CHAPTER XVII. REFORMATION OF POLICIES. SEC. 479. When policy will be reformed. SEC. 480. SEC. 481. Must be shown not to embody the contract made. Remedy must be sought before final judgment. When policy will be reformed. SEC. 479. Where the terms of the contract are plain and distinct, and the actual intention of the insurer and insured is not doubtful, a policy issued, either by fraud or mistake, that does not comply with the terms of the order therefor, or embody the real intention of the parties thereto, may be reformed in equity, or in those States where the court is permitted to exercise the functions of a court of law and equity, instanter, upon trial.' But, in order to entitle the party to this relief, the policy must materially vary from the real contract of the parties, and the variance must be fully made out by the clearest evi 1 Delaware Ins. Co. v. Hogan, 2 Wash. C. C. (U. S.) 4; Motteaux v. The London Assurance Co., 1 Atk. 545; Collett v. Morrison, 9 Hare, 162; Henkle v. Royal L. Ins. Co., 1 Ves. Sr. 317; Cone v. Niagara F. Ins. Co., 62 N. Y. 619; Equitable Ins. Co. v. Heurne, 20 Wall (U. S.) 494; Phonix Ins. Co. v. Gurnee, 1 Paige (N. Y.) Ch. 278. In Equitable Ins. Co. v. Hearne, 20 Wall (U. S.) 494, the plaintiff applied for insurance upon his vessel for a voyage from Liverpool to Cuba and to Europe via Falmouth, at a rate named, and the company offered to insure at a somewhat higher rate, saying: "It is worth something, you know, to cover the risk at the port of loading in Cuba." It was held that, under an insurance issued at such higher rates, it must be implied that the port of loading might be different from the port of discharge, and where the assured accepted this offer, and told the insurer to insure at and from Liverpool to Cuba and to Europe via a market port, etc., a policy which insured to port of discharge in Cuba and Europe via market port, etc., did not conform to the contract, and was reformed accordingly. Delaware Ins. Co. v. Hogan, ante; Ionides v. Pacific F. & M. Ins. Co., L. R. 6 Q. B. 674. The rule applicable to this class of cases is well illustrated in the following case. Thus, in Hearne v. New England Mut. Ins. Co., 10 Albany Law Jour. 348, the United States Supreme Court considered the questions involved in ref erence to the powers and duties of courts in reformation of a contract of marine insurance, which was entered into under the following circumstances: On the 7th of May, 1866, Hearne made his application by letter to the company for insurance. He said: "The bark Maria Henry is chartered to go from Liverpool to Cuba and load for Europe, via Falmouth for orders where discharge. Please insure $5,000 on this charter, valued at $16.000, provided you will not charge over four per cent. premium." On the 9th of that month, the company, through its president, replied: "Your favor of the 7th is at hand. As requested, we have dence.' The real intention of the parties, at the time when the policy was made, will control, and, as it prima facie is presumed to entered $5,000 on charter of bark Maria Henry, Liverpool to port in Cuba, and thence to port of advice and discharge in Europe, at four per cent." The policy was made out on the same day, and described the voyage as follows: "At and from Liverpool to port in Cuba, and at and thence to port of advice and discharge in Europe." Thereafter the policy was delivered to the assured and received without objection. The vessel was loaded with coal at Liverpool, and proceeded thence to St. Iago de Cuba. There she discharged her outward cargo. She went thence to Manzanillo, another port in Cuba, where she took on board a cargo of native woods. On the 17th of September, 1866, she sailed thence for Europe, intending to go by Falmouth for orders Upon the 10th of that month, on her homeward voyage, she was lost by perils of the sea. Due notice was given of the loss, and it is admitted to have occurred as alleged in the bill. The company refused to pay, upon the ground that the voyage from St. Iago de Cuba to Manzanillo was a deviation from the voyage described in the policy, and therefore put an end to the liability of the assured. On the 7th of December, 1868, two years after the loss occurred, Hearne brought an action at law against the company. The court held that he was not entitled to recover by reason of the deviation before stated. He failed in the suit. On the 16th of January, 1871, he filed his bill, and prayed therein to have the contract reformed so as to cover the elongated voyage from St. Iago to Manzanillo. The court held that the contract was not entitled to be reformed to meet the complainant's demand. SWAYNE, J., who delivered the opinion, said: “The correspondence between the parties constituted a preliminary agreement. The answer to Hearne's proposal was plain and explicit. It admitted but of one construction. He was bound carefully to read it, and it is presumed he did so. In that event there was as little room for mis * * apprehension on his part as on the part of the company. Such a result was hardly possible. There is nothing in the evidence which tends to show that any occurred. The inferrence of full and correct knowledge is inevitable. It is as satisfactory to the judicial mind as direct evidence to the same effect would be." * "The party alleging the mistake must show exactly in what it consists, and the correction that should be made. The evidence must be such as to leave no reasonable doubt upon the mind of the court as to either of these points. Beaumont v. Bramley, 1 F. & R. 41-50; Marquis of Broadalbane v. Marquis of Chandos, 2 M. & C. 711; Fowler v. Fowler, 4 D. G. & Jones, 255; Sells v. Sells, 1 Dr. & S. 42; Loyd v. Crocker, 19 Beav. 144. The mistake must be mutual and common to both parties to the instrument. It must appear that both have done what neither intended. Rook v. Lord Kensington, 2 K. & I. 753; Eaton v. Bennet, 34 Beav. 196. A mistake on one side may be a ground for rescinding, but not for reforming, a contract. Mortimer v. Shortal, 2 Dr. & War. 572; Sells v. Sells, supra.' The complainant claimed that there was a usage that vessels going to Cuba might visit at least two ports, one for discharge and the other for reloading. But it appeared that, in such cases, the contract of insurance was expressed so as to allow such a course. A reformation on this ground was, therefore, denied. The court also refused to decree a return of the premium. In Equitable Safety Ins. Co. v. Hearne, 20 Wall (U. S.) 474, a reformation of the contract of insurance was allowed on the following state of facts: "Hearne's proposition to the company was by the letter, to insure the bark Maria Henry, "voyage from Liverpool to Cuba, and to Europe via Falmouth." The company's response was in effect: "We will insure as proposed by you-Europe to Cuba―at three and one-half per cent. It is worth something, you know, to cover the risk at port of loading in Cuba." But the contract, as expressed in the policy, was "four thousand dollars on charter of bark Maria Henry, at and from Liverpool to port of discharge in Cuba, and at and hence to port of advice and discharge in Europe." The court was of opinion that the true contract was: "This company hereby insures $4,000 upon the charter of the bark Maria Henry, as proposed by the assured, from Europe to Cuba and back to Europe, at three and one-half per cent. net, the pre 1 Head v. Providence Ins. Co., 2 Cranch (U. S.) 127; 2 John. Ch. (N. Y.) 630; 2 Cranch (U. S.) 419; Andrews v. Essex F. & M. Ins. Co., 3 Mas. (U. S.) 6. embody the real understanding of the parties, the evidence to overcome it must be clear, direct and conclusive.' In all cases where the variance is material, and seriously affects either the party's remedy, or measure of recovery, application to reform the policy should be made, as, except it be reformed, except in exceptional cases hereafter enumerated, the contract as expressed therein, will control. The real intention of the parties may be arrived at, as well by showing that the agent or company issuing the policy knew that the plaintiff did not intend to have certain provisions in the policy apply in a given case, as by a contract actually expressed. Thus, where a policy was issued upon a building, with a provision that "if the premises are at mium enhanced to cover the risk at port of loading in Cuba." SWAYNE, J., who delivered the opinion, said: "The intent of the parties, as manifested, is the contract. Upon any other construction, the important language as to the port of loading' would be insensible and without effect. No other interpretation, we think, can reasonably be given to it. In Dickey v. The Balt. Ins. Co., 7 Cr. 327, the policy insured the vessel upon a voyage from New York to Barbadoes, and at and from thence to the Island of Trinadad, and at and from Trinidad back to New York. This court held that the words, at and from' protected the vessel in sailing from one port to another in Trinidad to take in a part of her cargo. MARSHALL, C.J., said: "It is the settled doctrine of the courts of England that insurance at and from an island, such as those in the West Indies, generally insures the vessel while coasting from port to port for the purpose of the voyage insured.' He refers to Bond v. Nutt, 2 Cow. 601, and to Thelluson v. Ferguson, 1 Doug. 360. The case of Cruikshank v. Jansen, 2 Taunt. 310, is to the same effect. These authorities fully sustain the proposition laid down. We are not aware that their authority has been questioned. They show the just liberality of construction which obtains where contracts of insurance are involved. In this controversy, the clear terms of the preliminary agreement warranted the court below in overruling the departure from it found in the policy." 'Head v. Prov. Ins. Co., ante. In Mead v. The Westchester F. Ins. Co., 64 N. Y. 454, it was held that to justify a court of equity in changing the language of a written instrument sought to be reformed, in the absence of fraud, it must be established that both parties agreed to something different from what is expressed in the writing, and the proof should be so clear and convincing as to leave no room for doubt. In an action to reform a policy of fire insurance upon a dwellinghouse, the alleged mistake was that an adjoining building was intended to be insured instead of the dwelling described. It appeared that the applicant had owned both buildings and had lived in the one described; that defendant's agent had insured the furniture therein; that he had insured the building claimed to have been intended and the policy was then outstanding. He had the description of both buildings upon his books. The applicant had removed from the dwelling to the adjoining building, which was occupied as a dwelling and paint shop, and did not, in fact. own the former. The agent, however, testified that he supposed that he did. The premium upon the dwelling was one and one-half per cent. upon the building it was two and one-half. The application was by letter for a policy on "my house." The agent, thereupon, made out the policy in question upon the dwelling, charging one and one-half per cent. The building was burned. The only direct evidence to establish that defendant intended to insure the building was that of the agent who, in answer to the question, "To what property do you understand this letter referred?" answered, to the property burned. Upon his cross-examination he testified, in substance, that at the time and before the policy was issued he was in doubt, but his idea was it was on the dwelling and he so made out the policy. It was held that the facts did not show an intent, on the part of defendant, to insure the building burned, and did not justify a reformation of the policy. * * the time of insuring, or during the life of this policy, vacant, unoccupied, or not in use, and remain thus for over ten days, without the company's consent is indorsed hereon, this insurance shall be void and of no effect." In an action to reform the policy, it was shown that the agent, at the time of issuing the policy, knew that the building was vacant and would probably remain so, and that it was expressly understood that it would remain vacant until September, to which the agent consented, it was held that this amounted to a waiver of the provision, and that the plaintiff was entitled to have his policy reformed, by having the company's consent indorsed thereon, according to the real understanding and intention of the parties.' Without a reformation. of the policy, however, the provision under the decisions of the New York courts would have applied and been a bar to a recovery. Thus, where commission merchants applied for insurance upon property in their warehouse, and the company issuing the policy knew that they were engaged in commission business, and the policy issued contained a provision that "goods held in trust or on commission are to be declared as such, otherwise the policy will not extend to cover such property," and the policy was not reformed, or any application for that purpose made, it was held that the policy must be construed according to its terms, and that, being plain and unambiguous, parol evidence was not admissible to vary its import or meaning. COCHRAN, J., in passing upon this point, said: "The appellees contended, on the hypothesis that the appellant knew that their application was to be for insurance on all the goods destroyed, both their own and those held on commission, that the policy should be so construed as to give effect to that intention, or in other words, that the extent of the risk underwritten should be ascertained from the fact stated, and not from the terms of the policy. The rule presented in this proposition we think cannot be applied here. The authorites referred to sustain the construction sought, present facts so far different from those in this case, as to involve other principles. In all of them the construction turned, either upon the meaning of terms, which by usage or custom had acquired a particular sense, or on evidence that the insurer, after a full disclosure of facts material to the risk and in violation of an obligation implied therefrom, neglected to insert in the policy such a reference to those facts as was essential to its validity as a contract of insurance. Parol evidence was admitted in 1Cone v. Niagara Ins. Co., 62 N. Y. 619. one class not to change or vary the contract, but to explain the meaning of the terms used, and in the other to prevent the insurer from obtaining the advantage of a contract which, through his fault, would otherwise have been without obligation, and void. The policy in this case is entirely consistent with the terms of the application, free from ambiguity and susceptible of a consistent construction in all its parts, and if there was mistake or error in the insurance effected, it does not appear to be one attributable to the appellant, nor such as to authorize us to look beyond the terms of the policy in ascertaining its meaning and legal effect. We think it cannot be excepted from the operation of the general rule requiring written contracts to be interpreted by their own terms, without regard to extrinsic facts.' The appellees appear to have obtained this insurance without making any specific statement of the nature of their interest in the goods destroyed, and had there been no express condition to the contrary, their interest in the goods held on commission might have been covered by the policy, for upon that state of fact, the material question would have been, whether the failure to inform the insured that the goods were held on commission would have affected the risk, and the admission that the communication of that fact would not have changed the rate of premium, might have been relied on as concluding it. But that is not the question here. This policy expressly provides that it was not to cover goods held on commission unless they were so declared, or as we understand it, so expressed as to appear, in some form, in the description of the goods intended to be covered by it. The right of the insurer to limit the extent of the risk by that condition cannot be doubted. And as we must presume, from the acceptance of the policy by the appellees, that they had knowledge of that condition, we think it should have the contemplated effect of limiting the risk to the goods which belonged to them."" Must be shown not to express the contract made. SEC. 480. The same rules prevail in reference to the reformation of a policy of insurance as to any other contract. The court cannot make a new contract for the parties, but only compel such a change therein as makes the 'Mumford v. Hallet, 1 Johns. 439; Mellen & Nesmith, v. National Ins. Co., 1 Hall, 452; Phil. Ins. 47, 319. 2 Phillips v. Knox Co. Ins. Co., 20 Ohio, 174; Briehta v. Lafayette Ins. Co., 2 Hall, 372; 2 Am. Lead. Cas. 642. Baltimore Fire Ins. Co. v. Loney et al. 20 (Md.), 3 Am. Law Reg. (U. S.) 651; see also, Peoria M. & F. Ins. Co. v. Hall, Mich. 3 id. 417. |