Insurer’s Attempt To Reform Policy Rejected

The Missouri Court of Appeals, which has decided a large number of coverage cases recently, ruled yesterday that an insurer could not reform a liability policy when the mistake in the policy was due to the insurer’s failure to properly assess accurate information provided by the insured.
The case is Alea London Ltd. v. Bono-Soltysiak Enterprises, 2006 WL 91451 (Mo. App. E.D. January 17, 2006). The insurer issued a binder to a restaurant that contained a more generous assault and battery exclusion than the insurer intended to issue in the policy. After the binder went into effect, but 13 days before the policy was issued, one restaurant patron knifed and killed another. The court found that the binder constituted the insurance contract in effect at the time of the killing, and the policy covered the assault. The insurer requested that the policy be reformed because it wrongly included a more generous exclusion in the binder based on the belief the restaurant did not serve alcohol. However, the court said the insured provided accurate information about itself, and the mistake was entirely that of the insurer. A contract can be reformed when a mistake is mutual, not when it is unilateral.

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