Sunday, December 1, 2013

OneBeacon America Insurance Co. v. Travelers Indemnity Company of Illinois case brief

OneBeacon America Insurance Co. v. Travelers Indemnity Company of Illinois case brief summary
465 F.3d 38 (2006)

Plaintiff insurer sought to recover under a motor vehicle liability policy that defendant insurers had issued to a vehicle leasing agency. Citing defendants' policy, plaintiff sought reimbursement of the policy's limit. Defendants argued mutual mistake and asked to have the policy reformed. The U.S. District Court for the District of Massachusetts refused to reform the policy and ordered defendants to pay. Defendants appealed.

Plaintiff settled a personal injury suit on behalf of its insured, the lessee of a vehicle from defendants' insured. Plaintiff sought reimbursement under defendants' policy. Defendants conceded that the policy could be read to provide coverage, so they focused on their claim to reform the policy to match the parties' intent that it only covered lessees who specifically applied for, were approved for, and paid for coverage under defendants' policy. Defendants also argued that there was no public policy justification for refusing to reform the policy to conform to the parties' intent.


  • The reviewing court agreed. 
  • Mutual mistakes justifying contract reformation could result simply from inattention, and such was the mistake urged by defendants. 
  • The evidence, including the lease agreement and the course of conduct, was compelling that the insured/leasing agency intended that its own insurance coverage for a particular vehicle would terminate once the vehicle was leased, and defendants' coverage applied only if the lessee specifically opted for it. 
  • Defendants met their burden to provide full, clear, and decisive proof of mistake, and there were no equitable barriers to reformation.

The court reversed the district court's summary judgment for plaintiff. The district court was directed to enter summary judgment for defendants, providing for reformation of the policy consistent with the court's ruling.

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