Harleysville Worchester Insurance v. Diamondhead Property Owners Ass'n , 741 F.3d 1336 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-2061
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Harleysville Worchester Insurance Company
lllllllllllllllllllll Plaintiff - Appellee
v.
Diamondhead Property Owners Association, Inc.
lllllllllllllllllllll Defendant
Fred Ensminger
lllllllllllllllllllll Defendant - Appellant
Jerry Chambliss; Cynthia Nelson
lllllllllllllllllllll Defendants
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Appeal from United States District Court
for the Western District of Arkansas - Hot Springs
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Submitted: December 20, 2013
Filed: February 4, 2014
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Before WOLLMAN, LOKEN, and KELLY, Circuit Judges.
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WOLLMAN, Circuit Judge.
Harleysville Worchester Insurance Company (Harleysville) issued
Diamondhead Property Owners Association, Inc. (Diamondhead), a commercial
insurance policy (the Policy). Although the parties intended for the Policy to exclude
coverage for law enforcement, Harleysville inadvertently omitted that exclusion from
the Policy itself. Following an altercation between Diamondhead police officer Fred
Ensminger and two Diamondhead residents, Harleysville sued Diamondhead,
Ensminger, and the two residents, seeking a reformation of the insurance contract and
a declaration that it had no duty to defend or indemnify the officer. The district court1
granted Harleysville its desired relief, from which Ensminger now appeals. We
affirm.
I.
Diamondhead is a gated community in Hot Springs, Arkansas. In June 2010,
Diamondhead asked its insurance agent, Arkansas Best Insurance Corporation
(Arkansas Best), to seek out and secure on Diamondhead’s behalf a commercial
insurance policy suitable to Diamondhead’s needs. Arkansas Best contacted
Harleysville to request a quote for such a policy.
Arkansas Best informed Harleysville that the policy would not need to include
law enforcement coverage because another insurer, Western World Insurance
Company, already insured Diamondhead against law enforcement liability.
Harleysville acknowledged that its policy would not include coverage for law
enforcement, and it submitted a proposed policy to Arkansas Best that excluded
coverage for law enforcement. Diamondhead ultimately selected Harleysville’s
proposal from a group of proposals collected by Arkansas Best, and Diamondhead’s
president executed a commercial insurance application that excluded coverage for law
1
The Honorable Susan O. Hickey, United States District Judge for the Western
District of Arkansas.
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enforcement. Arkansas Best gave the executed application to Harleysville, and
Harleysville officially issued the Policy on July 1, 2010, after inadvertently failing to
exclude coverage for law enforcement therein.
On July 21, 2010, Ensminger became involved in an altercation with two
Diamondhead residents, Jerry Chambliss and Cynthia Nelson. Chambliss and Nelson
sued Ensminger and Diamondhead, and Harleysville brought a declaratory judgment
action against all four parties seeking to avoid insurance liability for the incident.
Harleysville acknowledged that the Policy purported to cover law enforcement, but
asked the court to reform the Policy based on Arkansas’s doctrine of mutual mistake.
The district court granted Harleysville’s motion for partial summary judgment and
reformed the Policy to exclude coverage for law enforcement. The court then granted
Harleysville’s motion for summary judgment on the issue of coverage under the
reformed policy.
II.
Arkansas insurance law governs in this diversity action. See Langley v.
Allstate Ins. Co., 995 F.2d 841, 844 (8th Cir. 1993). We review the district court’s
grant of summary judgment de novo, viewing the evidence in the light most favorable
to the nonmoving party. Hill v. Walker, 737 F.3d 1209, 1216 (8th Cir. 2013).
Summary judgment is appropriate when there is “no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). Ensminger asserts that the district court erred in reforming the Policy and
in disregarding his affirmative defense of laches.
A.
Ensminger first argues that the district court erred in applying Arkansas’s
doctrine of mutual mistake to reform the Policy. Arkansas courts “will reform a
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writing to reflect the parties’ true intent when, by mistake, the parties fail to write
down the agreement accurately.” Hope v. Hope, 969 S.W.2d 633, 637 (Ark. 1998).
The uncontroverted evidence in this case demonstrates that Harleysville, Arkansas
Best, and Diamondhead all intended to enter into an insurance policy that excluded
coverage for law enforcement and that Harleysville’s failure to exclude that coverage
from the Policy was inadvertent.2 The district court thus did not err in reforming the
policy to reflect the parties’ intent.
B.
Ensminger next argues that the doctrine of laches precludes Diamondhead from
denying coverage. The affirmative defense of laches “is based on the equitable
principle that an unreasonable delay by the party seeking relief precludes recovery
when the circumstances are such as to make it inequitable or unjust for the party to
seek relief.” Felton v. Rebsamen Med. Ctr., Inc., 284 S.W.3d 486, 495 (Ark. 2008).
Because Ensminger has pointed to no fact that would make it unjust for Harleysville
to seek relief in this circumstance, we conclude that the argument is without merit.
III.
The judgment is affirmed.
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2
Ensminger argues that Arkansas Best was not an agent for Diamondhead and
that correspondence between Arkansas Best and Harleysville therefore cannot support
the conclusion that Diamondhead and Harleysville committed a mutual mistake. But
we see no other way to characterize the relationship between Diamondhead and
Arkansas Best. Diamondhead commissioned Arkansas Best to procure an insurance
policy suitable to Diamondhead’s needs, and in doing so Diamondhead authorized
Arkansas Best to act on its behalf. See Dodds v. Hanover Ins. Co., 880 S.W.2d 311,
314 (Ark. 1994).
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