouse B". Thus, although the location of the insured goods was stated in the original policy as "Warehouse A", there was not a warehouse so designated in existence when the policy was issued. Carl Occhiato testified that he did not give the company this designation, and he is corroborated by Rachel Bensik. The evidence shows that neither Carl Occhiato nor any member of the firm had ever been to Kentucky, and that they did not possess any knowledge of such a warehouse either at this time or when the second warehouse was built.

In the case of Aetna Insurance Co. of Hartford, Conn. v. Powers, 1942, 190 Okl. 116, 121 P.2d 599, the court allowed reformation of a fire insurance contract and recovery thereon. In that case, the defendant...