{"id":895773,"date":"2019-04-23T11:25:41","date_gmt":"2019-04-23T17:25:41","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895773"},"modified":"2019-04-23T11:25:43","modified_gmt":"2019-04-23T17:25:43","slug":"when-can-you-ask-for-redemption","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/when-can-you-ask-for-redemption\/","title":{"rendered":"When Can You Ask for Reformation?"},"content":{"rendered":"\n<p>Daniel Veroff | <a href=\"https:\/\/www.propertyinsurancecoveragelaw.com\/2019\/03\/articles\/insurance\/when-can-you-ask-for-reformation\/\">Property Insurance Coverage Law Blog<\/a> | March 31, 2019<\/p>\n\n\n\n<p>Everyone in the insurance industry has heard the term&nbsp;<em><strong>reformation<\/strong><\/em>, but it is often misunderstood. In California (and elsewhere), the legal right to reformation originated over a century ago when we still had separate courts of \u201claw\u201d and \u201cequity.\u201d Reformation was a creature of the latter, designed to prevent one party from using a mistake in a written agreement against the other.<\/p>\n\n\n\n<p>Today, a court\u2019s power to reform is generally restricted to the scenarios set forth in California\u2019s Civil Code section 3399, which only authorizes reformation in three situations: When a contract fails to reflect the parties\u2019 actual agreement because of fraud, a mutual mistake, or the unilateral mistake by one party which was known or suspected by the other.<sup>1<\/sup><\/p>\n\n\n\n<p>Still, policyholders and public adjusters should be wise to the fact that section 3399 has not totally displaced courts\u2019 equitable powers. \u201cIt is well settled that the remedy of reformation is equitable in nature and not restricted to the exact situations stated in [Civil Code] section 3399.\u201d<sup>2<\/sup>Courts are disinclined to apply Section 3399 strictly when doing so would \u201cgive[] a windfall\u201d to one party and \u201cwork[] a great injustice\u201d on the other.<sup>3<\/sup><\/p>\n\n\n\n<p>Policyholders and public adjusters should also be wise to the fact that section 3399 is not specific to insurance, and therefore, cases in other contexts may not be applicable. Compare, for example, the non-insurance case,\u00a0<em>Lemoge Elec. v. San Mateo Cty.<\/em>\u00a0(1956) 46 Cal.2d 659, versus the insurance case,\u00a0<em>Modica v. Hartford Acc. &amp; Indem. Co.<\/em>\u00a0(1965) 236 Cal.App.2d 588. In\u00a0<em>Lemoge<\/em>, an electrician submitted a bid for a job, but failed to account for some of the work needed. The other party suspected the error but accepted the bid anyway. The electrician asked the court to reform the contract to increase the bid amount, but the court found nothing to \u201creform\u201d the contract to because the parties never agreed to any other price. The court found there was no \u201cantecedent agreement\u201d to reform the contract to. On the other hand, in the insurance case\u00a0<em>Modica<\/em>, the court reformed the policy to include a type of coverage the agent agreed to provide but mistakenly excluded. The insurance company argued there was no \u201cantecedent agreement\u201d on the premium or limits for such coverage, and therefore, there was nothing to reform to. The court rejected the argument, holding:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>We have no doubt that reformation may be had notwithstanding the absence of agreement by the parties as to the specific amounts of such coverages, if such amounts under the evidence are reasonably determinable.<\/p><\/blockquote>\n\n\n\n<p><em>Modica<\/em>&nbsp;allowed reformation despite the fact it would be disallowed under the non-insurance case,&nbsp;<em>Lemoge<\/em>.<\/p>\n\n\n\n<p>Another argument that carriers often make is that the mistake was made by the agent, not the insurance company. But, in the insurance context at least, courts have held that an agent\u2019s mistake is attributable to the carrier if it is made within their authority.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>[W]here a policy of insurance does not represent the intention of the parties solely because of some fault or negligence&nbsp;<em><strong>of an agent of the insurer<\/strong><\/em>, equity will reform it so as to make it express such intention. So, a policy will be reformed to express the actual contract&nbsp;<em><strong>made with the agent in obtaining the insurance<\/strong><\/em>, although such contract differs from the expressed terms of the policy and notwithstanding it is provided that agents have no authority to make, alter, or discharge contracts.<sup>4<\/sup><\/p><\/blockquote>\n\n\n\n<p>Remember, even an independent agent can legally be considered the agent of the insurance company. \u201cThe most definitive characteristic of an insurance agent is his authority to bind his principal, the insurer.\u201d<sup>5<\/sup>&nbsp;In addition, look for \u201ca notice of agency appointment on file with the Department of Insurance.\u201d<sup>6<\/sup><\/p>\n\n\n\n<p>Reformation is always a highly factual question that requires careful review of the legal authorities. It is always advisable to consult with an attorney experienced in that area\u00a0<em><strong>before<\/strong><\/em>demanding the insurance company reform the policy, to ensure the demand is made as best it can be.<br>_____________________________________<br><sup>1<\/sup>\u00a0Section 3399 states, \u201cWhen, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.\u201d<br><sup>2<\/sup>\u00a0<em>Jones v. First Am. Title. Co.<\/em>\u00a0(2003), 107 Cal.App.4th 381, 388.<br><sup>3<\/sup>\u00a0<em>Schools Excess Liab. Fund v. Westchester Fire Ins. Co.<\/em>\u00a0(2004) 117 Cal.App.4th 1275, 1284.<br><sup>4<\/sup>\u00a0<em>Nat\u2019l Auto. &amp; Cas. Ins. Co. v. Indus. Acc. Comm.<\/em>\u00a0(1949) 34 Cal. 2d 20, 24-25\u00a0(emphasis added).<br><sup>5<\/sup>\u00a0<em>Marsh &amp; McLennan of Cal., Inc. v. City of Los Angeles<\/em>\u00a0(1976) 62 Cal.App.3d 108, 117-118.<br><sup>6<\/sup>\u00a0<em>Id.<\/em>; Ins. Code \u00a7 1704;\u00a0<em>Loehr v. Great Republic Ins. Co.<\/em>\u00a0(1990) 226 Cal.App.3d 727, 732-733.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Daniel Veroff | Property Insurance Coverage Law Blog | March 31, 2019 Everyone in the insurance industry has heard the term&nbsp;reformation, but it is often misunderstood. In California (and elsewhere), the legal right to reformation originated over a century ago when we still had separate courts of \u201claw\u201d and \u201cequity.\u201d Reformation was a creature of&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/when-can-you-ask-for-redemption\/\">Continue reading <span class=\"screen-reader-text\">When Can You Ask for Reformation?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9914],"tags":[9895,10593,10781],"class_list":["post-895773","post","type-post","status-publish","format-standard","hentry","category-insurance-coverage","tag-advise-consult","tag-insurance-coverage-disputes","tag-reformation","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>When Can You Ask for Reformation? 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