If Insurers Have an Alleged 'Right' to Reimbursement, Where Does It Come From?

In May 2012, the Washington Supreme Court held oral argument in National Surety Corporation v. Immunex Corp., 256 P.3d 439 (Wash. Ct. App. 2011), on an insurer's claim for reimbursement of defense costs. As the insurer's policy contained no provision allowing it reimbursement from its policyholder, the court quickly got to the heart of the matter, asking: If the policy is silent, where does the supposed right of reimbursement come from? The insurer's attorney argued that the right to reimbursement arises from an insurer's and policyholder's good faith obligations to fulfill the policy. But other insurers and their counsel have elsewhere taken other, indeed conflicting, positions regarding the supposed basis for their reimbursement claims. Some insurers admit that the right does not arise from their policies' letter or spirit, and instead argue that a separate, implied contract, embodied in their reservation of rights letters, allows for reimbursement. Other insurers claim no contractual right to reimbursement and instead argue that a policyholder's duty to reimburse them arises in equity to prevent alleged unjust enrichment. This article considers these conflicting theories as well as policyholders' views that insurers have no right to reimbursement in law or equity absent an express contractual provision relating to advancement of fees or recoupment.