Opinion ID: 1733805
Heading Depth: 1
Heading Rank: 3

Heading: Israel's Reformation Theory.

Text: Israel alleged in the alternative that the policy endorsement should be reformed by adding upset coverage to reflect the true intentions of the parties. He argues that with upset coverage provided in a reformed insurance policy, the entire loss would logically fall upon the insurer FMI, and FMI should therefore be required to indemnify him. Again issue preclusion presents a barrier to Israel's theory of recovery. Each of the four prerequisites for employing issue preclusion is satisfied. The reformation issue is identical, for Israel's answer filed in response to Crane's petition in the first lawsuit alleged the same basis for reformation that is framed by the pleadings in the second case. The issue was not only raised by the pleadings but litigated in the first lawsuit; Israel sought to prove that the parties intended to include upset coverage and would have except for their mutual mistake. Finally, the reformation issue was not only material and relevant to the disposition of the first case, but its determination was necessary and essential to the resulting judgment. Had the trial court found in favor of Israel on the reformation issue raised by its answer at the first trial, Crane's upset damages would have been payable under the insurance contract and not recoverable in the tort action as proximately caused by Israel's or FMI's negligent failure to include such insurance in the policy endorsement. We need not decide, as did the trial court, that Israel lacked standing to seek reformation in the present case. Israel had full and fair opportunity to litigate his reformation theory in the first case, and relitigation of the issue would be inconsistent with judicial economy and established principles of issue preclusion. See Hunter v. City of Des Moines, 300 N.W.2d 121, 123-24 (Iowa 1981).