Plaintiffs commenced this action alleging four theories of liability including negligence, reformation, breach of contract, and unjust enrichment arising from defendants' alleged failure to change the named insured on an insurance policy. Defendants each seek an order granting summary judgment dismissing plaintiffs' complaint and their co-defendants' respective cross-claims.

The court heard oral argument on November 7, 2007. The parties were granted permission to file post-argument submissions within two weeks from said date.

Sometime in November 1997, Joan F. Dorsey and her son Lawrence C. Foster formed D.F. Realty, LLC (hereinafter sometimes the "LLC"). The ownership of the LLC was divided between Joan F. Dorsey as the majority owner and Lawrence C. Foster as the minority owner.

On December 19, 1997, Joan F. Dorsey transferred 3 Thorpe Street to the LLC by way of warranty deed.

In late 1997 and early 1998, the LLC encountered insurance problems relating to the necessity for continuing to carry workers' compensation coverage. According to plaintiffs, there were numerous written and oral discussions between Joan F. Dorsey, her agent Steve Falvo, her attorney Phillip J. Artz, and workers' compensation officials through which the issue - Mr. Foster's status as an employee of the LLC - was ultimately resolved.

On February 19, 2000, the Policy was renewed for a second three year term starting February 19, 2000 through February 19, 2003 (hereinafter "Renewal No.1"). The premium was paid by the LLC each year of the renewal period.

Joan F. Dorsey died on July 15, 2000. Two of her five children, Lawrence C. Foster and Carol J. Guiton, were named co-executors of her estate. Ms. Dorsey's Last Will and Testament left her then 78.35% share ownership in the LLC to her five children.

On February 19, 2003, the Policy was renewed for a third three year term starting February 19, 2003 through February 19, 2006 (hereinafter "Renewal #2"). Again, the premium was paid by the LLC each year during the renewal period.

On November 21, 2003, Ms. Dorsey's interest in the LLC was formally transferred to her five children in accordance with the terms of her Last Will and Testament.

On September 22, 2005, fire destroyed the Premises.

From the time of Ms. Dorsey's purchase of the Premises in early 1997 until the date of the fire in 2005, the named insured on the Policy remained "Joan F. Dorsey" and had never been changed to the LLC. According to plaintiffs, there had been no change in the use or nature of the Premises from 1997 through 2005.

Immediately after the fire loss, the LLC made a formal request to Security Mutual that the LLC be substituted as the named insured on the Policy. Security Mutual denied the LLC's request citing a policy that "[w]e do not back date any type of endorsement to be made effective [*3]on the date of a loss" (Hanrahan Affidavit, Ex E). Thereafter, the LLC made a claim for loss under the Policy. Security Mutual denied LLC's claim on the grounds that the named insured, Joan F. Dorsey, had no insurable interest in the property at the time of the loss.

On March 3, 2006, plaintiffs filed a summons and complaint containing four causes of action. The first cause of action alleges negligence by all the named defendants for failing to change the owner and named insured of 3 Thorpe Street on the Policy. The second cause of action against all the defendants seeks reformation of the Policy to reflect the LLC as the correct owner and named insured. The third cause of action alleges a breach of the insurance contract by defendant Security Mutual. The fourth cause of action alleges unjust enrichment against all the defendants with respect to the premium payments paid from 1997 through 2005.^[FN3]

The court will initially address the crux of this matter, namely plaintiffs' second cause of action seeking equitable reformation of the Policy as against Security Mutual to reflect the LLC as the owner and named insured of the Premises as of the date of the fire on September 22, 2005.

It is well-settled that "[a] party is entitled to reformation where 'the writing in question was executed under mutual mistake or unilateral mistake coupled with fraud'" (Cheperuk v Liberty Fire Ins. Co., 263 AD2d 748, 749 [1999], quoting Leavitt-Berner Tanning Corp. v America Home Assur. Co., 129 AD2d 199, 201-202 [1971], lv denied 70 NY2d 609 [1971]).

Plaintiffs' make no allegation of fraud so the issue is whether this case involved a mutual mistake. Mutual mistake does not necessarily require overt mistakes by both parties. Rather, if "[i]t is apparent that an innocent mistake occurred with respect to a named insured and it is evident that the parties intended to cover the risk, the error may be deemed mutual for purposes of reformation even though the insurer was not aware of the error (Court Tobacco Stores v Great Eastern Insurance Co., 43 AD2d 561 [1973]; emphasis added).

On this record, there is no proof supporting any conclusion other than that Ms. Dorsey's failure to request a change in the named insured on this Policy was an innocent mistake. Thus, the question is whether the parties - particularly defendant Security Mutual - intended to cover the risk. If so, then the failure to change the named insured may be deemed a mutual error.

During oral argument, defendant Security Mutual's posited that it might not have insured these Premises if Ms. Dorsey had advised that the ownership had been transferred to the LLC. Security Mutual argues that it insures a risk based upon a combined assessment of the identity of the insured and the use of the property to be insured. According to Security Mutual it may have deemed the LLC as owner (rather than Ms. Dorsey) as an unacceptable risk and refused to insure the Premises had it known a change in ownership had occurred on December 19, 1997. [*4]

The court finds defendant Security Mutual's arguments to be without merit. First, Security Mutual offers no proof other than counsel's speculation that it would not have insured these Premises with the LLC as owner (Court Tobacco Stores , 43 AD2d at 562). Second,

it is undisputed that Ms. Dorsey purchased the Premises as rental property and Security Mutual insured the Premises in relation to that use. It is further undisputed that the neither the character of the Premises nor the nature of its use as a rental property changed from the time it was initially insured in February 1997 until the time of the fire in September 2005. In fact, the Third Department stated in a case similar to the case at bar as follows:

[o]bviously, it was the character of the property and the project that was proposed to be undertaken thereon (both of which were properly identified) that defined the risk; the identity of the owner was comparatively unimportant. Recognizing that '[t]he name of the insured in the policy is not always important if the intent to cover the risk is clear' [citations omitted]

(New York Cas. Ins. Co. v Shaker Pine Inc., 262 AD2d 735, 736 [1999]; emphasis added).

Moreover, the court notes that Security Mutual issued an internal bulletin on August 1, 2005 advising all agents that it would no longer accept endorsement requests for named insured changes, but rather would require new applications (Hanrahan Affidavit, Ex E). In other words, from February 1997 through August 1, 2005 - just weeks before this fire - Security Mutual would have accepted a request from Ms. Dorsey (via the The Falvo Insurance Agency) to change the named insured on this Policy to the LLC based upon a simple phone call request without the need for a new application and reassessment of the risk. As such, Security Mutual's current position that it may not have insured these Premises with the LLC as the named insured upon the change in ownership in late 1997 is unavailing and contrary to it's own policy until just weeks before the fire.

Furthermore, the court also notes that for almost 8 years the annual premiums on this Policy were paid by the LLC, accepted by the Falvo Insurance Agency, and forwarded to Security Mutual, without question. Further, it is clear that Mr. Falvo worked closely with Ms. Dorsey for many years and had a working knowledge of her business insurance affairs as exemplified by his involvement in the resolution of the workers' compensation issue in 1998.

Accordingly, the court finds that defendant Security Mutual's motion for summary judgment dismissing plaintiffs' second cause of action based upon reformation must be denied. Moreover, CPLR § 3212 (b) enables a court to grant summary judgment in favor of a nonmoving party without the necessity of a cross-motion if it shall appear that any party other than the movant is entitled to such relief. As set forth above, the court finds that the failure to change the named insured on this Policy may be deemed a mutual mistake in light of Ms. Dorsey's own innocent mistake coupled with the clear intent of the parties to cover this risk. Based upon the foregoing, the court finds that plaintiff is entitled to equitable reformation of the Policy as against defendant Security Mutual to correct the inadvertent misidentification of the named insured.

With respect to the second cause of action as against defendants The Falvo Insurance [*5]Agency, Steve Falvo, individually, and HFC, it is undisputed that they were never parties to the Policy at issue. Thus, The Falvo Insurance Agency, Steve Falvo, individually, and HFC were not properly named defendants on this reformation cause of action and this cause of action is dismissed against those defendants. That having been said, however, these defendants remain on Security Mutual's cross-claim on the issue of reformation.

2.Remaining causes of action

Plaintiffs' first cause of action alleges defendants were negligent in their collective failure to change the named insured on this Policy. Defendants seek to dismiss this negligence cause of action as barred by the three year statute of limitations. Defendants argue that any such negligence cause of action accrues at the time the agent/broker failed to procure the requested coverage. Defendants assert there is no proof whatsoever that any such request was ever made by Ms. Dorsey. However, defendants argue that even assuming for purposes of argument that Ms. Dorsey made such a request, the last possible date she could have made such a request was on the date of her death on July 15, 2000. Thus, any negligence cause of action would have accrued on July 15, 2000 and the statute of limitations would have expired three years later on July 15, 2003. This summons and complaint was not filed until March 3, 2006 and thus is clearly untimely. In fact, plaintiffs conceded during oral argument that their negligence cause of action was untimely. As such, defendants' motion and cross-motion to dismiss plaintiffs' first cause of action are granted.

Plaintiff's third cause of action alleges breach of contract against defendant Security Mutual. During oral argument, plaintiffs' counsel conceded that their third cause of action was not viable. Consequently, defendant Security Mutual's motion to dismiss plaintiffs' third cause of action for breach of contract is granted.

Finally, with respect to plaintiffs' fourth cause of action seeking a return of premiums based upon unjust enrichment, in view of the court's determination granting equitable reformation in favor of plaintiffs, defendants' motion to dismiss plaintiffs' fourth cause of action will be granted.

In view of the foregoing and, upon searching the record, the court grants summary judgment to plaintiffs on their second cause of action for equitable reformation (CPLR § 3212 [b]); and defendants' motion and cross-motion for summary judgment dismissing plaintiffs' complaint and each of the co-defendants' respective cross-claims with respect to plaintiffs' first (negligence), third (breach of contract), and fourth cause of action (unjust enrichment) are GRANTED; and as to plaintiffs' second cause of action (reformation) and co-defendants' cross-claims with respect thereto are DENIED.

The foregoing constitutes an order of the court upon which judgment may be entered according to its terms.

It is so ordered. [*6]

December 12, 2007

Binghamton, New York

s/ Ferris D. Lebous

Hon. Ferris D. Lebous

Justice, Supreme Court