Title: W.N. MCMURRY CONSTRUCTION CO., a Wyoming corporation v. COMMUNITY FIRST INSURANCE, INC. WYOMING, a Wyoming corporation, BW INSURANCE AGENCY, INC., AND OHIO CASUALTY INSURANCE COMPANY, an Ohio corporation

State: wyoming

Issuer: Wyoming Supreme Court

Document:

W.N. MCMURRY CONSTRUCTION CO., a Wyoming corporation v. COMMUNITY FIRST INSURANCE, INC. WYOMING, a Wyoming corporation, BW INSURANCE AGENCY, INC., AND OHIO CASUALTY INSURANCE COMPANY, an Ohio corporation 2007 WY 96160 P.3d 71Case Number: No. 06-271Decided: 06/12/2007
APRIL 
TERM, A.D. 2007

 
 
W.N. 
McMURRY CONSTRUCTION CO., a Wyoming corporation,        

Appellant 
(Plaintiff),

 
 
v.                                                                                             

                                                                                                

COMMUNITY 
FIRST INSURANCE, INC. WYOMING, a Wyoming corporation, 

BW 
INSURANCE AGENCY, INC., 

and 

OHIO 
CASUALTY INSURANCE COMPANY, an Ohio corporation,

Appellees 
(Defendants). 

 
 
Appeal 
from the DistrictCourtofNatronaCounty

 
 

Representing 
Appellant:

W.W. 
Reeves of Park 
Street Law Office, Casper, Wyoming.

 
 

Representing 
Appellee BW Insurance Agency, Inc.:

Richard 
A. Mincer and Billie L.M. Addleman of Hirst & Applegate, P.C., Cheyenne, Wyoming.  
Argument by Mr. Mincer.

 
 

Representing 
Appellee Ohio Casualty Insurance Company:

Patrick 
J. Murphy and Ryan Schwartz of Williams, Porter, Day & Neville, P.C., 
Casper, Wyoming.  
Argument by Mr. Murphy.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 
VOIGT, 
Chief Justice.

 
 
[¶1]      A construction 
company appeals from summary judgments granted to an insurance agency and an 
insurance company in a controversy primarily involving a builder's risk 
insurance policy.  The construction 
company also appeals from the district court's denial of its motion to amend its 
complaint.  We affirm the denial of 
the motion to amend, but reverse the summary judgments in part and remand this 
matter to the district court for further proceedings consistent 
herewith.

 
 
 
 
ISSUES

 
 
[¶2]     1.   Whether the builder's risk policy 
claims, including reformation, were barred by the construction company's failure 
to read the insurance documents or by its failure to mitigate 
damages?

 
 
           
2.   Whether the district 
court erred in denying the construction company's motion to amend its 
complaint?

 
 
 
 
FACTS

 
 
[¶3]      Early in 2005, 
McMurry Construction obtained a contract from the State of Wyoming to construct two steel buildings at the State 
Fairgrounds in Douglas.  McMurry Construction's bid was 
$5,521,299.00$3,368,761.00 for a livestock pavilion and $2,298,759.00 for a 
multi-purpose show center.1  The contract required McMurry 
Construction to obtain builder's risk insurance covering 100% of the contract 
amount.2  Anticipating this requirement, McMurry 
Construction had turned to BW Insurance, the agency it typically used, to 
procure premium estimates for the builder's risk and other insurance and bonding 
requirements of the project.  BW 
Insurance's employees estimated a premium of $8,415.00 for the builder's risk 
insurance on the originally estimated contract price of $4,500,000.00.  McMurry Construction used that premium 
estimate in calculating its bid.

 
 
[¶4]      Upon learning 
that McMurry Construction would be awarded the contract, BW Insurance sent an 
insurance application to Ohio Casualty, seeking "blanket" builder's risk 
coverage for the two buildings because both buildings were to be insured under 
the same contract number. The contract amount was stated in the application to 
be $5,524,000.00.  Because Ohio 
Casualty does not issue "blanket" builder's risk policiesmeaning one limit 
covering multiple buildingsOhio Casualty asked BW Insurance to break out the 
values of the two buildings.  In 
turn, BW Insurance contacted McMurry Construction to obtain those figures.  Misunderstanding what information was 
being sought, a McMurry Construction employee mistakenly gave BW Insurance the 
invoice amounts for the steel packages$603,003.00 for the livestock pavilion, 
and $365,147.00 for the multi-purpose show center.  Those figures were then relayed from BW 
Insurance to Ohio Casualty, where they were inserted as the operative coverage 
amounts in the builder's risk policy.  
The premium charged to McMurry Construction was, as a result, reduced 
from the estimate of $8,415.00 to $3,659.00.3 

 
 
[¶5]      BW Insurance 
mailed a certificate of insurance to McMurry Construction on March 2, 2005, 
showing the amount of builder's risk coverage to be $968,150.00.  The policy was mailed to McMurry 
Construction a few days later, once again containing the builder's risk 
coverages of $603,003.00 and $365,147.00 for the two buildings.  On March 15, 2005, BW Insurance faxed 
another copy of the certificate of insurance to McMurry Construction at the 
latter's request, and on March 18, 2005, again at McMurry Construction's 
request, BW Insurance faxed to it a copy of the policy's declarations page.  The declarations page, as the 
certificate of insurance, showed the builder's risk coverage to be 
$968,150.00.  McMurry Construction 
does not contest the fact that nobody in its offices read the certificate, the 
declarations page, or the policy upon their receipt.

 
 
[¶6]      This case was 
engendered when the livestock pavilion collapsed as it neared completion on June 
11, 2005, due to improper bracing by a subcontractor.  The cost to return the building to its 
condition before it collapsed was $951,715.00.  McMurry Construction purchased a new 
steel building package and reconstructed the livestock pavilion using its own 
employees.  It also reached a 
proposed settlement agreement with its subcontractor's insurer for 
$223,315.19.

 
 
[¶7]      Ohio Casualty 
sent a builder's risk claim analyst to the building site four days after the 
collapse.  The claim analyst 
estimated the damage amount, applied the policy's under-insured co-insurance 
penalty to that figure, and then advanced $150,000.00 to McMurry Construction 
before any formal claim was presented.4  Eventually, Ohio Casualty calculated the 
total policy benefit to be $176,543.19, and, after deducting the $1,000.00 
deductible, sent an additional $25,543.19 to McMurry 
Construction.

 
 
[¶8]      On November 14, 
2005, McMurry Construction filed suit against BW Insurance and Ohio Casualty, 
alleging breach of contract, negligence, and imputed liability, and seeking 
reformation of the insurance policy.5  In its proposed amended complaint, 
McMurry Construction sought to add new claims that coverage was due it under its 
commercial general liability (CGL) policy, that Ohio Casualty had wrongfully 
interfered with its subcontractor settlement by asserting its subrogation claim, 
that BW Insurance breached fiduciary duties created by its special relationship 
with McMurry Construction, that Ohio Casualty breached the implied covenant of 
good faith and fair dealing, and that McMurry Construction was entitled to 
recover attorney's fees and interest under Wyo. Stat. Ann. § 26-15-124 
(LexisNexis 2005) because Ohio Casualty's denial of coverage under the builder's 
risk policy was unreasonable.  
Finally, McMurry Construction sought to add a claim against BW Insurance, 
unrelated to the foregoing, based upon the alleged failure to include a 
particular employee as a covered driver under the company's business auto 
policy.

 
 
 
 
THE 
DISTRICT COURT DECISION

 
 
[¶9]      Both BW Insurance 
and Ohio Casualty filed motions for summary judgment.  Those motions, and McMurry 
Construction's motion for leave to amend its complaint, were heard by the 
district court on August 28, 2006.  
The gist of BW Insurance's and Ohio Casualty's summary judgment argument, 
as well as their present argument, was summarized as follows in their joint 
pre-hearing memorandum:

 
 
For 
purposes of this summary judgment motion, the Court may assume that BW Insurance 
and Ohio Casualty were each negligent (for not providing the requested 
$5,521,299 limits in the first instance, and for not catching any error with the 
$968,150 limits before the building collapsed).  The Court may also assume that BW 
Insurance breached its contract with McMurry Construction by not providing a 
builder's risk policy with limits of $5,521,299.  The Court may even assume, for purposes 
of this motion, that BW Insurance is deemed to be Ohio Casualty's agent, and 
that Ohio Casualty would be vicariously liable for any acts, errors, omissions, 
or breaches of BW Insurance.

 
 
            
[McMurry Construction's] claims for reformation, negligence, negligent 
misrepresentation, breach of contract and imputed liability are each barred by 
both the insured's failure to read its policy and the duty to mitigate, or 
avoid, its damages.

 
 
[¶10]   The district court accepted this 
argument and, relying upon several Wyoming cases that we will discuss below, 
granted the summary judgment motions.  
See infra ¶¶ 14, 21-28.  In addition, the district court 
concluded that the causes of action alleged in the proposed amended complaint 
related to the builder's risk policy would not survive summary judgment because 
they were also barred by McMurry Construction's failure to read the insurance 
documents.  The court, therefore, 
exercised its discretion and denied the motion to amend the complaint as to 
those causes of action.

 
 
[¶11]   Amendment of the complaint to add 
the two remaining claimsviolation of the separate CGL policy, and failure to 
provide appropriate business auto coveragewas also denied, but for different 
reasons.  As to the CGL policy, the 
court found that its coverage was never triggered because McMurry Construction 
produced no evidence that it had become legally obligated to pay any sums for 
which Ohio Casualty would be liable.6  The district court denied amendment of 
the complaint to add the business auto policy claim because that claim involved 
an unrelated factual matter and a separate policy, for which discovery was not 
complete.

 
 
 
 
DISCUSSION

 
 
            
Summary 
Judgment

 
 
[¶12]   Our standard for the review of a 
summary judgment was set forth in Abraham 
v. Great Western Energy, LLC, 2004 WY 145, ¶ 12, 101 P.3d 446, 452-53 (Wyo. 
2004):

 
 
            
When we review a summary judgment, we have before us the same materials 
as did the district court, and we follow the same standards which applied to the 
proceedings below.  The propriety of 
granting a motion for summary judgment depends upon the correctness of the dual 
findings that there is no genuine issue as to any material fact and that the 
prevailing party is entitled to judgment as a matter of law.  A genuine issue of material fact exists 
when a disputed fact, if proven, would have the effect of establishing or 
refuting an essential element of an asserted cause of action or defense.  We, of course, examine the record from a 
vantage point most favorable to that party who opposed the motion, affording to 
that party the benefit of all favorable inferences that fairly may be drawn from 
the record.  If the evidence leads 
to conflicting interpretations or if reasonable minds might differ, summary 
judgment is improper.  That standard 
of review is refined somewhat when applied to a negligence action.  Summary judgment is not favored in a 
negligence action and is, therefore, subject to more exacting scrutiny.  Woodard v. Cook Ford Sales, Inc., 927 P.2d 1168, 1169 (Wyo. 1996).  We have, however, affirmed summary 
judgment in negligence cases where the record failed to establish the existence 
of a genuine issue of material fact.  
See Krier v. Safeway Stores 46, 
Inc., 943 P.2d 405 (Wyo. 1997) (failure to establish duty); Popejoy v. Steinle, 820 P.2d 545 (Wyo. 
1991) (failure of proof of underlying claim of a joint venture); MacKrell v. Bell H2S Safety, 
795 P.2d 776 (Wyo. 1990) (failure of proof of defendant's duty); DeWald v. State, 719 P.2d 643 (Wyo. 
1986) (cause element was pure speculation); and Fiedler v. Steger, 713 P.2d 773 (Wyo. 
1986) (failure to establish cause in a medical malpractice action).  See McMackin v. JohnsonCountyHealthcareCenter, 2003 WY 91, ¶¶ 8-9, 73 P.3d 1094, ¶¶ 8-9 (Wyo. 2003).

 
 
[¶13]   Our task is made easier in the 
present case because, for purposes of their summary judgment motions, BW 
Insurance and Ohio Casualty admitted both negligence and breach of 
contract.  The issue left for us is 
purely a legal one, which we review de 
novo, giving no deference to the district court's determination.  Eklund v. Farmers Ins. Exch., 2004 WY 
24, ¶ 10, 86 P.3d 259, 262 (Wyo. 2004).  
That issue is whether McMurry Construction's claims are barred by its 
failure to read the builder's risk policy documents, or by its failure to 
mitigate damages.  Our analysis will 
focus upon the even more specific question of whether the equitable doctrine of 
reformation survives in the face of a clear violation of the failure-to-read 
rule and the failure to mitigate damages.

 
 
[¶14]   In numerous cases over the years, 
this Court has espoused the principle that an insured has a duty to read his or 
her insurance policy.  The primary 
cases in that jurisprudence are the following:  St. Paul Fire & Marine Ins. Co. v. 
Albany County Sch. Dist. No. 1, 763 P.2d 1255, 1263 (Wyo. 1988) (doctrine of 
reasonable expectations not applicable where policy is unambiguous, and does not 
absolve insured from duty to read policy); Darlow v. Farmers Ins. Exch., 822 P.2d 820, 828-29 (Wyo. 1991) (adjuster did not take advantage of insureds' ignorance, 
especially where insureds had fulfilled their duty to read the policy); Feather v. State Farm Fire & Cas., 
872 P.2d 1177, 1181-82 (Wyo. 1994) (insured's lack of reasonable diligence in 
failing to read renewal notices defeated claim against insurer for not providing 
coverage for a particular vehicle); Small 
v. King, 915 P.2d 1192, 1194 (Wyo. 1996) (insured who fulfilled duty to read 
policy and became aware that it was unacceptable, had further duty to reject the 
policy or to renegotiate with the insurer); Ahrenholtz v. Time Ins. Co., 968 P.2d 946, 950 (Wyo. 1998) (court may not reform unambiguous policy simply because 
insured failed to read it); Cordero 
Mining Co. v. United States Fid. & Guar. Ins. Co., 2003 WY 48, ¶¶ 26-32, 
67 P.3d 616, 625-27 (Wyo. 2003) (insured's failure in its duty to read policy 
and reject it as unacceptable, and third party beneficiary's similar failure to 
avoid loss by allowing project to proceed without determining existence of 
required coverage, relieved insurer from resulting injury); Cathcart v. State Farm Mut. Auto. Ins. 
Co., 2005 WY 154, ¶ 49, 123 P.3d 579, 596 (Wyo. 2005) (question not answered 
whether defense of failure to read policy available in case of non-policyholder 
insured's such failure).

 
 
[¶15]   The federal courts have also 
interpreted Wyoming law as imposing upon an insured the 
duty to read his or her policy.  In 
National Farmers Union Property & 
Casualty Co. v. Zuber, 824 F. Supp. 1017, 1021 (D. Wyo. 1993), the District 
Court for the District of Wyoming granted summary judgment to an insurer in a 
dispute over coverage limits because the policy was unambiguous and the insureds 
did not read the policy or object when they received renewal notices of, and 
paid premiums for, lesser coverage than they believed the policy provided.  Similarly, in Brown v. Royal Maccabees Life Ins. Co., 
137 F.3d 1236, 1244 (10th Cir. 1998), the Tenth Circuit Court of Appeals 
affirmed summary judgment in favor of an insurer on the ground that promotional 
materials were not part of the insurance policy, and because insureds have a 
specific duty under Wyoming law to read their policy.

 
 
[¶16]   BW Insurance and Ohio Casualty also 
rely upon the similar but separate "refinement" of the general rule of 
mitigation of damages stated in Moore v. 
Continental Insurance Co., 813 P.2d 1296, 1301 (Wyo. 
1991):

 
 
            
There is a refinement of the mitigation rule which we hold to be 
applicable here, i.e., Restatement, Second, Contracts § 350 
(1981):

 
 
"(1) 
Except as stated in Subsection (2), damages are not recoverable for loss that 
the injured party could have avoided without undue risk, burden or 
humiliation.

 
 
"(2) The 
injured party is not precluded from recovery by the rule stated in Subsection 
(1) to the extent that he has made reasonable but unsuccessful efforts to avoid 
loss."

 
 
The 
rationale of this principle, which differentiates it from mitigation in a more 
general sense, is that damages which the plaintiff might have avoided with 
reasonable effort and without undue risk, expense, or humiliation are either not 
caused by the defendant's wrong or need not have been, and, therefore, are not 
to be charged against him.  11 
Williston on Contracts, § 1353 (3rd ed. 1968); 5 Corbin on Contracts § 1039 
(1964).

 
 
[¶17]   The gist of the failure-to-read 
principle differs from the gist of the Moore principle; the former faults the 
insured for failing to gain necessary information by not reading the policy, 
while the latter faults the insured for failing to act upon information obtained 
by reading the policy or otherwise.  
The similarity between the two principles is that, by a simple act, the 
insured could have protected himself or herself from harm.

 
 
[¶18]   Undoubtedly, BW Insurance and Ohio 
Casualty admitted negligence and breach of contract for purposes of their 
summary judgment motions under the assumption that these defensesfailure to 
read the policy and failure to mitigate damagesprotected them from 
liability.  McMurry Construction 
counters, however, with the proposition that, in none of the cited cases, did 
these defenses triumph in the face of a properly pled and proven cause of action 
for reformation of contract.  Before 
we look back at those cases, we will reiterate the law of reformation of 
contracts, sometimes known as the law of mutual mistake:

 
 
Reformation 
is an equitable remedy which emanates from the maxim that "equity treats that as 
done which ought to have been done."  
66 Am.Jur.2d Reformation of 
Instruments § 2 at 528 (1973).  
At its most fundamental level, the remedy acknowledges the fact that for 
one reason or another written instruments do not always accurately memorialize 
the antecedent agreement of the parties.  
See 3 Arthur L. Corbin, 
Corbin on Contracts § 540 
(1960).  Accordingly, a court acting 
in equity may reform a written instrument upon clear and convincing evidence of 
the following elements:  (1) a 
meeting of the mindsa mutual understanding between the partiesprior to the 
time a writing is entered into, (2) a written contract, or agreement, or deed 
(3) which does not conform to the understanding, by reason of mutual 
mistake.  Clear and convincing 
evidence is defined as "that kind of proof which would persuade a trier of fact 
that the truth of the contention is highly probable."  MacGuire v. Harriscope Broadcasting Co., 
612 P.2d 830, 839 (Wyo. 1980).

 
 

Hutchins 
v. Payless Auto Sales, Inc., 2002 
WY 8, ¶ 19, 38 P.3d 1057, 1063 (Wyo. 2002) (citations 
omitted).

 
 
[¶19]   The availability of the remedy of 
reformation is entirely dependent upon two particulars:  (1) that the mistake occurred in the 
drafting of the instrument, rather than in reaching the antecedent agreement, Hutchings v. Krachun, 2002 WY 98, ¶ 20, 
49 P.3d 176, 183 (Wyo. 2002), overruled 
in part on other grounds by White v. 
Allen, 2003 WY 39, 65 P.3d 395 (Wyo. 2003); and (2) that the mistake was 
"reciprocal and common to both parties with each party being under the same 
misconception as to the terms of the written instrument," Mathis v. Wendling, 962 P.2d 160, 164 
(Wyo. 1998).  In other words, an 
agreement was reached, but that agreement was not correctly recited in the 
subsequently written instrument.7  Whether or not that initial agreement 
was reached is a question of fact.  
Raymond v. Steen, 882 P.2d 852, 856 (Wyo. 
1994).

 
 
[¶20]   The present question is not whether 
this builder's risk policy should be reformed.  Rather, the present question is whether 
McMurry Construction can seek reformation, given its failure to read the 
policy.  As noted above, the 
district court concluded that McMurry Construction could not seek reformation 
because this Court's case law forbade it.  
See supra ¶ 10.  We are, however, inclined to agree with 
McMurry Construction that such is not the case.  A more detailed analysis of the cases 
cited above will show why that is true.  
See infra ¶¶ 
21-28.

 
 
[¶21]   We begin with St. Paul Fire & Marine Insurance Co. v. 
Albany County School Dist. No. 1, 763 P.2d 1255 (Wyo. 1988), which involved 
a conflict between an insured and an insurer over a liability policy's coverage 
of the insured in a civil rights lawsuit against one of the insured's 
employees.  We held that the 
doctrine of reasonable expectations, being a rule of insurance contract 
construction, is of no assistance where the policy at issue is unambiguous, and 
that we would not "absolve the parties to an insurance policy from the duty to 
read the policy." Id. at 
1263.  The insured did not seek 
reformation of the policy and there was no argument presented to this Court that 
the policy, due to mutual mistake, did not reflect the antecedent agreement of 
the parties.  The lesson of St. Paul Fire & Marine is simply 
that an insured who possesses an unambiguous policy saying one thing cannot be 
heard to say that he unilaterally thought it said something else, especially 
where he did not even read the policy.

 
 
[¶22]   Taking the cases in chronological 
order, we next consider Darlow v. Farmers 
Insurance Exchange, 822 P.2d 820 (Wyo. 1991).  In Darlow, the insured was injured in an 
automobile accident.  Her insurer 
also insured the other vehicle.  The 
gravamen of the insured's eventual civil action against the insurer was that, in 
settling the insured's claim, the insurer had misled the insured in regard to 
maximizing coverage via a first-party claim under her own policy, as opposed to 
pursuing a third-party claim against the other driver.  We affirmed summary judgment in favor of 
the insurer because the insurer had placed the insured on notice that she could 
secure medical payments under her own policy, and because the insured "knew and 
understood the terms of [her] policy, fulfilling [her] duty to read." Id. at 828-29.  Reformation of the policy was not at 
issue.8

 
 
[¶23]   The facts in Feather v. State Farm Fire & 
Casualty, 872 P.2d 1177 (Wyo. 1994), one of the primary cases upon which BW 
Insurance and Ohio Casualty rely, are simple.  The insured had an automobile liability 
policy with the insurer.  The 
insured was in an accident and filed an indemnity claim with the insurer.  The insurer denied coverage because the 
particular vehicle was not listed on the policy or the renewal declaration 
pages, and the insured had never paid a premium to cover that vehicle, or 
exercised due diligence in determining whether the vehicle was covered.  Id. at 1180-82.  Once again, we affirmed summary judgment 
in favor of the insurer due to these lapses.  Id. at 1182.  Although the insured did seek a judgment 
declaring that a policy was created with the disputed coverage, no request was 
made that the policy be reformed due to mutual mistake.

 
 
[¶24]   Small v. King, 915 P.2d 1192 (Wyo. 1996), is another of 
the cases relied upon heavily by BW Insurance and Ohio Casualty.  In Small, the insureds promoted a musical 
concert and sought from an insurance agent what they described as "full 
coverage" for the event.  What they 
received was a general liability policy that did not provide coverage for 
certain weather-related damages.  
This Court upheld a jury verdict against the insureds, holding in part 
that the insureds, having read the policy and recognized its shortcomings, but 
having neither rejected nor renegotiated the policy, could not, after the 
damages occurred, maintain a claim for misrepresentation against the agent.  Id. 
at 1194.  As in Feather, the insureds did not seek 
formal reformation of the policy based on an alleged mutual 
mistake.

 
 
[¶25]   The next opinion in sequence, Ahrenholtz v. Time Insurance Co., 968 P.2d 946 (Wyo. 1998), seems at first glance most strongly to support the 
contentions of BW Insurance and Ohio Casualty because in it, this Court declared 
that it "may not reform an unambiguous contract simply because the insured 
failed to read the contract and ignored warnings concerning coverage."  Id. 
at 950.  Despite this phraseology, 
however, the insured in Ahrenholtz 
did not seek the equitable remedy of contract reformation.  Rather, the Court refused to "reform" 
the contract by applying the reasonable expectations doctrine in the face of an 
unambiguous contract that the insured simply had not read.  Id. 
at 949-50.  Summary judgment in 
favor of the insured had nothing to do with the unavailability of the equitable 
doctrine of reformation or mutual mistake.

 
 
[¶26]   Cordero Mining Co. v. United States Fidelity 
& Guarantee Insurance Co., 2003 WY 48, 67 P.3d 616 (Wyo. 2003), is the 
only one of these cases in which reformation of contract was actually raised as 
a claim in the complaint.  
Id., ¶ 1 at 
619.  The facts of Cordero are more complex than the facts 
in the other cases just described:

 
 
Cordero 
Mining Company (Cordero), a subsidiary of Kennecott Energy Company (Kennecott), 
contracted for work to be done at its mine in CampbellCounty.  The general contractor and subcontractor 
were required to procure insurance naming Cordero as an additional insured.  However, the subcontractor's policy 
failed to do so.  After settling 
claims made against Cordero by an injured worker, the general contractor's 
insurer, Transcontinental Insurance Company and Continental Casualty Company 
(together CNA), and Cordero filed claims against the subcontractor's insurer, 
United States Fidelity and Guarantee Insurance Company (USF & G), and its 
agent, The Barlow Agency (Barlow), including claims for reformation of the 
insurance policy, negligence in failing to name Cordero, and breach of contract 
on the basis that Cordero was an intended third-party beneficiary.  The district court granted summary 
judgment for USF & G and Barlow as to all claims.

 
 

Id., ¶ 1 at 
619.

 
 
[¶27]   In affirming the summary judgment 
in favor of the agency and the insurer, we first concluded that (1) it was the 
intent of the contract between Cordero and the contractor that the contractor 
obtain insurance naming Cordero as an additional insured; (2) it was the intent 
of the contract between the contractor and the subcontractor that the 
subcontractor obtain insurance naming Cordero as an additional insured; (3) it 
was the intent of the agency to obtain insurance for the subcontractor naming 
"the owner of the mine" as an additional insured; and (4) this combination of 
facts indicates that Cordero was an intended third-party beneficiary of the 
subcontractor's promise to procure insurance.  Id., ¶ 20 at 
624.

 
 
[¶28]   After next concluding that the 
agency's knowledge that Cordero was to be a named insured should be imputed to 
the insurer, we considered the bases of the district court's ruling against 
Cordero, those being that the subcontractor had violated its duty to review the 
policy and to reject it if it did not comply with the coverage requested, and 
that Cordero had done nothing to ensure that the appropriate insurance was in 
place before proceeding with the work.  
Id., ¶ 25 at 
625.  We affirmed those conclusions 
based upon the reasoning of Small, Feather, and Moore, after 
first determining that Cordero, as third-party beneficiary, could be in no 
better position than the subcontractor, meaning that the defenses of failure to 
read and failure to mitigate were available to the insurer against Cordero.  Id., ¶¶ 27-31 at 
626-27.  Interestingly enough, 
however, in concluding that the failure-to-read and failure-to-mitigate defenses 
applied to bar both Cordero's breach of contract and tort claims, we did not 
address the district court's right, if any, to reach for the equitable remedy of 
reformation.  Id., ¶ 33 at 
627.  Consequently, the question of 
whether failure to read is a bar to reformation was not answered by Cordero, just as it had not been 
answered by any previous Wyoming case.  In summary, even after Cordero, this Court has only gone so far 
as to say that the defenses of failure to read and failure to mitigate barred a 
plaintiff's legal contract and tort claims.9

 
 
[¶29]   The courts of the country are split 
over the separate question of the availability of the equitable doctrine of 
reformation where an insured has failed to read an insurance 
policy.

 
 
            
The insured's failure to read the policy at issue has often been offered 
as a defense to reformation, drawing a variety of responses from the 
courts.  While many of these 
decisions speak in terms of broad principles, they should be considered in light 
of the inherently equitable nature of reformation.

 
 
            
As a general rule, the courts have not been receptive to claims that 
insureds should be barred from reformation by their failure to examine the 
policy sufficiently, or to the similar claim that the insured did, in fact, read 
the policy and should be held to know what it said.

 
 
            
. . . .

 
 
            
Under the broad general rule, reformation is not precluded by the fact 
that the insured has held the policy for some time without reading it, even 
after a loss has occurred.  Where 
this rule is applied, mere receipt of the policy does not charge the insured 
with constructive knowledge of its terms, although there is limited contrary 
authority, at least where the failure to read the policy is only a part of the 
"fault" which the insured may be said to bear for the policy not reflecting the 
real intent of the parties.  In 
fact, many courts explicitly take the approach that the effect of failure to 
read the policy should not alone be the basis for deciding whether there is a 
right to reformation, but that such failure should be merely one circumstance of 
the case to be considered.

 
 
            
. . . .

 
 
            
The theory behind allowing reformation despite an insured's failure to 
read the policy is that the insured accepts the policy in the erroneous but good 
faith belief that it conforms to the agreement made, and to hold otherwise would 
permit the insurer to take advantage of its own wrong, or of a mutual 
mistake.

 
 
            
While the general rule does not bar reformation merely because the 
insured accepts an incorrect policy, it must still be determined whether the 
failure to read the policy constitutes negligence, although the trend of 
authority is that mere failure of the insured to read his or her policy does not 
amount to such laches and negligence as will bar 
reformation.

 
 
            
The principle of the above cases is also stated in terms of the rule that 
an insured who accepts and retains a policy is bound to know the contents 
thereof being inapplicable to an equitable proceeding to reform the 
policy.

 
 
2 Lee R. 
Russ & Thomas F. Segalla, Couch on 
Insurance § 27:72, at 27-74 (3d ed. 2005 & Cum. Supp. 2006) (internal 
footnotes omitted).  The contrary 
view is described in a later section in the same 
authority:

 
 
            
Contrary to the rule recognized in the preceding sections, there is 
authority that the insured has the duty to read his or her policy to ascertain 
the contents and if the policy is unsatisfactory the insured must object thereto 
at that time and not wait for loss long afterward and then claim a right of 
reformation.  This rule has been 
urged even though the insured never had possession of the 
policy.

 
 
            
Under the foregoing view, an insured cannot have a policy reformed merely 
because it does not conform to what he or she supposed it contained, where he or 
she has accepted it without reading it, and there has been no deceit or 
overbearing inducement on the part of the insurer.

 
 
            
Unawareness of a provision in the policy has been held not to justify 
reformation unless the insured is misled by acts of the insurer, and there is 
limited authority that even the acts of the insurer's agent in forging the 
insured's signature to a document designed to obtain the insured's signed 
acknowledgement of denial of request for accidental death benefits, and in 
failing to inform insured that requested coverage for such benefits had been 
rejected, do not provide justification for reformation in the face of the 
insured's failure to inform himself or herself of the policy's terms.  Equity will not reform a policy merely 
because it does not conform to the application, where it has been retained by 
the applicant without examination, at least, where the insurer had no reason to 
believe that it would not be read, and there is no fraud or mutual 
mistake.

 
 

Id. 
§ 27:74, 
at 27-78 (2005 & Cum. Supp. 2006) (internal footnotes 
omitted).

 
 
[¶30]   These contrasting views are summed 
up in 4A John Alan Appleman & Jean Appleman, Insurance Law and Practice § 2913, at 
636 (1969) (internal footnotes omitted) as follows:

 
 
            
Two views are represented by these cases.  The majority view apparently permits the 
insured to rely upon the thought that the oral intention of the parties was 
expressed in the written contract, and does not require him to examine the 
policy.  Those cases permit 
recovery, as an examination of their facts will show, though the suit for 
reformation is not brought for several months, and perhaps even several years, 
after the policy was delivered.  The 
minority view requires that the insured act diligently in examining the policy 
and notify the insurer if the contract is not satisfactory, and holds 
reformation to be barred by the insured's own laches if he fails so to do.  The latter view is certainly the more 
logical, but it is decidedly questionable whether the average layman who is 
insured would ever comply with such a legal duty.

 
 
[¶31]   These secondary sources have 
reviewed dozens of cases from across the country in contrasting the two views of 
the effect of failure to read an insurance policy upon the availability of the 
doctrine of contract reformation.  
We see no reason to duplicate that effort here.  See, e.g., Estate of Blakely v. Federal Kemper Life 
Assurance Co., 640 N.E.2d 961, 967 (Ill. App. 2d Dist. 1994) (rule that 
insured has duty to read the policy does not apply to equitable proceeding for 
reformation); Commercial Cas. Ins. 
Co. v. Hosey, 191 So. 343, 345 (Ala. 1939) (failure to read policy not a violation of a 
positive duty and does not bar reformation); Jenkad Enters., Inc. v. Transportation Ins. Co., 18 S.W.3d 34, 38 (Mo. Ct. App. 2000) (reversing trial court's reformation of 
policy, because insured had failed in its duty to read the policy); Martinez v. John Hancock Mut. Life Ins. Co., 367 A.2d 904, 910 (N.J. Super. Ct. App. Div. 1976) (denying reformation of life 
insurance policy to raise limits where insured did not read policy).  See also 43 Am. Jur. 2d Insurance §§ 381-82 
(2003).

 
 
[¶32]   We are convinced that the majority 
view is the correct viewwhere effectuation of an antecedent agreement is 
thwarted by mutual mistake in reducing that agreement to writing, justice is not 
served by judicial enforcement of the mistaken writing, rather than the intended 
agreement, just because one of the parties did not read the writing.  While we continue to hold that failure 
to read and failure to mitigate bar the legal claims, which is the principle 
espoused in Small v. King and the other cases from this Court 
cited above, see supra ¶¶ 14, 21-28, 
we conclude that they should not and do not bar the equitable remedy of contract 
reformation.  See Crompton v. Bruce, 669 P.2d 930, 
934-35 (Wyo. 
1983) (failure to read contract before signing it is not such negligence as to 
defeat reformation).

 
 
[¶33]   McMurry Construction believes that 
it can prove, by clear and convincing evidence, that it reached an agreement 
with Ohio Casualty, through BW Insurance, for builder's risk coverage for the 
full replacement value of the two buildings, and that both sides to that 
agreement intended that full replacement value was $5,521,299.00.  McMurry Construction contends that the 
policy was not written to reflect that agreement only because Ohio Casualty 
would not write a blanket policy covering both buildings, and that it was in the 
process of "breaking out" the values between the two buildings when the mutual 
mistake occurred.  Reformation is an 
equitable remedy, and we see no compelling reason why McMurry Construction 
should not be allowed to seek enforcement of the contract, reformed to its 
original intent, solely because it did not read the policy upon receiving 
it.  This case must be remanded to 
the district court for trial on the factual issues underlying the elements of 
the equitable doctrine.

 
 
            
Motion to Amend 
Complaint

 
 
[¶34]   As outlined above, the district 
court denied McMurry Construction's motion to amend its complaint.  See supra ¶¶ 10 & 11.  We review the denial of a motion to 
amend a pleading under the following standard:

 
 
            
A motion to amend a pleading under W.R.C.P. 15(a) "shall be freely given 
when justice so requires."  However, 
a district court's decision to grant or deny a motion to amend is a matter best 
left to the judgment of that court and we will not reverse its decision absent 
an abuse of discretion.  Ekberg v. Sharp, 2003 WY 123, ¶ 9, 76 P.3d 1250, 1253 (Wyo. 2003).

 
 

Ray v. 
St. Vincent Healthcare, Inc., 2006 
WY 98, ¶ 7, 139 P.3d 464, 466 (Wyo. 2006).

 
 
[¶35]   
The district court broke the new allegations of the proposed 
amended complaint into three categories, and denied amendment for a different 
reason as to each category.  We 
cannot say that the denial was an abuse of discretion as to any of the three 
categories.  First, the district 
court disallowed amendment for the purpose of adding additional tort and 
contract claims based upon the builder's risk policy under the theory that those 
claims, like those already presented, were barred by McMurry Construction's 
failure to read the policy.  Second, 
the district court disallowed amendment for the purpose of adding a completely 
unrelated business auto claim on the ground that discovery on other matters was 
complete.  Third, the district court 
disallowed amendment for the purpose of adding a claim under a separate CGL 
policy because the evidence showed that the CGL policy's liability coverage was 
never at issue, given McMurry Construction's rebuilding of the collapsed 
building before any legal demand was made upon it to do 
so.

 
 
[¶36]   We cannot say that any of these 
decisions evidenced an abuse of discretion, where the appropriate exercise of 
discretion is characterized as "exercising sound judgment with regard to what is 
right under the circumstances and without doing so arbitrarily or 
capriciously."  Sanchez v. State, 2006 WY 116, ¶ 25, 142 P.3d 1134, 1142 (Wyo. 2006).  The 
district court presented a reasonable basis for each decision, based upon 
objective criteria.  See id.  The complaint was filed on November 14, 
2005, and the motion hearing was on August 28, 2006, nearly ten months 
later.  Discovery was complete in 
regard to the existing claims.  The 
business auto policy issues were totally unrelated to the issues at hand, and 
the CGL policy, though related to the underlying facts, would have required 
renewed discovery because the claim questions would be different.  The party seeking amendment has the 
burden of showing why the motion should be granted and that burden was not met 
in this case.  The "ultimate issue 
is whether the court could reasonably conclude as it did."  Doenz v. SheridanCountyBd. of 
CountyComm'rs, 949 P.2d 464, 465 (Wyo. 1997).  In the instant case, it was not 
unreasonable for the district court to deny amendment of a complaint to add new 
issues to a ten-month-old case.

 
 
 
 
CONCLUSION

 
 
[¶37]   The district court appropriately 
granted summary judgment to BW Insurance and Ohio Casualty on the tort and 
contract causes of action contained in McMurry Construction's complaint because 
those causes of action were barred by McMurry Construction's failure to read the 
insurance policy documents sent to it.  
Summary judgment was not appropriate, however, on the equitable doctrine 
of reformation, which remains viable under the majority rule, which we adopt 
today.  The summary judgments are 
reversed to that extent and this matter is remanded to the district court for 
further proceedings consistent herewith.

 
 
[¶38]   The district court did not abuse 
its discretion in denying McMurry Construction's motion to amend its complaint 
and that denial is affirmed.

 
 
 
 

FOOTNOTES

1The 
State sought separate bidsone for each 
building, and one composite bid.  
McMurry's composite bid was accepted as the low 
bid.

2Generally 
speaking, builder's risk insurance covers the owner's interest in the property 
during construction.  11 Lee R. 
Russ & Thomas F. Segalla, Couch on 
Insurance §§ 155:42-43, at 155-60 & 155-61 (3d ed. 1998 & Cum. Supp. 
2006).

3The 
original premium estimate was, to say the least, inaccurate.  Had Ohio Casualty provided builder's 
risk coverage of $5,521,229.00, the premium would have been 
$20,790.00.

4Insurers 
impose a "co-insurance penalty" in builder's risk policies where the coverage is 
not equal to the property's full value.

5BW 
Insurance is the successor to an original named defendant, Community First 
Insurance, Inc., Wyoming.

6McMurry 
Construction rebuilt the livestock pavilion without any claim or legal demand 
being made by the State of Wyoming.

7Black's 
Law Dictionary 1307 (8th 
ed. 2004), citing Douglas Laycock, Modern American Remedies 39 (3d ed. 
2002), has modernized the definition of reformation to explain that "[i]f the 
parties made a mistake about the premises of their agreement, about some fact in 
the world outside their word-processing machines, reformation is not a 
solution."

8This case 
more nearly resembles the failure-to-mitigate cases, than it does the 
failure-to-read cases.  The logic of 
the case is that the insured could have avoided any losses by filing first-party 
medical claims, the availability of which she was aware.

9In the 
different context of a renewal policy, however, we have held that the insured 
has the right to presume that the new policy is the same as the old, and that 
the insurer has the obligation to call any changes to the attention of the 
insured.  Aetna Ins. Co. v. Lythgoe, 618 P.2d 1057, 1060 (Wyo. 1980).