In United States Fidelity & Guarantee Co. v. United States Sports Specialty Association, No. 20090657, 2012 UT 3 (Utah Jan. 12, 2012), the court held that an insurer is not entitled to reimbursement or restitution from its insured unless the right is expressly set forth in the insurance policy.  The underlying tort action arose out of injuries sustained by a seven-year old boy who was struck in the head with a baseball bat during an adult softball game sponsored by the United States Sports Specialty Association (“USSSA”).  The boy’s parents sued USSSA, which was insured under a $2 million liability policy issued by United States Fidelity & Guarantee Co. (“USF&G”), which assumed the defense of USSSA.  Following a jury verdict of $6.1 million, the case proceeded to mediation and USF&G settled the judgment with the underlying claimants for $4.8 million pursuant to a “unilateral reservation of rights” to seek reimbursement from USSSA for the $2.8 million of the settlement in excess of the policy limits.  USSSA refused to sign the settlement and objected to USF&G’s attempt to reserve its rights against USSSA.  After the settlement, USF&G brought a lawsuit against USSSA to seek restitution of the amount of the settlement that exceeded the policy limits. 

In support of its argument that it was entitled to restitution of the amounts paid in excess of policy limits, USF&G argued that USSSA had been unjustly enriched, and asked the court to follow Blue Ridge Ins. Co. v. Jacobsen, 22 P.3d 313 (Cal. 2001), which held that an insurer may seek reimbursement from its insured for noncovered payments if: (1) the insurer timely and expressly informed its insured that the insurer is reserving its rights; (2) the insurer notifies the insured of its intent to make the potentially noncovered payment; and (3) the insurer expressly offers the insured the opportunity to assume its own defense of the underlying action if it objects to the payment.

The United States Sports Specialty Association court declined to follow Blue Ridge Ins., holding that “[t]here can be no extracontractual right to restitution between the insurer and its insured, and only the express terms of a policy create an enforceable right to reimbursement.”  In so ruling, the court stated that to allow a claim of restitution or reimbursement “would effectively add or modify terms” to the policy for which the parties had not bargained.  The court also relied on the Utah Insurance Code, which provides that “an insurance policy may not contain any agreement or incorporate any provision not fully set forth in the policy . . . .”

A number of other courts have held that an insurer is not entitled to reimbursement of defense costs and/or indemnity payments absent a policy provision expressly authorizing reimbursement or pursuant to a written agreement from the insured.  See, e.g., Perdue Farms Inc. v. Travelers Cas. & Sur. Co., 448 F.3d 252 (4th Cir. 2006); Liberty Mut. Ins. Co. v. FAG Bearings Corp., 153 F.3d 919 (8th Cir. 1998); Utica Mut. Ins. Co. v. Rohm & Haas Co., 683 F. Supp. 2d 368 (E.D. Pa. 2010); Am. & Foreign Ins. Co. v. Jerry's Sport Ctr., Inc., 2 A.3d 526 (Pa. 2010); Shoshone First Bank v. Pac. Employers Co., 2 P.3d 510 (Wyo. 2000); London v. Frank's Casing Crew and Rental Tools, 246 S.W.3d 42 (Tex. 2008); and Gen. Agents Ins. Co. v. Midwest Sporting Goods Co., 828 N.E.2d 1092 (Ill. 2005); Medical Malpractice Joint Underwriting Ass'n of Mass., 680 N.E.2d 1121 (Mass. 1997).  Contra Travelers Prop. & Cas. Co. of America v. Hillerich & Bradsby Co., 598 F.3d 257 (6th Cir. 2010); American Guar. & Liab. Ins. Co. v. CNA Reins. Co., 16 A.D.3d 154 (1st Dept. 2005); and Buss v. Superior Court, 939 P.2d 766 (Cal. 1997).