If A Mistake Occurs Regarding Coverage of A Policy, The Policy Will Be Construed Consistent With The Intention of The Parties

Mr. and Mrs. Berry owned two vehicles; a Cavalier and a Durango. The Berrys decided to allow the policy covering the Cavalier to lapse. However, because of a mix-up, coverage for the Durango lapsed. There is no dispute that the Berrys sought to continue coverage only for the Durango when both of their policies with the insurance company were up for renewal. However, due to mistake, the reinstatement of the policy identified a Cavalier, rather than the Durango as the covered vehicle. The Berrys, in order to reinstate the Durango’s insurance, sent payment to the insurance company. Subsequently, Mr. Berry, while driving his Durango, struck a pedestrian. The pedestrian sued for the bodily injuries sustained as a result of the accident.

The insurance company claims that its policy provided no coverage for the Cavalier at the time of the accident. If a mutual mistake occurs regarding the coverage provided by an insurance contract, the contract will be interpreted consistent with the intentions of the parties. The court looked at the intent of the parties to conclude that the policy was intended to cover the Durango, not the Cavalier. Equity has the right to grant relief by reformation of the contract. The court held that equitable contribution cannot be imposed on insurance company because the policy did not provide coverage for the Cavalier at the time of the accident. The court reformed the contract to represent the intention of the parties, which was to have the Durango covered under the policy (not the Cavalier).

 

Mid-Century Ins. Co. v. Founders Ins. Co., 404 Ill.App.3d 961, 936 N.E.2d 780, (Ill.App. 1 Dist., 2010)