Opinion ID: 1800001
Heading Depth: 1
Heading Rank: 1

Heading: primary policy

Text: Greene argues that the Primary Endorsement is ineffective to cover Scott, for two main reasons. First, Greene argues that parol evidence is not admissible to clarify to whom the Primary Endorsement refers because that endorsement, which names James Scott Vance instead of Scott James Vance, is unambiguous on its face. This argument ignores the well-settled law that parol evidence is admissible to clarify a latent ambiguity. In Medical Clinic Board v. Smelley, 408 So.2d 1203, 1206 (Ala.1981), we stated: The ambiguity may be latent if the writing appears clear and unambiguous on its face, `but there is some collateral matter which makes the meaning uncertain; and parol or other extrinsic evidence is admissible to explain or clarify a latent ambiguity.' (Quoting Ford v. Ward, 272 Ala. 235, 130 So.2d 380 (1961).) In Lamar v. Minter, 13 Ala. 31, 35 (1848), this Court stated that parol evidence was admissible to clarify the latent ambiguity arising from the incorrect listing of Sheppard Spencer Johnson's name in a deed. Specifically, the Court stated that it would not bar parol evidence to show that Spencer S. Johnson in the deed was a transposition of the person's first and middle names and was intended to refer to Sheppard S. Johnson. Id. Likewise, in this case, we will not bar parol evidence to show that the naming of James Scott Vance in the Primary Policy is a transposition of the person's first and middle names and was intended to refer to Scott James Vance. In support of its motion for summary judgment, Hanover submitted the affidavit of Scott's father, the president of VEC, stating that he and Scott both had understood that Scott was not covered by Hanover. Further, Hanover introduced a deposition of its agent in which the agent said that both Hanover and VEC intended the Primary Endorsement to exclude Scott from coverage. The agent also stated that he had helped VEC obtain coverage from another insurance company, Progressive Insurance Company, solely because Hanover would not cover Scott. Greene failed to produce any evidence to contradict the evidence that the true intent of Hanover and VEC was to exclude Scott from coverage under the Primary Endorsement. [3] Thus, the parol evidence was admissible at the summary judgment stage to reform the insurance contract with respect to the transposition of first and middle names, in order to show the true intent of the parties. See National Life & Accident Ins. Co. v. Saffold, 225 Ala. 664, 665-66, 144 So. 816 (1932) (allowing parol evidence clarifying a woman's name to reform an insurance contract). Greene argues that even if the parol evidence was admissible, the trial court could not use it to reform the name James Scott Vance to Scott James Vance because such a reformation would operate to prejudice Greene's right as a third-party beneficiary of the Primary Policy. Greene cites Ala. Code 1975, § 8-1-2, which states: When, through fraud, a mutual mistake of the parties or a mistake of one party which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised by a court on the application of the party aggrieved so as to express that intention, so far as it can be done without prejudice to the rights acquired by third persons in good faith and for value. (Emphasis added.) Section 8-1-2 codified the equitable remedy of reformation of contracts. American Liberty Ins. Co. v. Leonard, 270 Ala. 17, 21, 115 So.2d 470, 473 (1959). This remedy will not operate to prejudice third parties, such as bona fide purchasers, who acquire rights for value that would be affected by the reformation. Irvin v. Griffin Corp., 808 F.2d 802, 806 (11th Cir.1987) (interpreting Ala.Code 1975, § 8-1-2). The no-prejudice bar will not, however, prevent reformation that will affect the rights of third parties, such as judgment creditors, where those rights were acquired without paying value. See Beasley v. Mellon Fin. Servs. Corp., 569 So.2d 389, 394 (Ala. 1990) (Reformation will be allowed ... against ... judgment creditors); 66 Am. Jur.2d Reformation of Instruments § 69 (1973) (reformation of an instrument may be had in equity as against judgment creditors, since they are not regarded as bona fide purchasers for value); see also 2 Couch on Insurance 3d § 27:82 (1975) (insurance policies may be reformed or modified to limit or exclude coverage if such was the intention of the parties, even where the rights of third-party claimants who are not parties to [the] insurance contract are adversely affected). The trial court properly reformed the Primary Endorsement to reflect the undisputed intention of VEC and Hanover to exclude Scott from coverage. Greene cannot recover under the Primary Policy.