Argonaut Great Central Insurance Company v. Audrain County Joint Communications
MEMORANDUM DECISION IT IS HEREBY ORDERED that ACJC's Request for Reformation is DENIED. IT IS FURTHER ORDERED that the parties shall confer, and on or before September 19, 2013, shall file a joint notice (i) identifying whether any previously-asserted issues remain for determination prior to trial; (ii) estimating the number of days necessary for the jury trial; and (iii) advising whether the parties wish to try the case in St. Louis or in Hannibal. The case shall be tried in Hannibal unless both parties consent to trial in St. Louis. Response to Court due by 9/19/2013. Signed by District Judge Audrey G. Fleissig on 9/10/2013. (NCL) Modified docket text on 9/10/2013 (NCL).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
ARGONAUT GREAT CENTRAL
AUDRAIN COUNTY JOINT
No. 2:11CV00034 AGF
This diversity tort action is before the Court for findings of fact and conclusion of
law on the issue of contract reformation. Defendant Audrain County Joint
Communications (“ACJC”) maintains that due to mutual mistake, the general liability
insurance policy provided to it by its insurer should be reformed retroactively to include an
endorsement that the purchase of the insurance did not waive ACJC’s sovereign immunity
for tort liability provided for by Missouri Revised Statute § 537.600.1.1 Plaintiff Argonaut
Great Central Insurance Co. (“Argonaut”) maintains that under Missouri Revised Statutes
§ 537.610.1, ACJC waived sovereign immunity by virtue of having purchased the
Section 537.600.1 provides, in relevant part, as follows:
Such sovereign or governmental tort immunity as existed at common law in
this state prior to September 12, 1977, except to the extent waived, abrogated
or modified by statutes in effect prior to that date, shall remain in full force
insurance policy at issue. The request of reformation, which the parties agreed would be
determined by the Court, was severed from the jury trial on the merits. The bench trial on
the issue of reformation was held on August 26 and 27, 2013.2 Upon review of the record,
including the parties’ evidence and arguments, and having observed the demeanor of the
one witness who testified live, reformation shall be denied.
The relevant facts are largely undisputed. On July 24, 2006, there was a burglary
and fire at a store owned by Hickman Foods, Inc. (“Hickman”), which was insured by
Argonaut. After Argonaut paid Hickman for the property damage caused by the
burglary and fire, Argonuat filed this action as Hickman’s assignee, asserting claims
against ACJC for negligence (Count I) and reckless, willful, and wanton misconduct
(Count II), all in relation to ACJC’s monitoring of a security panel on its premises.
ACJC, as a tax-funded 911 call center, is a political subdivision of the State of
Missouri. Sometime prior to August 2005, ACJC asked Patricia Jackson, an agent with
Melahn Insurance Agency (“Melahn”), to shop for insurance for the newly formed 911
center. This was ACJC’s first contact with Jackson. ACJC filled out a “Request for
Insurance,” setting forth its insurance needs. No mention was made of sovereign
immunity. Indeed, the evidence shows and the Court finds that neither the ACJC
representatives involved in procuring the insurance, nor Jackson, knew at that time that the
“An action to reform a written instrument in accordance with the intent of the parties
was exclusively equitable, thus a claim for reformation under the Federal Rules is triable to
the court.” Smith Flooring, Inc. v. Pa. Lumbermens Mut. Ins. Co., 713 F.3d 933, 937 (8th
purchase of liability insurance by ACJC could waive its sovereign immunity, or the means
by which such immunity could be preserved despite the purchase of liability insurance.
Indeed, the subject was not considered at all.
In August 2005, Jackson presented a proposal to ACJC for general liability
insurance to be provided by VFIS, a subdivision of Gladfelter Insurance Group, that met
ACJC’s needs as set forth in its request. (Doc. No. 89-12.) VFIS specializes in
providing insurance coverage to emergency service organizations throughout the United
States and Canada. In 2005, it was VFIS’s general practice to include in a policy issued to
a Missouri public entity, such as ACJC, a Missouri Sovereign Immunity Endorsement that
states that no coverage was provided for liability for damages that were barred by
sovereign immunity, and that the policy was not intended to act as a waiver of any defense
such as immunity available to the insured. Indeed there was credible testimony that
within VFIS such an endorsement was mandatory, that is, required by VFIS in liability
policies ensuring Missouri public entities such as ACJC. But the policy prepared for
ACJC did not include this endorsement. No one could explain this omission, and the
evidence suggests that it was due to a mistake by VFIS.3
The customer service representative at Melahn, whose job it was to review policies
prepared by agents to see if the policies matched what the agent quoted to the client,
ACJC did not firmly establish the omission of the endorsement was a mistake, as
ACJC did not locate or depose the former employee who prepared the policy, and it is
possible, but not likely, that the preparer determined the endorsement would not apply to
tis entity. But, of course, it is ACJS’s burden to establish the omission was a mistake.
approved the policy as prepared, and it was presented to ACJC. ACJC reviewed the
policy and accepted it, effective October 1, 2005, through October 1, 2006. The policy
did not include the sovereign immunity endorsement, or any other provision about
sovereign immunity. (Doc. No. 89-14, 15.) The absence of the endorsement was not
noted when the policy was renewed in 2006. Based on the evidence presented at the
bench trial, the Court finds that this, too, was likely a mistake on the part of VFIS, and that
when the policy was renewed in 2006, neither ACJC nor Jackson knew about waiving
and/or preserving ACJC’s sovereign immunity.
This lawsuit was filed on May 2, 2011. In December 2011, during discovery,
ACJC realized that the endorsement was not part of its VFIS liability policy, and that this
might mean it had waived its immunity relevant to the suit. Thereafter, by agreement,
ACJC and VFIS proceeded to amend the policy by adding the endorsement.
As noted above, Argonaut maintains that ACJC waived sovereign immunity by
virtue of having purchased the VFIS policy. Argonaut maintains that while the
amendment to the policy by ACJC and VFIS is effective going forward, it has no
retroactive effect. According to ACJC, the record establishes that the VFIS policy did not
include the above-noted endorsement due to the mutual mistake of ACJC and VFIS.
Argonaut responds, however, that ACJC’s reformation argument fails as a matter of law
because the evidence shows that there was no mutual mistake as claimed by ACJC.
Under Missouri law, to support a claim for reformation due to mistake, the party
seeking reformation must show by “clear and convincing” evidence that, “1) a preexisting
agreement between the parties affected by the proposed reformation is consistent with the
change sought; 2) a mistake was made in that the [contract] was prepared other than as
agreed; and 3) the mistake was mutual, i.e., it was common to both parties.” Cardinal
Partners, LLC v. Desco Inv. Co., 301 S.W.3d 104, 110 (Mo. Ct. App. 2010) (citation
omitted); see also Black & Veatch Corp. v. Wellington Syndicate, 302 S.W.3d 114, 126
(Mo. Ct. App. 2009).
[I]n demonstrating a pre-existing agreement between the parties consistent
with the change sought, it is sufficient to show that the parties agreed to
accomplish a particular object and that the instrument was insufficient to
effectuate that intent. Even circumstantial evidence can establish such
agreement, provided that natural and reasonable inferences drawn from such
evidence clearly and decidedly prove the alleged mistake.
Mo. Land Dev. I, LLC v. Raleigh Dev., LLC, ___ S.W.3d ___, 2013 WL 3246389, at *8
(Mo. Ct. App. June 28, 2013) (citing Lunceford v. Houghtlin, 326 S.W.3d 53, 65 (Mo. Ct.
App. 2010); see also Smith Flooring, Inc., 713 F.3d at 937) (“a party seeking reformation
[under Missouri law] must show that the writing fails to accurately set forth the terms of the
actual agreement or fails to incorporate the true prior intentions of the parties”) (citation
In this context, “clear, cogent and convincing evidence is that which instantly tilts
the scales in the affirmative when weighed against evidence in opposition; evidence which
clearly convinces the fact finder of the truth of the proposition to be proved.” Smith
Flooring, Inc., 713 F.3d at 939 (citation omitted). “This degree of proof relates not only
to the existence of a mutual mistake, but also to establishment of the actual agreement
allegedly made.” Thompson v. Koenen, 396 S.W.3d 429, 434 (Mo. Ct. App. 2013).
Here, even if the Court finds that VFIS mistakenly did not include the sovereign
immunity endorsement with the policy it presented to ACJC, this was a unilateral mistake,
not a mutual mistake. The only evidence of a preexisting agreement, explicit or implicit,
between VFIS and ACJC that the liability policy would include the endorsement or some
policy provision to preserve ACJS’s sovereign immunity, is VFIS and ACJC’s
after-the-fact amendment to ACJC’s policy.4 This however falls far short of clear and
convincing evidence, in light of the contrary evidence in the record that establishes that in
2005 and 2006 ACJC did not think about whether its statutory sovereign immunity would
be waived or preserved with its purchase of the insurance.
Lunceford, 326 S.W.3d 53, relied upon by ACJC is inapposite. In that case the
court reformed a release between settling parties that stated that it released all entities from
liability for an accident, to state that it released only the settling parties. This was based
upon clear and convincing evidence that each of the parties to the release understood at the
time it was entered into that it only pertained to the settling parties. Lunceford, 326
S.W.3d at 67-69. Here, the Court concludes that there is insufficient evidence that ACJC
had a prior understanding or presumption that the VFIS policy would not waive its
sovereign immunity. To the contrary, the evidence noted above that in 2005 and 2006 the
ACJC representatives involved and Jackson did not know about waiving or preserving
Of course, it is in both ACJC’s and VFIS’s financial interest to reform the contract in
a manner that might eliminate Plaintiff’s claim in this lawsuit.
ACJC’s sovereign immunity, negates such a presumption. Cf. Merch. White Line
Warehousing Inc., v. City of Des Moines, No. 00-1938, 2003 WL 1022838, at *6-7 (Iowa
Ct. App. March 12, 2003) (affirming reformation of a city’s liability insurance policy to
include a government immunity endorsement where clear and convincing evidence
showed that at the time it was negotiating for the policy, the city impressed upon its
insurance broker the need for the endorsement and the insurer intended to include the
endorsement but mistakenly omitted it.) While it may be true that ACJC and VFIS did not
discuss waiving sovereign immunity, it is equally clear that the parties never discussed -and never had a meeting of the minds -- with respect to preserving sovereign immunity.
As such, ACJC has not and cannot meet its heavy burden to establish an entitlement to
The Court concludes that ACJC did not meet its burden of presenting clear and
convincing evidence of a preexisting agreement between ACJC and VSIF to include the
sovereign immunity endorsement in the FSIV policy issued to ACJC, and the Court will
not reform the policy in that regard.
IT IS HEREBY ORDERED that ACJC’s Request for Reformation is DENIED.
IT IS FURTHER ORDERED that the parties shall confer, and on or before
September 19, 2013, shall file a joint notice (i) identifying whether any
previously-asserted issues remain for determination prior to trial; (ii) estimating the
number of days necessary for the jury trial; and (iii) advising whether the parties wish to try
the case in St. Louis or in Hannibal. The case shall be tried in Hannibal unless both parties
consent to trial in St. Louis.
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 10th day of September, 2013.
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