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Western District of Pennsylvania Denies Reformation of Service Contract's Indemnity and Insurance Provisions (PA)

May 12, 2023

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<p style="text-align: justify;">In the recent case captioned <a href="https://www.wcmlaw.com/wp-content/uploads/2023/05/Case-4-May.pdf"><em>Complaint of Borghese Lane, LLC</em>,</a> No. 2:18-CV-00533-MJH, 2023 WL 3060705 (W.D. Pa. Apr. 24, 2023), the District Court for the Western District of Pennsylvania granted a motion for partial summary judgment in favor of a party which claimed it had suffered a breach of contract to the extent that it was not named as an additional insured on its contract partner’s insurance policies. The court’s opinion contains a helpful overview of Pennsylvania law concerning reformation of contracts that pertain to contractual insurance and indemnification requirements.</p>
<p style="text-align: justify;">In brief, the matter at issue in <em>Borghese</em> arose out of a service contract entered into by ITS (a marine and industrial services company) and McKees Rocks (a harbor services company). The contract concerned a barge mooring area on the Ohio River in Western Pennsylvania,</p>
<p style="text-align: justify;">The contract contained an indemnity provision whereby McKees Rocks was to indemnify ITS for claims arising out of McKees Rocks’ services at the mooring area. Additionally, the contract contained an insurance provision whereby McKees Rocks was to name ITS as an additional insured on its policies.</p>
<p style="text-align: justify;">However, McKees Rocks did not name ITS as an additional insured on its policies; McKees Rocks also refused to defend and indemnify ITS. McKees Rocks claimed that the obligations imposed on it by the contract were done so in error and that those obligations should have been imposed on a third party, Borghese (a marine transport and towing company), for the benefit of ITS and McKees Rocks.</p>
<p style="text-align: justify;">ITS moved for partial summary judgment against McKees Rocks on the issue of breach of contract and contractual indemnity. In response, McKees Rocks sought reformation of the contract and argued that it is not bound by the terms of the indemnity and insurance provisions as drafted because the contract was the result of a mutual mistake of the parties.</p>
<p style="text-align: justify;">The court disposed of McKees Rocks’ reformation argument because the evidence presented demonstrated that while McKees Rocks retained Borghese to perform certain functions, McKees Rocks itself was responsible for management of the mooring area. The court looked to testimony about the extensive drafting process, including rounds of negotiations, that preceded the execution of the final contract. Thus, the court found no mutual mistake and, on that basis, denied McKees Rocks’ request for reformation. The court then disposed of McKees Rocks’ substantive argument regarding indemnity and insurance because, with no reformation of the contract, McKees Rocks breached the contract by failing to name ITS as an additional insured on its policies.</p>
Thank you to Jason Laicha for his contribution to this post.  Should you have any questions, contact <a href="mcare@wcmlaw.com">Matthew Care.</a>

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