Unjustly Enriched Claimant Ordered to Reimburse Carrier

February 15th, 2017 By Jeffrey C. Glass

Our clients rarely find themselves in a position to recover payments issued based on an improper or dishonest claim. Banion v. Geovera Specialty Ins. Co., CV H-15-1595, 2016 WL 7242536, at *1 (S.D. Tex. Dec. 15, 2016) involved a rare instance of such an argument’s success, even though the policy was void.

Banion sued GeoVera, her homeowner’s carrier, for water damage to her home and GeoVera paid her over $57,000, but later discovered Banion had never owned the property. GeoVera then denied the claim, cancelled the policy, and returned Banion’s premiums. Banion sued GeoVera and it counterclaimed for unjust enrichment, fraud, and attorneys fees. Banion’s suit was dismissed for want of prosecution and GeoVera moved for summary judgment (which Banion failed to respond to) on its claims for unjust enrichment and attorneys fees.

Judge Lee Rosenthal of the Southern District granted summary judgment on the unjust enrichment claim and ordered Banion to reimburse the carrier for amounts paid on the claim. Unjust enrichment is an equitable cause of action – because it does not rely on a valid contract – that allows recovery when a person has obtained benefits from another by fraud, duress, or taking undue advantage. The court found the summary judgment evidence showed Banion’s representation that she owned the house was false and improperly induced GeoVera to issue the policy. Because GeoVera cancelled the policy and returned the premiums, however, it could not rely on policy provisions to recover from Banion. The Court held that because Banion had kept both the returned premiums and the amount paid for the claim, GeoVera was entitled to return of the claim payment (over $57,000), as a matter of law. The Court did not explicitly find that its holding was based on fraud.

The court, however, denied the carrier’s claims for “fee-shifting” under Section 541.153 of the Insurance Code. That section justifies an attorneys fees award “if the court finds that an action under this subchapter is groundless and brought in bad faith or brought for the purpose of harassment.” The Court found that GeoVera’s “one sentence”, conclusory argument on the point failed to prove Banion’s claim was legally groundless and brought maliciously or for purposes of harassment. It is likely the carrier’s case for attorneys fees would have been strengthened by a showing that Banion knew her claims of ownership were untrue, but the facts of the case may not have made such a showing possible.