Reimbursement of Advance Benefits

Insurance companies are often required to decide whether to pay benefits under the policy before sufficient information is known about the claim to determine whether there will ultimately be coverage. So, what happens if it is later discovered that payments were made for non-covered claims? Can an insurer seek reimbursement? Although a plethora of case law exists on an insurer's right to seek reimbursement of defense costs and settlement payments on non-covered claims, rendering mixed results on these issues nationwide, there is a dearth of decisions on reimbursement of advance benefits. Two recent decisions suggest that an insurer can seek reimbursement, albeit under differing theories of law, leaving open the conundrum of how an insurer can preserve its rights. A review of the differing theories allowing recovery and suggestions on how an insurer can protect its rights to reimbursement follows.