Court Opinion

ID: 9645755
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:34:11.510837+00
Date Added: 2024-06-11T18:11:31.133790
License: Public Domain

OVARD, Justice,
dissenting.
Because I believe the trial court properly reformed the insurance contract to reflect the actual agreement of the contracting parties, I respectfully dissent.
Insurance policies are contracts and, as such, are subject to rules applicable to contracts generally. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex.1994). The essence of a contract involves the meeting of the minds between the two parties to the agreement. E.g., Zurich Ins. Co. v. Bass, 443 S.W.2d 371, 374 (Tex.Civ.App. — Dallas 1969, no writ); Sonne v. Federal Deposit Ins. Corp., 881 S.W.2d 789, 791 (Tex.App. — Houston [14th Dist.] 1994, writ denied). When the parties have come to an agreement, the terms can be memorialized in a written contract.
*222When both parties to the contract are mistaken as to what the terms of the written contract are or when there is a unilateral mistake induced by fraud, the courts can reform the written memorialization to reflect the actual terms of the contract. See Automobile Ins. Co. v. United Elec. Serv. Co., 275 S.W.2d 833, 838 (Tex.Civ.App. — Fort Worth 1955, writ refd n.r.e.). The underlying objective of reformation is to correct a mutual mistake made in preparing a written instrument, so that the instrument truly reflects the original agreement of the parties. Cherokee Water Co. v. Forderhause, 741 S.W.2d 377, 379 (Tex.1987). Reformation is not an alteration or amendment of the actual contract, but merely a change to the written memorialization to more truly reflect what the parties had agreed. In reforming an instrument the court does not change the terms of the contract made by the parties, it merely declares what those terms were.1 Automobile Ins. Co., 275 S.W.2d at 840. Thus, reformation necessarily relates back to the time that the original contract was first memorialized in writing.
For the remedy of reformation to be available on the ground of mutual mistake the parties must have reached a definite and explicit agreement, understood in the same sense by both, which agreement has been misstated in the written contract because of a mistake common to both contracting parties. Zurich Ins. Co., 443 S.W.2d at 374. Reformation requires that the facts and circumstances warranting reformation be established by clear and convincing evidence. Oldaker v. Travelers Ins. Co., 497 S.W.2d 402, 404 (Tex.Civ.App. — El Paso 1973, no writ).
As the majority acknowledges, courts in this state have repeatedly allowed insurance contracts to be reformed to reflect the true contract that existed between the parties. Champlin Oil & Refining Co. v. Chastain, 403 S.W.2d 376, 377 (Tex.1965). Reformation of an insurance policy may be effected even after a loss has occurred if the agreement actually made by the parties has not been correctly incorporated in the instrument through mutual mistake, and this is true even when there have been several renewals of the contract over a period of years. Automobile Ins. Co., 275 S.W.2d at 838.
In fact, courts in this state have discussed reformation as an option when dealing with a rejection of coverage under article 5.06-1. In Oldaker v. Travelers Insurance Co., the court discussed article 5.06-1 and whether there was a mutual mistake allowing the court the option to reform the contract. Ol-daker, 497 S.W.2d at 404. The court concluded that the party seeking reformation had not established by clear and convincing evidence that mutual mistake or unilateral mistake induced by fraud existed. Oldaker, 497 S.W.2d at 404. That court inferred that had mutual mistake or mistake induced by fraud been proven, reformation was permissible. Oldaker, 497 S.W.2d at 404.
The majority opinion goes beyond any other case in this jurisdiction and expands the current law to severely restrict an individual’s contractual freedoms. The majority points to the Employers Casualty Co. v. Sloan, Unigard Security Insurance Co. v. Schaefer, and Guarantee Insurance Co. v. Boggs decisions in support of its public policy expansion of the law. However, none of these cases is directly on point or expands the law as the majority opinion does.
The Sloan decision deals with an oral contract, where the coverage was denied orally, but the agreement was never memorialized in writing and the parties did not seek reformation. Employers Casualty Co. v. Sloan, 565 S.W.2d 580, 585 (Tex.Civ.App. — Austin 1978, writ ref'd n.r.e.). The Sloan decision never discussed reformation and stands for the proposition that the rejection of uninsured/underinsured coverage must be in writing.
In Unigard the court addressed Personal Injury Protection under article 5.06-3 and a written “Exclusion .of Named Driver” that *223did not mention or refer to the article 5.06-3 coverage. Unigard Security Ins. Co. v. Schaefer, 572 S.W.2d 303, 306 (Tex.1978). The Unigard decision also did not address reformation and stands for the proposition that clear and express rejection of article 5.06-3 coverage is required.2
The Boggs decision simply analyzes the rejection of coverage language of article 5.06-1. Specifically, the court determines that the word “issued” in the statute must be strictly construed. Guarantee Ins. Co. v. Boggs, 527 S.W.2d 265, 268-69 (Tex.Civ.App. — Amarillo 1975, writ dism’d). None of these decisions raises the equitable remedy of reformation, nor do any of these opinions expand the language of article 5.06-1.
I agree with the majority’s analysis of the policies behind article 5.06-1. However, in this case, there is no question that, with the reformation, the rejection of uninsured/un-derinsured coverage by Palestine falls within the plain language and policies of the statute. There is a clear showing of mutual mistake. Both parties to the contract agreed that the terms of the insurance contract included a rejection of uninsured/underinsured coverage. On these terms the parties had a “meeting of the minds” upon which the contract was created. Palestine did not pay a premium for the coverage. The written me-morialization of the contract did not reflect this coverage as required by article 5.06-1. The parties sought to reform the contract to reflect their true agreement. The reformation was in writing, as required by article 5.06-1, and related back to when the original agreement was signed, therefore reflecting the true agreement or contract of the parties.
Although the majority limits its holding only to bar reformation under the rejection of uninsured/underinsured coverage under article 5.05-1, the bar will affect more than the limited circumstances involved in this case. Mutual mistake is not the only case when reformation may be utilized by the courts. Reformation may also be warranted in the case of fraud. See Zurich Ins. Co., 443 S.W.2d at 375. By barring reformation, one of the parties could be prevented from having coverage or not having coverage by the fraudulent act of the other party. When this happens, the courts should have the power to reform the written agreement.
Additionally, the freedom to contract is an important right that the courts should seek to uphold. The legislature has provided the insured with the automatic inclusion of uninsured/underinsured coverage when the parties fail to address the coverage during negotiations. However, uninsured/un-derinsured coverage is not mandatory in this state. See Greene v. Great Am. Ins. Co., 516 S.W.2d 739, 740 (Tex.Civ.App.— Beaumont 1974, writ ref'd n.r.e.). Article 5.06-1 does not prevent insureds from taking on known risks associated with uninsured/underinsured motorists. This Court has held that article 5.06-1 expresses the legislative intent not to guarantee uninsured/underinsured coverage in every case. Farmers Texas County Mut. Ins. Co. v. Griffin, 868 S.W.2d 861, 864 (Tex.App.— Dallas 1993, writ denied). The legislature also provided that, although the parties are not required to have uninsured/underin-sured coverage, when, through a meeting of the minds they agree not to have uninsured/underinsured coverage, they must put the agreement not to have coverage in writing. Tex Ins.Code Ann. art. 5.06-1(1) (Vernon 1981).
If the legislature wishes to expand the law so that reformation under these circumstances is not a proper remedy, thus limiting the contracting parties’ contractual freedoms, then it should do so, but this Court should not take it upon itself to expand the law beyond the plain language of the statute.
The Texas Supreme Court has stated that one of the purposes of article 5.06-1 was to protect the conscientious and thoughtful motorist against losses caused by negligent, financially irresponsible motorists. Francis v. International Serv. Ins. Co., 546 S.W.2d 57, 61 (Tex.1976). In this case, the choice of whether or not to have the coverage was solely under Palestine’s control. Palestine decided not to have the uninsured/underin-*224sured coverage. If Howard was under the false impression that Palestine did have that coverage, he could pursue an action against Palestine. Under the majority opinion, Howard has received a windfall. Palestine rejected coverage and did not pay premiums for the coverage, and INA did not collect premiums for the coverage.
Reformation is an equitable remedy that should be used sparingly. However, when the facts are clear and both parties are in agreement, as in this case, the courts should have the ability to reform contracts to reflect the true contract made between the parties. Because I believe that INA and Palestine, the two parties to the contract, effectively reformed their contract for insurance to reject the uninsured/underinsured coverage, I would overrule Howard’s points of error. I would affirm the trial court’s judgment that the uninsured/underinsured coverage was not in effect at the time of the accident.

. Even when the legislature mandates that a term of an agreement be in writing, reformation is not barred. For example, the statute of frauds is no bar to the reformation of a contract for the sale of land where the parties had an agreement and by their mutual mistake failed to state the agreement in the writing. National Resort Communities, Inc. v. Cain, 526 S.W.2d 510, 513 (Tex.1975).

. The Unigard court stated in dicta that its holding also applied to article 5.06-1 since the public policy aspects of the two coverages are so similar. Unigard, 572 S.W.2d at 308.