Page 105 - FDCC_InsightsSpecialIssue23

Insurance Coverage Law
what a particular state’s highest court may do. And in such cases, the Restatement may provide influence. Examples of each of these cases were seen in 2021 and 2022, both involving the question of whether an insurance company could seek reimbursement of its defense expenses where (1) the insurance company had already paid defense costs, (2) when a court ruled that the insurer owed not duty to defend, (3) the insurer had reserved the right to seek reimbursement of its defense costs in a reservation of rights letter, but (4) the policy did not provide for the right to seek reimbursement.
In Nautilus Ins. Co. v. Access Med,18 the Nevada Supreme Court was asked to make the law of Nevada on the issue of seeking reimbursement after successfully defeating coverage in a declaratory judgment action. The Court opinion decided 4-3 in favor of reimbursement, the majority rule, but contrary to the conclusion of the Restatement. Ironically, in rejecting the Restatement, the majority relied explicitly on a different Restatement, this one the Restatement of the Law, Unjust Enrichment. The dissent, conversely, sought
to adopt the Restatement’s rule denying an insurer the right to reimbursement where the policy did not explicitly provide for it.
In Georgia, there is no controlling state appellate court opinion on this question. Over the last decade, several Georgia federal court decision have weighed in on the issue of an insurer’s ability to recoup defense costs in the absence of a policy provision permitting same. Some opinions permitted it, noting it was the majority rule. A few did not. During 2002, the issue was addressed again in Mt. Hawley Ins. Co. v. East Perimeter Pointe Apartments LP, where the insurer sought to recoup costs it incurred defending the insured against a lawsuit after it prevailed in a declaratory judgment action where the 11th Circuit affirmed a ruling that the insurer had no duty to defend. The policy at issue had no provision explicitly allowing the insurer to recover defense costs where it owed no duty to defend. The insurer reserved the right to recoup in its reservation of rights letter and the insured accepted the defense.
In reaching its decision, the judge, like many before him, evaluated the majority rule, which allows an insurer to recoup defense costs on an unjust enrichment and implied-in-contract theory, and evaluated the minority rule, which does not allow such recoupment on the theory that doing so in the absence of specific policy language is tantamount to allowing the insurer to unilaterally alter the policy through
its reservation of rights letter, and found the minority rule to be persuasive. But unlike prior opinions dealing with this issue over the last decade, there was a new factor in the Court’s decision. The Court also argued that the Restatement was in its favor. The Restatement did not adopt the majority rule, and instead adopted and supported the minority rule in favor of insureds. As noted above, Restatements historically were supposed to declare the consensus or majority rules of law on their subject.
While there is not a trend of Courts relying on the Restatement to change existing precedence, there have been several decisions in the years since the Restatement was published that followed or relied upon
the Restatement to make new precedent or, as was done here, follow the Restatement in the absence of binding precedence.
In Georgia, a different Federal judge is still free to permit reimbursement, as several others have done. But the most recent opinions have trended against reimbursement, and the Restatement will add to the challenge until Georgia’s and other states’ appellate courts provide a binding precedent.
18 482 P.3d 683 (Nev. 2021).
96
FDCC ANNUAL FIVES 2023