Settlement Based on Mutual Mistake Must be Rescinded
Barry Zalma
Jun 29, 2023
Read the full article at https://lnkd.in/ghJweEhc and see the full video at https://lnkd.in/g-F6rvFv and at https://lnkd.in/grsi39pA and at https://zalma.com/blog plus more than 4550 posts.
People with a claim against an estate entered into a settlement agreement to resolve a claim against the estate regarding life insurance coverage that the decedent was required under a divorce decree to maintain for the benefit of the children of the broken marriage. Subsequently, the parties jointly petitioned the county court for Douglas County, Nebraska, for a declaration of their rights and obligations under the agreement. The county court reformed the agreement to be fair to all. The ex-wife appealed.
In In re Estate of Jordon R. Wiggins, deceased et a., No. S-22-543, 314 Neb. 565, Supreme Court of Nebraska (June 23, 2023) the Supreme Court of Nebraska resolved the dispute in a Solomon-like fashion.
BACKGROUND
Jordon R. Wiggins died on August 28, 2019. Prior to his death, Jordon executed a will, which established the Jordon R. Wiggins Family Trust (the Trust) for his children’s benefit. Jordon’s father, Robert Wiggins, was appointed personal representative of Jordon’s estate on October 17, 2019.
Jordon was previously married to Allison Hardy, and two minor children, Elizabeth Wiggins and Leah Wiggins, were born to them during the marriage. The divorce decree required Jordon and Allison each to “maintain a life insurance policy” of at least $250,000 “to provide for the minor children” if Jordon or Allison died.
On December 20, 2019, Allison brought a claim for $250,000 plus interest against the estate on the children’s behalf, alleging that the personal representative had not yet identified any life insurance policy maintained by Jordon for the children’s benefit. However, after the claim was brought, Jordon’s former employer informed Jordon’s brother, Jason Wiggins, that Jason was the sole beneficiary of Jordon’s two employer-provided life insurance policies, valued at $360,000 total.
The Settlement
Subsequently, Jason, as an interested party; Allison, on behalf of the minor children; and Robert, as personal representative, agreed to settle Allison’s claim against the estate. The settlement agreement began by acknowledging that “to the best of the [p]arties’ knowledge,” Jordon had not designated the children as beneficiaries of a life insurance policy of at least $250,000. The agreement then called for Jason to “gift” $250,000 of the insurance proceeds that he received to the Trust, whereupon Allison would withdraw the claim.
However, after they entered the settlement agreement, the parties learned that Jordon’s daughter Elizabeth was actually the beneficiary of one of Jordon’s life insurance policies, while Jason was the beneficiary of the other policy. Thereafter, the insurer paid $120,000 “directly” to Elizabeth; this money was not placed in the Trust. The insurer also paid $240,000 to Jason, who then paid $130,000 into the Trust and retained $110,000. Allison took issue with Jason’s action, arguing that he was required under the divorce decree, the settlement agreement, and Nebraska law to pay the entire $240,000 into the Trust for the children.
The Validity of the Settlement
At the hearing on the motion for declaratory judgment, Jason argued that the settlement agreement should be rescinded on various grounds, including the parties’ mutual mistake as to Jordon’s life insurance coverage. Alternatively, Jason argued that the agreement should be reformed due to this mutual mistake. Allison countered that there was no basis for reformation or rescission because the agreement in its written form correctly expressed the parties’ intent at the time they entered the agreement and Jason assumed the risk of mistake.
The county court ruled in Jason’s favor. The county court ordered that the $130,000 that Jason paid into the Trust satisfied his obligation under the settlement agreement, because he was entitled to a credit of $120,000 for the life insurance proceeds that Elizabeth received. Believing that this $120,000 had been placed in the Trust, the county court also ordered that the $250,000 received into the Trust for the children’s benefit satisfied the claim against the estate. It ordered that the settlement agreement be reformed accordingly.
ANALYSIS
Allison argued that the settlement agreement should be enforced against Jason because the agreement as written accurately reflects the parties’ intent at the time they signed the agreement.
A settlement agreement is subject to the general principles of contract law.
Rescission, in contrast to reformation, may be granted where the parties have apparently entered into a contract evidenced by a writing, but owing to a mistake, their minds did not meet as to all the essential elements of the transaction, so that no real contract was made by them. Generally, grounds for cancellation or rescission of a contract include fraud, duress, unilateral or mutual mistake, and inadequacy of consideration.
When used in reference to rescission, however, the term “mutual mistake” is not limited to a mistake in drafting the instrument. Specifically, for purposes of rescission, a mutual mistake of fact must relate to either a present or past fact or facts that are material to the contract, and not to an opinion as to future conditions as the result of present known facts.
The situation is different as to rescission. Here, the evidence clearly and convincingly showed that the parties were mutually mistaken as to a fact which was a material inducement for the contract. Specifically, their mutual mistake of fact was their belief that Jordon failed to maintain any life insurance for the benefit of the children and instead named Jason as the sole beneficiary.
On its face, the settlement agreement calls for Jason to pay money that he did not receive from the life insurance proceeds. It does not seem just and fair to require Jason to pay an additional $110,000-which would result in a total of $360,000 in life insurance proceeds’ being available to the children-where the divorce decree contemplated a minimum of $250,000 in life insurance proceeds, Elizabeth received $120,000 of life insurance proceeds directly from the insurer, and Jason has already paid $130,000 into the Trust, which is available to both Elizabeth and Leah.
The purpose of rescission is to place the parties in a status quo, that is, return the parties to their position which existed before the rescinded contract.
A mutual mistake as to the existence of a fact that was a material inducement to the contract is not ground for reformation, although it may be ground for rescission. Accordingly, the Supreme Court reversed the judgment of the county court and remand the cause with directions for the county court to rescind the settlement agreement and conduct further proceedings not inconsistent with this opinion.
ZALMA OPINION
The most difficult problem raised by the need for life insurance after a divorce is what to do when the spouse required to carry life insurance for the benefit of the children of the broken marriage is how to enforce the agreement. It would be simple to buy the insurance, name the children as beneficiaries and provide copies of the policy to the divorced spouse and/or the children. In this case, communications failed and the parties tried to be fair with to little information. Rescission was the appropriate resolution because the settlement was reached based on false information resulting in an unfair result.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808
Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01
Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Go to substack at https://lnkd.in/gcZKhG6g
Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88;; https://lnkd.in/gWVSBde.
Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
See the video at and at and at https://www.zalma.com/blog plus more than 5250 posts.
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
Read the full article at https://lnkd.in/guNhStN2, see the full video at https://lnkd.in/gYqkk-n3 and at https://lnkd.in/g8U3ehuc, and at https://zalma.com/blog plus more than 5250 posts.
Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
See the video at and at
When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
