Mutual Of Omaha Insurance Co. v. Russell

402 F.2d 339 (10th Cir. 1968)

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Nature of the Case

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Facts

Rev. and Mrs. Russell got word that her brothers had died in Lubbock. Mrs. Russell decided to fly to Lubbock for the funeral. Mrs. Russell made reservations, but her return flight was left open because the funeral date had not been set. While in the airport, Mrs. Russell and her son and husband passed an insurance vending machine and decided that they should get insurance. The machine dispensed what was called a T-20 policy that provided protection only for accidents while aboard an airplane or in established limousines going to or coming to the airport. The coverage was to remain in effect for the duration of the round trip or twelve months. However, no one had the proper change, so they stopped at the staffed insurance booth. They asked basic questions about the amounts that could be covered and agreed upon a policy for $20,000 and made the policy good for four days at a cost of $2.25. However, this policy was not a T-20 policy but a T-18 policy, which was a significantly different policy. The T-18 policy is a general accident policy that covers almost all risks during the life of the policy. The policy terms are stated in terms of 24-hour periods on a daily basis up to 31 days. The premium on the T-18 is higher than the T-20 for the same price, and the T-18 was not sold in machines. It was alleged that the insurance agent present did not warn P that the policy expired in four days and that there were other policies available. The trial judge also found that P intended to buy insurance that would cover her round trip, which both she and P thought would occur within four days. Tragically, her return airplane flight crashed twelve hours after the insurance policy expired. The Insurer (D) denied liability. P sued D under diversity for reformation of the policy to cover the death of Mrs. Russell. The District Judge held that the contract was clear and unambiguous and as written did not cover the accident. Then the judge held that the policy should be reformed to cover the accident. D appealed; The Company was not guilty of any inequitable conduct that would give rise to the remedy of reformation. P cross-appealed contending that the judgment should have been for $90,000, which is what $2.25 in premium, would have bought under a T-20 policy.