
    HAMMEL v. UNITED STATES FIDELITY & GUARANTY CO.
    1. Insurance — Reformation of Instruments — Mistake.
    Where the sole purpose of an insurance policy was to indemnify plaintiff against liability for injuries to workmen employed under a contract between him and another, which both plaintiff and the insurance agent construed as creating the relationship of owner and independent contractor, but which, the court construed as erecting a partnership, the mistake was not one of law as to the effect of the policy issued, but of law in construing the contract, and plaintiff is therefore entitled to have the policy reformed to carry out and effectuate the intention of the parties the same as if the mistake had been one of fact.
    2. Reformation of Instruments — Mutual Mistake.-
    Reformation is a proper remedy for mutual mistake of fact.
    3. Insurance — Reformation of Instruments.
    The mistake of an insurance agent in issuing the wrong form o’f policy may be corrected by reformation.
    On right to reformation of insurance policy for mistake of soliciting agent, see annotation in 11 L. R. A. (N. S.) 357.
    As to right to relief from mistake of law as to effect of insurance policy, see annotation in 28 L. R. A. (N. S.) 831.
    Appeal from Wayne; White (Charles E.), J., presiding.
    Submitted January 31, 1929.
    (Docket No. 8, Calendar No. 34,066.)
    Decided March 29, 1929.
    Bill by Godfrey Hammel against the United States Fidelity & Guaranty Company praying reformation of an insurance policy and a money decree. From a decree for plaintiff, defendant appeals.
    Affirmed.
    
      Payne & Payne, for appellant.
    
      Wm. Henry Gallagher, for appellee.
   Fead, J.

Plaintiff purchased some lots in Detroit and made a contract with one Rubenstein, under which, plaintiff furnished the money and Bubenstein built houses on the lots, the profits on the sales to be divided between them. The'contract was drafted by plaintiff’s attorney under instructions to create the relationship of owner and independent contractor. Plaintiff applied to defendant’s agent for a policy of insurance against claims of workmen for injuries. The agent sent him an ordinary workmen’s compensation policy. Plaintiff refused it as he had no pay roll. The agent called on him, examined the Bubenstein contract, and wrote plaintiff an owner’s contingent policy which would' cover plaintiff if Bubenstein were an independent contractor.

An employee of a subcontractor was injured through Rubenstein’s negligence and brought suit against him and plaintiff. Defendant conducted the defense in circuit court. The court left the construction of the contract to the jury, to determine whether plaintiff and Rubenstein were owner and independent contractor or partners. The jury held they were partners and rendered verdict against both. After judgment, defendant collected further premiums from plaintiff and denied liability because plaintiff was not an independent owner. On review of the case in this court, Keiswetter v. Rubenstein, 235 Mich. 36 (48 A. L. R. 1049), the contract was held to have created a joint enterprise, and judgment against this plaintiff was affirmed. Plaintiff paid the judgment and brought this action to reform the policy and to recover money damage. The circuit court decreed the relief prayed for.

The sole purpose of the insurance was to indemnify plaintiff against liability for injuries on the Bubenstein job. Both plaintiff and defendant’s agent construed the Bubenstein contract as creating the relationship of owner and independent contractor. The agent selected the form of policy. There was no fraud or misconduct in the transaction, as the policy was appropriate to the conditions as the parties understood them. Had they construed the contract as this court afterward held it, the agent could, and doubtless would, have issued an effective policy in another form. Aside from estoppel, the principal question is whether the mutual mistake of plaintiff and defendant’s agent in construing the Rubenstein contract and determining plaintiff’s status permits the remedy of reformation, defendant contending that the mistake was one of law and precludes the remedy.

The mistake was not one of law as to the effect of the policy issued. It was of law in construing the antecedent contract. It resulted’ in a policy which did not carry out and effectuate the intention of the parties to cover plaintiff in his liability arising out of the Rubenstein contract. 28 L. R. A. (N. S.) 792, note. The applicable rule is stated in Pomeroy’s Equity Jurisprudence (4th Ed.), § 849, quoted in substance in Renard v. Clink, 91 Mich. 1:

“Wherever a person is ignorant or mistaken with respect to his own antecedent and existing private legal rights, interests, estates, duties, liabilities, or other relation, either of property or contract or personal status, and enters into some transaction the legal scope and operation of which he correctly apprehends and understands, for the purpose of affecting such assumed rights, interests, or relations, or of carrying out such assumed duties or liabilities’, equity will grant its relief, defensive or affirmative, treating the mistake as analogous to, if not identical with, a mistake of fact.”

See, also, 28 L. R. A. (N. S.) 840, note; Livingstone v. Murphy, 187 Mass. 315 (72 N. E. 1012, 105 Am. St. Rep. 400); Wyche v. Greene, 16 Ga. 49; 23 R. C. L. p. 324.

Reformation is a proper remedy for mutual mistake of fact.

In addition to the application of this principle, we have here a specialized kind of contract. The variety of forms of insurance policies, the fact that they are prepared by the insurer, are not the subject of negotiation and agreement as are ordinary contracts, the particular form is selected by the agent of the insurer, and the known general ignorance of the public on insurance matters, raise equitable considerations which forbid strengthening and induce relaxing the rules in order to work out the actual and intended purpose of a policy. The mistake of an agent in issuing the wrong form of policy may be corrected by reformation. Raymond v. Auto-Owners’ Insurance Co., 236 Mich. 393; Esch Bros. v. Home Insurance Co., 78 Iowa, 334 (43 N. W. 229, 16 Am. St. Rep. 443); Harris v. Columbiana County Mut. Ins. Co., 18 Ohio, 116 (51 Am. Dec. 448); 14 R. C. L. p. 902.

In the case at bar, reformation will result, not in making a new contract as urged by defendant, but in giving effect to the purpose of the insurance and the intention of the parties to cover plaintiff’s liability in a particular situation. The defendant is not injured by reformation because a correct construction of the antecedent contract would merely have resulted in the issuance of a different form of policy which would have been effective.

The decree is affirmed, with costs.

North, C. J., and Fellows, Wiest, Clark, McDonald, Potter, and Sharpe, JJ., concurred.  