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Occidental Fire & Cas. of N.C. v. Goodman - 339 Ga. App. 427, 793 S.E.2d 606 (2016)

Rule:

Reformation of a contract is an equitable remedy for correcting an instrument to make it express the true intention of the parties, where from some cause, such as fraud, accident, or mistake, it does not express such intention. The remedy is not available for the purpose of making a new and different contract for the parties, but is confined to establishment of the actual agreement. Where reformation is sought on the ground of mutual mistake, it must, of course, be proved to be the mistake of both parties. The cause of the defect is immaterial so long as the mistake is common to both parties to the transaction. And the negligence of the complaining party will not defeat his right to reformation if the other party has not been prejudiced. Furthermore, although the evidence as to the mistake must be clear, unequivocal and decisive, there is no rule that reformation will be denied unless the mistake be admitted by both parties.

Facts:

On March 8, 2009, Gregory Ryan Gilliam was fatally stabbed at the Irish Bred Pub & Grill. In April 2009, R & R, the new owner of Irish Bred Pub & Grill, was served with a lawsuit filed by plaintiffs parents and estate of Gilliam, seeking wrongful death damages. During acquisition Jones, the sole member of R & R, signed an application for commercial insurance coverage for the new bar and restaurant business as well as an acceptance of a written proposal for insurance coverage from defendant Occidental Fire and Casualty. Because of the lawsuit, R & R requested that, pursuant to the policy, Occidental provide R & R with a defense in the wrongful death suit. But Occidental denied coverage and refused to provide a defense on the basis that R & R was not listed as an insured, and did not come within the definition of, an insured under the policy. After Occidental denied coverage, R & R entered into a settlement agreement with the plaintiffs, whereby R & R assigned all of its claims against Occidental to the plaintiffs. Thus, the plaintiffs filed their complaint against Occidental asserting, among other things, claims for reformation of the insurance policy and breach of contract. The trial court granted the plaintiffs' motions, finding that there was an enforceable contract between R & R and Occidental. The trial court held that the amount of damages caused by the breach of contract was an issue for the jury. The trial court denied Occidental's motion for summary judgment on the plaintiffs' claims. Occidental appealed from the trial court's summary judgment order.

Issue:

In a wrongful death action where plaintiffs sought reformation of the insurance policy in order to correct the mutual mistake of the parties naming the wrong insured, did the trial court err in reforming the policy to identify the owner of the business rather than the former owner, as the insured?

Answer:

No

Conclusion:

The Court of Appeals of Georgia held that the trial court correctly ruled that the insurance policy must be reformed to correct the mutual mistake of the parties naming the wrong insured. The mistake in the name of the insured under the subject insurance policy was one common to both parties and it existed at the time of the execution of the contract of insurance and reformation of the policy to cover the owner of the business, rather than the former owner. The Court further noted that the insurer was not prejudiced by reformation of the policy, as it agreed to insure the operations of the bar and restaurant, accepted payment to do so, and then sought to avoid coverage. Thus, rather than being prejudiced, the insurer stood to obtain a windfall not bargained for absent the equitable remedy of reformation. Considering that there existed genuine issues of material fact as to the remaining claims, the Court affirmed the summary judgment rulings. The Court also added that the trial court correctly awarded post-judgment interest as provided for under the insurance policy after the insurer refused to defend the insured and simply denied coverage.

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