Summary 2007 WY 96

Summary of Decision issued June 15, 2007

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Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: McMurry Construction Co. v. Community First Ins., Inc., BW Insurance Agency, Inc., and Ohio Casualty Ins. Co.

Citation: 2007 WY 96

Docket Number: 06-271

Appeal from the District Court of Natrona County, the Honorable John C. Brooks, Judge

Representing Appellant (Plaintiff): W.W. Reeves of Park Street Law Office, Casper, Wyoming.

Representing Appellee BW Ins. Agency, Inc.: Richard A. Mincer and Billie L.M. Addleman of Hirst & Applegate, PC, Cheyenne, Wyoming. Argument by Mr. Mincer.

Representing Appellee Ohio Casualty Ins. Co.: Patrick J. Murphy and Ryan Schwartz of Williams, Porter, Day & Neville, PC, Casper, Wyoming. Argument by Mr. Murphy.

Issues: Whether the builder’s risk policy claims, including reformation, were barred by the construction company’s failure to read the insurance documents or by its failure to mitigate damages. Whether the district court erred in denying the construction company’s motion to amend its complaint.

Facts/Discussion: McMurry appealed from summary judgments granted to an insurance agency and an insurance company in a controversy primarily involving a builder’s risk insurance policy. McMurry appeals from the district court’s denial of its motion to amend its complaint.

Standard of Review: When the Court reviews a summary judgment, they have before them the same materials as the district court had and they follow the same standards which applied to the proceedings below. In the present case, BW Ins. and Ohio Casualty both admitted negligence and breach of contract which left a purely legal issue for the Court to review de novo.
The issue was whether McMurry’s claims were barred by its failure to read the builder’s risk policy documents or its failure to mitigate damages. The Court’s analysis focused on whether the equitable doctrine of reformation survived in the face of a clear violation of the failure-to-read rule and the failure to mitigate damages.
The Court espouses the principle that an insured has a duty to read his or her insurance policy. The federal courts have also interpreted Wyoming law as imposing upon an insured the duty to read his or her policy.
The Court conjectured that BW and Ohio admitted negligence and breach of contract for purposes of their summary judgment motions under the assumption that failure to read the policy and failure to mitigate damages protected them from liability. McMurry countered that in none of the cases cited did those defenses triumph in the face of a properly pled and proven cause of action for reformation of contract. Reformation is dependent upon an agreement having been reached and that the agreement had been correctly recited in the subsequently written instrument.
The Court stated the question it was being asked to consider was whether McMurry could seek reformation, given its failure to read the policy. Cordero Mining Co. v. United States Fidelity & Guarantee Insurance Co. was the only one of the cases cited in which the reformation of contract was actually raised as a claim in the complaint. The Court summarized that even after Cordero, they have only gone so far as to say that the defenses of failure to read and failure to mitigate barred a plaintiff’s legal contract and tort claims. The Court noted that the courts of the country are split over the separate question of the availability of the equitable doctrine of reformation where an insured has failed to read an insurance policy. The Court stated they were convinced the majority view was correct – where effectuation of an antecedent agreement is thwarted by mutual mistake in reducing that agreement to writing, justice is not served by judicial enforcement of the mistaken writing, rather than the intended agreement, just because one of the parties did not read the writing. The Court concluded that failure to read and failure to mitigate should not and do not bar the remedy of contract reformation.
Motion to Amend Complaint: The district court separated the new allegations of the proposed amended complaint into three categories and denied amendment for a different reason as to each category. The district court presented a reasonable basis for each decision, based upon objective criteria. The complaint was filed in November, 2005 and the motion hearing was in August, 2006. It was not unreasonable for the district court to deny amendment of a complaint to add new issues to a ten-month-old case.

Holding: The district court appropriately granted summary judgment to BW Insurance and Ohio Casualty on the tort and contract causes of action contained in McMurry’s complaint because those causes of action were barred by McMurry’s failure to read the insurance policy documents sent to it. Summary judgment was not appropriate on the equitable doctrine of reformation, which remained viable under the majority rule, which the Court adopted. The summary judgments were reversed to that extent and the matter was remanded to the district court for further proceedings. The district court did not abuse its discretion in denying McMurry’s motion to amend its complaint and that denial is affirmed.

Affirmed in part and reversed and remanded in part.

C.J. Voigt delivered the decision.

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