Unjust Enrichment Case Law In California

When a party lends or pays out money at the request of another, the law will imply a promise or obligation to repay the money stemming from the equitable principle of avoiding unjust enrichment. (Moya v. Northrup (1970) 10 Cal. App. 3d 276, 280-281 88 Cal. Rptr. 783; Rains v. Arnett (1961) 189 Cal. App. 2d 337, 344 11 Cal. Rptr. 299.) In Buss v. Superior Court (1997) 16 Cal. 4th 35 65 Cal. Rptr. 2d 366, 939 P.2d 766, our Supreme Court clarified the application of principles concerning "quasi-contractual" or implied-in-law obligations in the context of third party insurance. In Buss, a multicount complaint was filed against the insured, who tendered defense of the action to his insurers. (Buss v. Superior Court, supra, 16 Cal. 4th at pp. 40-41.) The pertinent insurer accepted the defense under a reservation of rights, contending that only one of the claims alleged in the complaint was potentially covered by the insurer's policy. (Id. at pp. 41-42.) The reservation of rights included the right to seek reimbursement for defense funds expended on claims for which there was no policy coverage. (Id. at p. 42.) The action was eventually settled without a settlement contribution from the insurer. (Ibid.) The insurer then sought reimbursement for the defense funds it had expended with respect to the claims it contended were not potentially covered by the policy. (Buss v. Superior Court, supra, 16 Cal. 4th at pp. 42-43.) Citing principles concerning unjust enrichment, the court in Buss concluded that third party insurers that reserve the right to reimbursement have a quasi-contractual right to recover defense costs arising from claims that are not potentially covered by the policy, but no similar right to recover defense costs arising from claims that are potentially covered. (Id. at pp. 49-52.) The Buss court reasoned that under a standard third party policy, an insurer has a duty to indemnify the insured for sums that the insured becomes legally obligated to pay as damages for any covered claim, as well as the duty to defend potentially covered claims. (Buss v. Superior Court, supra, 16 Cal. 4th at pp. 42-44.) Accordingly, insurers cannot recover defense costs incurred on potentially covered claims in quasi-contract because they have a contractual duty to pay these costs. ( Id. at pp. 49-50, 65 Cal. Rptr. 2d 366, 939 P.2d 766.)