A New York trial court has rejected an insured's attempt to reform an insurance policy to remove a 100 percent co-insurance requirement.
The Case
National Compressor Exchange, Inc., sued Hanover Insurance Company, Inc., seeking to recover under its commercial property insurance policy for loss of business income it allegedly incurred when it had no telephone service at its offices on certain days in June and July 2013.
Hanover, after having compensated National Compressor for $12,069.88, contended that it had been fully compensated under the policy, which contained a 100 percent co-insurance requirement.
National Compressor moved for reformation of the policy on the ground of mutual mistake.
The Trial Court's Decision
The trial court denied National Compressor's motion, finding that it failed to state a cause of action for reformation of the policy based on mutual mistake.
In its decision, the trial court found no fraudulent or negligent misrepresentation on Hanover's part such that a claim of unilateral mistake was established.
On the contrary, the trial court continued, there was "no clear allegation" that Hanover had ever been asked to change the policy coverage from the 100 percent coinsurance requirement that originally was provided and that existed "for many years" to a new policy without the co-insurance requirement.
Moreover, the trial court found, the parties had mutually agreed to the 100 percent co-insurance requirement. The trial court pointed out that the prior policies National Compressor had with Hanover all contained the 100 percent co-insurance requirement; that National Compressor had the particular policy in its possession for many months prior to the outage but that it had not objected to the co-insurance term; and that National Compressor had "received the policy which it ordered and had ample opportunity to correct it after its issuance and before the loss."
The trial court observed that a claim of reformation based on "unilateral mistake coupled with fraud" had to be pleaded with a high degree of particularity, and that it required a showing of "unilateral mistake induced by the other party's fraudulent representations." National Compressor failed to meet these pleading requirements, the trial court concluded.
The case is National Compressor Exchange, Inc. v. Hanover Ins. Co. Inc., No. 703116/15 (N.Y. Sup. Ct. Queens Co. Oct. 23, 2019).
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].