A policy can sometimes be reformed if it can be proved that there was a mutual mistake about its terms. In granting reformation based on mutual mistake, a court does not create a new agreement or increase the scope of coverage, but only enforces the terms of the policy as the parties originally intended.

In Caliber One Indemnity Co. v. Wade Cook Financial Corp., 491 F3d 1079 (9th Cir. 2007), the insured disputed the dollar amount of coverage under a commercial property policy that provided earthquake coverage. The original policy provided a $5 million earthquake coverage limit. The policy renewed in 1999 with the insured, through its insurance agent, requesting the exact same terms as the previous policy.

Due to a clerical error, however, the renewal policy provided an earthquake coverage limit of $500,000. This reduced limit was also contained in the 2000 policy renewal. Neither the insured nor the insurer discovered the error until after an earthquake damaged the covered property in 2001. At that time, the reduced limit was discovered and the insurer admitted that the reduction was the result of a clerical error on its part. Despite admitting its mistake, the insurer filed a declaratory judgment action seeking to limit its exposure to $500,000. The insured claimed mutual mistake and sought reformation of the policy.