The Texas Supreme Court rejected an insurer’s equitable claim to recover overpayments because the policy contained contractual remedies that addressed the insured’s conduct.Gotham Insurance Co. v. Warren E & P, Inc., 2014 WL 1190049 (Tex. Mar. 21, 2014), petition for rehearing filed (Apr. 7, 2014).
The insured represented that it owned a 100% interest in a well that blew out, and the insurer paid claims accordingly. However, the insurer later learned that the insured had only a partial interest in the well and that others shared in the loss. The insurer sued the insured seeking reimbursement under both breach of contract and equity theories. Reemphasizing its holding inFortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007), the Texas Supreme Court noted that "an insurer is limited to contractual claims when the policy addresses the matter at issue. Here, the policy contains several clauses addressing misrepresentations, reporting, salvage and recoveries, subrogation and due diligence." Accordingly, because the insurer had a contractual remedy to recover the overpayments, it could not rely on equitable claims. The Supreme Court also held that the insurer could not pursue equitable claims against the third parties who benefited from the overpayments.