Sardo v. Fidelity & Deposit Co.

Brief Fact Summary.

Plaintiff sued when his store was robbed and Defendant refused coverage. The trial court ruled in favor of Plaintiff. Defendant appealed.

Synopsis of Rule of Law.

A written contract can only be reformed if there has been a mutual mistake in putting the terms of the parties’ agreement into writing.

Facts.

Sardo (Plaintiff) desired to obtain insurance against theft of the jewelry in his store. Plaintiff visited Fidelity & Deposit Co. (Defendant) agent, who told Plaintiff that the agent had authority only to issue policies covering burglary and that he would speak with Defendant about finding a policy suited to Plaintiff’s needs. Defendant issued a policy covering “money and securities” but not jewelry. Plaintiff did not read the policy but, as he had applied for a policy covering jewelry, assumed it covered jewelry. Plaintiff sued when his store was robbed and Defendant refused coverage. The trial court ruled that since Defendant’s agent had knowledge that there were no securities in Plaintiff’s store that Plaintiff was entitled to have the contract reformed to substitute “jewelry” for “securities.” Defendant appealed.

Issue.

Whether a insurance policy holder is entitled to reformation of the policy if he is mistaken as to what the policy covers.

Held.

No. The trial court’s ruling is reversed. A written contract can only be reformed if there has been a mutual mistake in putting the terms of the parties’ agreement into writing.

Discussion.

In such a case, a court when reforming a contract will make the contract conform to the parties’ actual agreement. Here there was no such agreement. Defendant understood the policy as covering only more money and securities and was unaware that the agent thought otherwise. Nor did Defendant ratify the agent’s acts when it learned of them. The word “securities” was clearly defined in the policy, which Plaintiff neglected to read, and there was thus no mutual mistake entitling Plaintiff to reformation.