Travelers Ins. Co. v. Bailey
124 Vt. 114
Case Synopsis:
Defendant insured appealed the decree of the Chancery Court, Windsor County (Vermont), in favor of plaintiff insurance company; the chancellor allowed reformation of the annuity provisions of a life insurance policy on the basis of mistake.
Facts:
-The insured submitted an application to an agent of the insurer for a life insurance policy.
-The plan requested in the application was one insuring the defendant’s life for $ 5000, with an annuity at age 65 for $ 500 a year for the balance of his life, 10 years certain.
-When the application was accepted and the policy prepared, the correct descriptive information was inserted on the wrong policy form.
-The printed portion of the form used yielded the correct life insurance contract, but produced an annuity obligation to pay $ 500 a month for life, 100 months certain.
Holding:
The court affirmed the grant of reformation, holding that where there had been established beyond a reasonable doubt a specific contractual agreement between parties, and a subsequent erroneous rendition of the terms of the agreement in a material particular, the party penalized by the error was entitled to reformation, if there had been no prejudicial change of position by the other party while ignorant of the mistake. Here the insured was not prejudiced by the existence of the error.
Rules:
-Where it is established beyond a reasonable doubt that there was a specific contractual agreement between the parties and a subsequent erroneous rendition of the terms of the agreement in a material particular, the party penalized by the error is entitled to reformation if there has been no prejudicial change of position by the other party while ignorant of the mistake.
-If you have a mechanical mistake and both parties agree that’s not what they contracted for, then courts are going to apply the actual agreement the parties had.
Analysis:
The court affirmed the decree.
124 Vt. 114
Case Synopsis:
Defendant insured appealed the decree of the Chancery Court, Windsor County (Vermont), in favor of plaintiff insurance company; the chancellor allowed reformation of the annuity provisions of a life insurance policy on the basis of mistake.
Facts:
-The insured submitted an application to an agent of the insurer for a life insurance policy.
-The plan requested in the application was one insuring the defendant’s life for $ 5000, with an annuity at age 65 for $ 500 a year for the balance of his life, 10 years certain.
-When the application was accepted and the policy prepared, the correct descriptive information was inserted on the wrong policy form.
-The printed portion of the form used yielded the correct life insurance contract, but produced an annuity obligation to pay $ 500 a month for life, 100 months certain.
Holding:
The court affirmed the grant of reformation, holding that where there had been established beyond a reasonable doubt a specific contractual agreement between parties, and a subsequent erroneous rendition of the terms of the agreement in a material particular, the party penalized by the error was entitled to reformation, if there had been no prejudicial change of position by the other party while ignorant of the mistake. Here the insured was not prejudiced by the existence of the error.
Rules:
-Where it is established beyond a reasonable doubt that there was a specific contractual agreement between the parties and a subsequent erroneous rendition of the terms of the agreement in a material particular, the party penalized by the error is entitled to reformation if there has been no prejudicial change of position by the other party while ignorant of the mistake.
-If you have a mechanical mistake and both parties agree that’s not what they contracted for, then courts are going to apply the actual agreement the parties had.
Analysis:
- Where an antecedent contract has been established by the requisite measure of proof, equity will act to bring the erroneous writing into conformity with the true agreement. On the basis of the maxim, “Equity regards that as done which ought to be done,” equity will deal generously with the correction of mistakes. This power has been regularly and frequently invoked in connection with real estate transactions, but there is nothing that requires that equity limit its application to that kind of case.
- To insist on enforcement of the contract once knowledge of the error is acquired by the insured is held to be unconscionable, and classified as then a unilateral mistake known to the other party, which supports reformation. If the mistake exists in the writing unknown to both parties, it is classified as “mutual” and reformation is allowed.
- Where there has been established beyond a reasonable doubt a specific contractual agreement between parties, and a subsequent erroneous rendition of the terms of the agreement in a material particular, the party penalized by the error is entitled to reformation, if there has been no prejudicial change of position by the other party while ignorant of the mistake. If such change of position can equitably be taken into account and adjusted for in the decree, reformation may be possible even then. Mistakes generally occur through some carelessness, and failure to discover a mistake may be in some degree negligent, but unless some prejudice to the other party’s rights under the true contract results, so as to make its enforcement inequitable, reformation will not be refused because of the presence of some negligence.
The court affirmed the decree.
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