Appeal from Circuit Court, Multnomah County. Richard J. Burke, Judge.
William H. Poole, Portland, argued the cause for appellant. With him on the briefs were Carol Hewitt and Lindsay, Nahstoll, Hart, Duncan, Dafoe & Krause, Portland.
Ridgway K. Foley, Jr., Portland, argued the cause for respondent. With him on the brief were Kenneth E. Roberts and Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland.
O'Connell, Chief Justice, and McAllister, Denecke, Holman, Howell and Bryson, Justices.
This is an action at law to recover $490,000 under an insurance policy issued by defendant to plaintiff's employer, the city of Tigard. Defendant answered, asserting the defense of reformation, and the trial then proceeded on the equity side of the court on the issue of reformation. This is an appeal by plaintiff from a judgment ordering reformation of the policy and dismissing plaintiff's complaint.*fn1
On November 5, 1968, defendant issued to the city of Tigard a three-year Comprehensive General Liability Insurance and Comprehensive Automobile Liability Insurance policy with a single limit endorsement for coverage in the amount of $500,000. The policy as issued did not have an uninsured motorist endorsement attached to it,*fn2 but a premium for such coverage was specified in the policy.
On April 19, 1969 plaintiff while in the course of his employment for the city of Tigard was struck and seriously injured by an uninsured motorist, and on November 16, 1970 plaintiff recovered a judgment against the driver for $542,213.50. Plaintiff then made a claim against defendant under the policy for $500,000. Defendant acknowledged liability to the extent of $10,000 and paid this amount pursuant to an agreement that neither party's rights would be prejudiced by the payment. On November 25, 1970, plaintiff filed the complaint in this action in which he prays for recovery of $500,000 less the $10,000 received from defendant.
Defendant's equitable defense pleaded the above
facts and averred that through mutual mistake an uninsured motorist endorsement with coverage of $10,000 for each person and $20,000 aggregate was omitted from the policy in question. Evidence adduced at trial showed that 10/20 uninsured motorist coverage was requested in an invitation to bid issued by the city of Tigard, and that defendant submitted an insurance broker's quotation including coverage for 10/20 uninsured motorist coverage. The broker submitted to the city administrator defendant's proposal based upon the quotation. The city administrator executed a memorandum to the city council summarizing the various responses to the invitation to bid, including defendant's. The memorandum indicated 10/20 uninsured motorist coverage.
The trial court found that there was clear and convincing evidence that defendant and the city of Tigard bargained for and agreed upon uninsured motorist coverage, and that the omission of the uninsured motorist endorsement was an oversight on the part of defendant. The policy was judicially reformed to include the omitted endorsement and judgment was entered in favor of defendant.
In his first assignment of error plaintiff contends that an equitable "counterclaim" for reformation may not be pleaded in an action at law because it seeks affirmative relief and that only purely defensive matters may be pleaded as an equitable defense to an action at law. Although defendant's fifth affirmative defense was initially designated a counterclaim, that label was stricken by defendant upon plaintiff's objection and defendant assured the court that ...