Extrinsic Evidence and Conditional Reform

In addition, the notion of a potential ambiguity in contract language can lead to burdensome and expensive discovery into extrinsic evidence of intent, with much of the extrinsic 'evidence' sought in coverage litigation more noteworthy for its invasiveness than its actual or potential probative nature. Finally, as repeat players in coverage litigation, insurers must be wary of how an assertion or intimation that policy language is ambiguous will impact coverage disputes involving identical or similar language, even if the collateral effect of such an argument in the existing coverage dispute is insignificant. All of these considerations tend to make insurers reluctant to urge a court to consider extrinsic evidence in coverage litigation or to suggest that the policy language at issue is ambiguous.

But it is not true ' or at least it should not be ' that consideration of extrinsic evidence necessarily leads to all of the collateral damage discussed above. In particular, when an insurer seeks to reform a policy provision to reflect the parties' actual intent, it does not involve an intimation of ambiguity, nor should it open the door to freewheeling and burdensome discovery of extrinsic evidence that often comes to the fore when courts are called upon to construe arguably ambiguous policy provisions. Indeed, in those relatively uncommon situations where reformation is an appropriate remedy, effective litigation management can sometimes permit reformation to prevent the invasive discovery of extrinsic evidence that sometimes occurs in coverage litigation. The availability of reformation as an effective case management tool becomes apparent when contrasting the relevance of extrinsic evidence in policy construction with the use of such evidence in reformation litigation.