451 Pa. 154 | Pa. | 1973
Opinion by
This is an appeal from an order of the Court of Common Pleas of Philadelphia sustaining preliminary objections in the nature of a demurrer to the amended
Line Lexington and Millwork Company, Inc., appellant (hereinafter referred to as “Line”), filed a complaint in equity against Pennsylvania Publishing Corporation (hereinafter referred to as “Publishing”) not a party to this appeal, Marsh & McLennan, Inc., appellee (hereinafter referred to as “Marsh”), and various insurance companies, appellees (hereinafter referred to as “Insurers”). Preliminary objections in the nature of a demurrer and also raising additional questions not pertinent to this appeal were filed. Appellant filed an amended complaint and, after the entry by the court below of an order dismissing the amended complaint, an appeal was taken to this court.
Line, by way of a written lease dated April 5, 1971, leased an Industrial building which it owned to Publishing. Inter alia> the lease required Publishing to pay as additional rent, all fire insurance premiums on the demised premises and/or the building of which the demised premises was a part. By an oral agreement between Line and Publishing, the latter undertook to obtain fire insurance in the amount of $70,000.00 in order to protect fully Line’s ownership interest in the building.
Publishing contacted Marsh as broker and as agent for Insurers and secured fire insurance policies contain
A review of the complaint forces the conclusion that it alleges facts justifying reformation of the insurance policies to name appellant as the insured party with respect to the building.
“12. Pursuant to the said oral agreement defendant [Publishing] applied to defendant Maesh, an insurance broker and agent for each of the remaining defendants, for fire insurance on the said building in the amount of $70,000. . . . Plaintiff does not know whether the said applications were oral or in writing, the content thereof (other than the allegations set forth in Paragraph 13 hereof), nor precisely when they were made by defendant Publishing to defendant Maesh. The facts relating thereto are in the exclusive knowledge of defendants Publishing and Maesh. . . .
“13. . . . defendant Publishing disclosed to defendant Maesh at the time of its application for said
“19. Defendant Marsh, well knowing that plaintiff was the owner of the said building and that plaintiff was intended to be designated in the said policies as the insured party with respect thereto, caused each of the said policies of insurance to be issued to defendant Publishing as the insured party as to both the building and the contents and failed to cause plaintiff to be designated in the several policies of insurance as the insured party with respect to said building.”
Ordinarily, a mistake must be mutual to the parties to the contract in order to justify reformation of a written instrument on the basis of mistake. Bugen v. New York Life Insurance Co., 408 Pa. 472, 475, 184 A. 2d 499, 500 (1962). Since the complaint suggests that Marsh intentionally caused Publishing to be named as the insured party, the lower court was correct in noting that this is not a case of mutual mistake.
Apart from the doctrine of mutual mistake, authorities have recognized that a mistake by one party, and knowledge of the mistake by the other, should justify relief as fully as a mutual mistake. Williston on Contracts, 3rd Ed. §1577; Restatement of Contracts §505; Corbin on Contracts, 1960 Ed. §610. In effect, the party with knowledge of the mistake is estopped from relying on the mistake.
Our courts have indicated approval of that doctrine as early as Cook v. Liston, 192 Pa. 19, 43 A. 389 (1899) .
It remains to determine whether this doctrine would justify relief under the facts alleged in the appellant’s complaint. We are satisfied that the complaint contains the elements of estoppel set forth in GEGG v. Aetna, supra. First, appellant alleged that it was the owner of the building. That allegation establishes that it has an insurable interest. Second, appellant alleged that the applicant, Publishing, disclosed to Marsh that appellant was the owner and Publishing was the lessee of the building. Marsh was thereby in possession of all of the facts relevant to the risk involved in insuring the building. Third, appellant alleged that Marsh knew that appellant was intended to be designated as the insured party, yet Marsh caused Publishing to be named as the insured party. Marsh therefore was advised of the desired coverage and failed to provide that coverage.
The lower court, relying on Spires v. Hanover Fire Insurance Co., 364 Pa. 52, 70 A. 2d 828 (1950), refused to grant relief to a “total stranger” to an insurance policy. Spires does not demand such a result in the in-
The lower court also relied upon Van Cor, Inc. v. American Casualty Co. of Reading, 417 Pa. 408, 208 A. 2d 267 (1965). This case merely affirms the rule that, in order for one to be a third party beneficiary, to a contract, the contracting parties must have so intended.
The court below contended that our appellate courts have never granted relief to a “total stranger” to a written contract. Bugen v. New York Life Insurance Co., 408 Pa. 472, 184 A. 2d 499 (1962) refutes this contention. There, while the plaintiff had been named as beneficiary in an earlier life insurance policy, she was not named in the policy upon which liability was predicated. She was granted reformation on the basis of mutual mistake. Where the gravamen of a complaint is the failure of an insurance company to name the plaintiff as a beneficiary, it would deprive the aggrieved party completely of relief to adopt the rule relied upon below.
The liability of appellee Insurers must be derived from Marsh on a theory of agency. The complaint al
Decree below reversed and case remanded for proceedings not inconsistent with this opinion. Each party to bear own costs.
As to Publishing, the court below transferred the case to the law side of the court. At the time the record was certified to this court, Line’s action against Publishing was still pending.
Prior to this oral agreement, Line had obtained a $50,000.00 fire insurance policy on the building with a carrier that is not involved in this action. The total value of the building is alleged to have been $120,000.00.
At the same time Publishing applied for $900,000.00 insurance on the conlents of the building which contents belonged to Publishing. That coverage is not at issue in this appeal.
From the Insurers’ preliminary objections, it is apparent that the appellant notified the Insurers of its claim before they had made any settlement with Publishing. The Insurers chose to ignore this claim and to consummate the negotiations with Publishing rather than to use the vehicle of interpleader or declaratory judgment to ascertain their liability. See, Pa. R. C. P. 2301 et seq., and Act of June 18, 1923, P. L. 840, §1 et seq., 12 P.S. §831 et seq.
Appellant also contends that the facts in his amended complaint would entitle him to relief at law on the theory that Publishing was appellant’s agent. We need not reach that issue in view of our disposition of the matter.
The court’s per curiam opinion approves of the lower court’s recognition of this doctrine.
The mistake in Kaufman was not so glaring as to warrant an inference that the insurance company had such knowledge, and the plaintiff failed to produce any other evidence of such knowledge. Therefore, reformation was not granted in that case.
The appellant was not barred from recovery on the face of the pleadings because of their failure and the failure of Publishing to notice the mistake. An insured or the agent of the insured is not charged with knowledge of all of the terms of the policy, see, e.g., Q-MGG v. Aetna, supra and cases cited therein. It was the obligation of the appellees to allege and prove that the error in this case was so significant as to warrant the invocation of the theory of constructive knowledge.