Court Opinion

ID: 9640230
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:01:31.637435+00
Date Added: 2024-06-11T18:10:28.448943
License: Public Domain

CHASE, Circuit Judge
(dissenting).
As there was no mutual mistake and no fraud either claimed or found, the basis for the reformation of this insurance policy can be put, as it has been, only on the vague ground of inequitable conduct. At most, that rests upon the failure of Johnson & Higgins to comply with a rather thinly proved practice to call attention to any departures from the terms of a binder embodied in a superseding policy when they presented that to the defendant for approval. Had the defendant relied on any such custom and so been induced to approve the policy after but casual examination in the belief that only the binder risk was covered, there would, indeed, be some ground for reformation. But the facts are otherwise. Reilly, acting for the defendant, was an experienced expert on insurance contracts whose business it was to read policies submitted for the express purpose *968of determining whether the defendant would sell the policy. He did read this one and knew exactly what language was in it. There is nothing to show that the policy was not in terms one which the defendant could, and would, issue for some premium and nothing to show that Reilly misunderstood the defendant’s liability under it. What he^did not fully comprehend was that the coverage was more extensive than that of the binder which limited one loss to one location while the policy did not. But what .was the effect of that? Simply, of course, the basis for a higher premium rate. Even if we assume that there was some failure in the duty owed the defendant when Johnson & Higgins submitted the policy without notice of any change from the binder provisions, is it ■reasonable to believe that that failure brought about the actual issuance of the policy? There is nothing in this record to induce such a belief. Instead, notice of the change would at most have given the defendant express information that Johnson & Higgins understood that under the-policy a greater risk for the same premium was being assumed than -had been under the binder. Any possible reformation should be limited to an adjustment of the premium to make it commensurate, assuming without more that it was not, with a fair premium for the risk taken. But such relief is doubtful,' for the defendant was not misled as to the amount of the policy premium.
The sort of reformation allowed here, and for reasons so advanced that I cannot find adequate support for them, fails to give effect to any equities which have arisen in favor of the plaintiff by reason of the defendant’s conduct.
After such consideration as it, unhindered, chose to give the proposed policy, the defendant issued it. It allowed it to remain in force for a considerable time during which it caused it to be made applicable to a new primary policy and made no objection, whatever, to its terms until after a loss. Then for the first time, when it is too late for the plaintiff to get the reinsurance elsewhere which it had good reason to believe it had obtained from the defendant, the claim is made that the defendant is entitled to have the policy reformed; not because of any fraud; not because of a mutual mistake; not because of any mistake whatever as to the actual terms of the policy; but because of what really simmers down to a failure on the part of Johnson & Higgins to call the defendant’s attention expressly to the fact that the binder did not provide the reinsurance wanted since it limited the excess coverage to loss measured by locations.
Reilly knew the policy didn’t do that when he read it and, regardless of what obligations the defendant had, or had not, assumed under the binder, he knew what obligations it was assuming under the policy. He relied on his own expert judgment in approving the policy, and his mistake in believing that the policy risk was the same as the binder risk seems to me no just ground for remaking a contract which not only made the risk definite but which, no matter what had been done before, the parties understood was issued expressly for that purpose.
I would reverse the decree allowing reformation under the circumstances here disclosed.