PrairieGold Solar LLC v. AGCS Marine Insurance Company, et al.
Attorneys and Parties
Brief Summary
Insurance coverage and policy reformation concerning whether an all-risk policy covers hurricane/windstorm (natural catastrophe) losses and the high burden to reform a policy based on mutual mistake.
Upon reargument, granted defendants' motion for summary judgment and dismissed the complaint based on reformation of the policy to exclude natural catastrophe losses.
The grant of summary judgment to defendants on their reformation counterclaims and the resulting dismissal of the complaint.
Defendants failed to establish mutual mistake by clear and convincing evidence at the time of contracting; record evidence, including deposition testimony, created triable issues of fact and supported that plaintiff believed named windstorms were covered, and the policy’s text defined windstorm and did not list windstorm, hurricane, or natural catastrophe in the General Exclusions.
Background
Plaintiff insured its Puerto Rico facility under a September 2014 all-risk and business interruption policy issued by defendants. The policy defined a "windstorm" to include storms named by the National Weather Service or National Hurricane Center. Hurricane Maria caused damage to plaintiff’s Carmelo Productora facility. The policy’s General Exclusions listed 15 excluded causes of loss, but did not list windstorm, hurricane, or natural catastrophe. Plaintiff claimed coverage for the hurricane losses; defendants denied coverage and counterclaimed for reformation, asserting both parties intended to exclude natural catastrophe coverage and pointing to plaintiff’s prior inquiry into purchasing additional natural catastrophe coverage, which plaintiff declined.
Lower Court Decision
The Supreme Court, New York County, on reargument, granted defendants’ motion for summary judgment, effectively reforming the policy to exclude natural catastrophe losses and dismissing the complaint.
Appellate Division Reversal
The Appellate Division unanimously reversed, denied defendants’ motion for summary judgment on reformation, and reinstated the action. The court held defendants did not carry their clear-and-convincing burden to prove mutual mistake at the time of policy execution and that triable issues of fact existed. Evidence showed plaintiff believed named windstorms were covered, defendants’ own employee acknowledged plaintiff clearly thought it had such coverage, and the policy text supported coverage (windstorm defined; no exclusion for windstorm/hurricane/NAT CAT in General Exclusions). Plaintiff’s inquiry into additional natural catastrophe coverage, standing alone, did not prove mutual mistake.
Legal Significance
Reaffirms the heavy presumption that an integrated insurance policy negotiated by sophisticated parties reflects their intent and that reformation requires clear and convincing evidence of a mutual mistake at the time of execution. Insurers cannot obtain summary judgment on reformation merely by citing the insured’s exploration of optional coverages where the written policy text supports coverage and testimony creates factual disputes.
Policy reformation based on mutual mistake is an extraordinary remedy; where the policy’s plain language supports coverage and the record shows the insured believed coverage existed, summary judgment for reformation is improper even if the insured once considered purchasing additional coverage.