Palmer v. Hartford Fire Ins. Co.

• Decision Date: 11 February 1887
• Citation: 54 Conn. 488,9 A. 248
• Court: Connecticut Supreme Court
• Parties: PALMER and others v. HARTFORD FIRE INS. CO.

9 A. 248

54 Conn. 488

PALMER and others

v. HARTFORD FIRE INS. CO.

Supreme Court of Errors of Connecticut.

February 11, 1887.

Appeal from superior court, New London county.

Suit by Palmer and others, appellants, for reformation of a policy of fire insurance, and for the amount due on the policy when reformed.

S. Lucas, for appellants.

H. C. Robinson and C. E. Perkins, for appellee.

PARDEE, J. The complaint in this case is in effect as follows: Prior to May 15, 1884, the defendant had issued to the plaintiffs a policy of insurance against loss by fire upon merchandise. On that day it expired. On that day the defendant proposed to them to renew the insurance upon the terms and conditions of the expiring policy. The plaintiffs accepted the proposition. The defendant wrote a policy, delivered it to, and received the premium from, the plaintiffs. They, relying upon the fidelity of the defendant to its promise, and supposing the last written policy to contain the same stipulations and conditions as were in the first, omitted to read it. The merchandise was damaged by fire on August 17, 1884. Subsequently the plaintiffs for the first time discovered that the last policy contained this condition, which was not in the first: "Co-Insurance Clause. If the value of the property at the time of any fire shall be greater than the amount of the insurance thereon, the insurer shall be considered as co-insurer for such excess, and all losses shall be adjusted accordingly." In this respect the last policy materially differs from the first. The plaintiffs would not have accepted the policy and paid the premium if they had known that it contained this clause; and, if the defendant had notified them of its refusal to perform its agreement, they could and would have obtained elsewhere, at the same price, the desired insurance upon the stipulated terms. The defendant refuses either to correct the policy or perform the agreement. The plaintiffs ask that the policy may be reformed so as to express the agreement, and that the defendant be compelled to perform the agreement, and pay the indemnity promised by it. The defendant answers by demurrer, assigning therefor the following reasons: "That upon the facts stated the plaintiffs are not entitled to the relief sought; that the complaint does not aver that there was a mutual mistake between the parties as to the terms of the policy, or as to the agreement for one; and that the plaintiffs were guilty of gross laches in not reading the policy, and in not notifying the defendant of their claim, so that it might have exercised its right of rescission before loss.

The superior court held the complaint to be insufficient. The plaintiffs appeal, assigning the following reasons: "(1) The court erred and mistook the law in rendering judgment in favor of the defendant to recover costs; (2) in not holding that the plaintiffs were entitled to recover at least the amount of loss covered by the policy, as delivered to the plaintiffs by the defendant; (3) in holding that upon the facts stated in the complaint the plaintiffs were not entitled to the relief sought; (4) in holding that the plaintiffs should have averred in their complaint that there was a mutual mistake between the plaintiffs and defendant as to the terms of said policy; (5) in holding that there was no allegation in the plaintiffs' complaint of an agreement between the parties as to the specific terms of the new policy that was to be issued; (6) in not holding that, as the defendant had agreed to renew said insurance on the same terms and conditions as stated in the old policy, for the same premium, and issue a policy therefor, it was immaterial, under the circumstances in this case, whether the failure to perform said agreement on the part of the defendant was by mistake or design; (7) in holding that the plaintiffs were guilty of such gross laches in not examining the new policy that they are not entitled to relief, and in holding that the defendant was excused in the performance of its contract because the plaintiffs did not detect its omission to deliver such a policy to the plaintiffs as it agreed to till after the fire; (8) in holding that it was the duty of the plaintiffs to detect, and notify the defendant of, an alteration which the defendant made, and in the very nature of the case must have had knowledge of, to-wit, the changes in the terms and conditions of the new policy from those in the old; (9) in not holding that the plaintiffs were entitled to a correction of said last-named policy in the manner sought, and to specific performance of the agreement stated in paragraph 10, and to judgment for the amount that would be due by said policy, when corrected, by reason of said loss by said fire."

For the purpose of testing the sufficiency of the pleadings we are to assume that the defendant admits that an agreement between it and the plaintiffs for indemnity against loss by fire, containing every stipulation and condition which should enter into or affect it, was reduced to writing, and that the defendant agreed to make and sign a copy thereof, except as to the dates of commencement and termination of risk, and deliver the same to the plaintiffs; that it wrote and signed a policy of insurance, and delivered it to the plaintiffs as and for a performance of its promise, and received the stipulated premium, without notice to them that an important and variant condition had been added to those contained in the first written agreement; and that the plaintiffs, trusting to the defendant's fidelity to its undertaking, omitted to examine the policy for the purpose of discovering variances from the written draft, and did not in fact discover the variance until after damage to the property for which indemnity had been sought.

The presence of the variant clause in the delivered instrument is of necessity due either to intention or mistake upon the part of the defendant. To attribute it to the former is to charge constructive fraud at least; and, inasmuch as the plaintiffs have not charged this specifically, if we accede to the rule of law invoked by the defendant, that unless fraud is so charged it is excluded from the case there remains the other and only possibility, namely, mistake; and, upon a fair interpretation of the allegation, this, the only possible legal meaning, is to be attributed to it, namely: that the writing, which by the agreement of the parties should have been a copy of a previously written draft, did in fact contain a variant and material clause, which neither of them desired or intended that it should contain, and which neither party would knowingly have permitted to be in it. This meaning the defendant should have found therein, and to it made answer.

That it is a most frequent and useful office of a court of equity to reform written contracts, and make them conform to the verbal agreement or written draft which of necessity precedes them, is in the knowledge of all, and it is sufficiently accurate to say that no writing is beyond its reach if the prayer for relief is presented in due season, and supported by convincing evidence. Of course, the presumption in favor of the written over the spoken agreement is almost resistless; and the court has wearied itself in declaring that such prayers must be supported by overwhelming evidence or be denied. But in the case at bar the defendant volunteers to lift this burden from the plaintiffs, and upon the pleadings admits that the delivered policy is materially variant from the precedent written draft agreed upon. There are many precedents for the reformation of policies of insurance in cases where the insured has held the policy, until after a loss, in silence and in ignorance of the necessity for such reformation,—ignorance because of the omission to read the policy, or of a careless reading. A few are cited.

In Andrews v. Essex Ins. Co., 3 Mason, 10, Story, J., said: "There cannot at the present day be any serious doubt that a court of equity has authority to reform a contract where there has been an omission of a material stipulation by mistake. And a policy of insurance is just as much within the reach of the principle as any other written contract. But a court of equity ought to be extremely cautious in the exercise of such an authority, seeing that it trenches upon one of the most salutary rules of evidence, that parol evidence ought not to be admitted to vary a written instrument. It ought, therefore, in all cases to withhold its aid where the mistake is not made out by the clearest evidence according to the understanding of both parties, and upon testimony entirely exact and satisfactory. There is less danger where the instrument is to be reformed by reference to a preliminary written contract which it was designed to execute. But even here there is abundant room for caution, since the parties may have varied their intentions, or the clause may not have been originally understood by either party to go to the extent now required. And these considerations acquire additional force where circumstances have occurred in the intermediate time which give an increased importance to the asserted mistake. Under these limitations the doctrine of courts of equity on this subject does not seem at variance with general convenience or justice."

In 1 Story, Eq. Jur. § 159, it is said as follows: "The relief granted by courts of equity in cases of this character is not confined to mere executory contracts, by altering and conforming them to the real intent of the parties; but it is extended to solemn instruments which are made by the parties in pursuance of such executory or preliminary contracts; and indeed, if the court acted otherwise, there would be a great defect of justice, and the main evils of the mistake would remain irremediable. Hence, in preliminary contracts for conveyances, settlements, and other solemn instruments, the court acts efficiently by reforming...