Mutual mistake in contract terms is a legal doctrine that many equate with the Hail Mary pass – it’s what you argue when there is nothing else to argue.  And the Massachusetts high court has just limited that doctrine in a significant manner.  To top it off, the decision (subscription required) comes in a dog bite case.  This is not a joke.

The homeowner purchased a new insurance policy with limits of $500,000 but with an endorsement limiting dog bite claims to $25,000.  The endorsement included a list of dog breeds for which there is apparently no coverage at all  The homeowner misunderstood the endorsement, believing that the reduced limit applied to the blacklisted breeds, and claims arising from her dog would have the full coverage limit of $500,000.  Turns out the insurance agent had the same mistaken impression, although neither person mentioned this to the other.

So: dog bites man; man is seriously injured; man sues; insurance company pays $25,000; man gets assignment of homeowner’s rights against insurance company and argues for full coverage; man loses.[1]     

The Massachusetts court said that “absent full, clear, and decisive proof of some prior agreement between the parties . . . different than that contained in the policy, there was no mutual mistake warranting reformation” of the policy.  So it was not enough that two persons on either side of the insurance agreement harbored the same, mistaken, idea.  The failure to communicate with one another, per the court, meant that the “essential element of mutuality” was missing.  On one hand this statement makes no sense; people can have mutual understandings without expressing them.  On the other hand, the court appears to be concerned about a legal doctrine that is already viewed as a desperation pass, and is ready to maintain tight control on that doctrine.  If not mutually expressed at the time, it will not be considered a mutual mistake.