The Alabama Supreme Court affirmed a trial court’s judgment to reform a commercial property policy on the basis of mutual mistake. Har-Mar Collisions, Inc. v. Scottsdale Ins. Co., 2016 WL 3136189 (Ala. June 3, 2016).
An auto shop operator obtained commercial property coverage which incorrectly identified the name in which it was incorporated. After a fire destroyed the auto shop, the insurer made an initial payment but later claimed it was unclear what, if any, insurable interest the named insured had in the auto shop. The auto shop’s sole shareholder asserted he had never incorporated a business under the name identified as the named insured and that it must have been “a typo or abbreviation.” The auto shop sued the insurer seeking a judgment that the corporation was a named insured under the policy and asserting claims for breach of contract and bad faith failure to pay claims. At trial, the trial court found there was a mutual mistake and that reformation was appropriate.
The Alabama Supreme Court affirmed the trial court’s judgment to reform the policy to reflect the corporation as the named insured. The court considered the Ohio Court of Appeals decisionGooslin v. B-Affordable Tress Serv., (N. S-10-045, Aug. 12, 2011) 2011-Ohio-4048, and found that, similar to that case, the issue is whether the contract provision in question is clearly and convincingly contrary to the parties’ understanding. The court found that it was, reasoning that the undisputed evidence showed that the parties intended for the policy to insure the auto shop, regardless of under what name it is incorporated, and that the policy did not reflect that intent because it lists a corporation that does not exist and never existed.