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Michigan Mut. Liability Co. v. Type & Press Co.

SEPTEMBER 13, 1965.




Appeal from the Circuit Court of Cook County; the Hon. JOHN J. LUPE, Judge, presiding. Order affirmed.


Rehearing denied October 1, 1965.

The Michigan Mutual Liability Company brought this action against its insured, Type and Press Company of Illinois, Inc., for reformation of the insurance policy and against Arthur Holmes for a declaration that the insured is not entitled to coverage under the policy with respect to a claim filed by Holmes arising out of injuries which he sustained on August 6, 1962, while operating a guillotine press sold by the insured. The insurance company sought reformation of the policy on the grounds that the endorsements to the policy adding products liability coverage were issued through inadvertence and mistake and were contrary to the agreement of the parties inasmuch as they designated as the effective date August 1, 1962, (prior to Holmes injury) instead of August 7, 1962.

A Master in Chancery, to whom the case was referred and who heard all of the evidence, found that "the proof does not clearly and convincingly show that a mistake was made which was mutual and common to both parties in issuing the endorsement in question to be effective August 1, 1962, instead of August 7, 1962. There is no charge of fraud and both parties were fully informed of the problem presented at the time the endorsement was issued." The insurance company appeals from an order of the Chancellor overruling exceptions to the Master's reports, approving and confirming those reports and dismissing the case for want of equity.

The record discloses that the insured sells rebuilt and used printing machinery and equipment for use in the graphic arts. The insurance company originally issued a comprehensive general liability policy to the insured on May 9, 1962, covering the period from June 1, 1962, to June 1, 1963. The policy was countersigned on behalf of the insurance company by A.J. Shorey of the insurance brokerage firm of Price, Buesch and Shorey, the authorized representative of the insurance company. By the terms of this policy, products hazards were specifically excluded from coverage.

On August 6, 1962, Arthur Holmes sustained personal injuries while using a product distributed by the insured for which he subsequently filed suit against the insured. The insured's office manager, Howard Mikkelsen, testified that on the day following Holmes' injuries he telephoned Price, Buesch and Shorey, which had written insurance for his company for about fifteen years, and that he spoke to John Buesch. He recounted the conversation as follows:

I told Mr. Buesch, I believe, there was an accident with one of our machines that we had sold to a customer in which we might become involved and were we covered under our liability policy. . . . He looked up the policy and said no, we weren't, but he would have Mr. Shorey contact me.

The following day Mikkelsen spoke to Mr. Shorey on the telephone. Mikkelsen indicated the possibility that a machine which was sold by his company was involved in the accident and he asked whether the company was covered. Shorey indicated that the company was not covered. Mikkelsen recounted the remainder of the conversation as follows:

I asked him why we weren't and he said well, there was something he overlooked but he would come out and talk to me about it. I said I believe we should be covered so he said he would get the rates together and the other information and come out and see me, which he did.

Mikkelsen testified that when Shorey did visit him a few days later, they had the following conversation:

I asked Mr. Shorey if there was [some possibility that the insured might become involved in the accident], why we were never offered this type of insurance before and he said well, it was an oversight on his part but, however, he was going to bind me on this and in issuing it, as long as there is no suits pending, he would try and make it retroactive before the 6th of August. . . . I said that was fine.

Mikkelsen further testified that he received three endorsements during October, 1962, one of which added products liability coverage and the other two of which increased the limits of liability. All three endorsements had an effective date of August 1, 1962. Mikkelsen noted the effective date at the time the endorsements were received.

On November 21, 1962, the insured received summons in the suit commenced by Holmes. Mikkelsen testified that he telephoned Shorey at that time; that he told Shorey of the suit and that he was going to send the summons to the insured's attorney. Mikkelsen testified further that Shorey told him that he would take care of it and asked that the summons be mailed to him.

Mikkelsen further stated that sometime in December 1962, he received from the broker a letter dated October 3, 1962, addressed to the broker and signed by L.B. Segur, an underwriter for the insurance company, advising the broker that the company was issuing an endorsement adding products liability coverage effective August 7, 1962. He also received a letter dated November 26, 1962, also addressed to the broker and signed by Segur advising the broker that he was enclosing two endorsements correcting the effective dates of the addition of products liability endorsement and the increased limits of liability ...

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