The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
Here is a last puzzle from the law of restitution. A hospital treats you in an emergency. It sends the bill to an insurance company that is thought to provide your coverage, and the company pays the hospital the full amount due – say, $50,000. Then the insurance company discovers that the payment was a mistake. You do not have insurance there; maybe your policy had lapsed, or you were confused with someone else who had a similar name. Now what?
The insurance company has a good restitution claim against you because it paid a debt that should have been yours. But you might not be able to pay the claim, so the insurance company will likely demand its money back from the hospital. Yet the hospital usually wins. This seems very strange. The hospital was reimbursed by the insurance company, but that was a mistake; the company owed the hospital nothing. Yet the company can't get its money back. Why?
The answer is that the hospital has a defense against the insurance company's restitution claim. The hospital can describe itself as a "bona fide creditor." When the hospital received the money, it wasn't unjustly enriched; it was owed money, and received it. The fact that the party who paid the money didn't owe it is merely a detail!
There are endless interesting questions in the law of restitution – interesting to me, anyway, and maybe to you – that there hasn't been enough time and space to mention this week. I cut down your trees and use them to make chairs, then get caught; do you get the chairs? If I paint a masterpiece on a canvas stolen from you, what do you get then?
What about the house I mentioned on the first day of these entries – the one you mistakenly built on my land while I watched? Do I get your house, do you get my land, or is the answer somewhere in between? Or, to return to another question from the first day, suppose I pay a bribe to a judge, and he defaults. The contract is illegal, of course, so I have no remedy under the law of contract. But can I use a restitution claim to at least get my money back?
These are, I think, delightful problems, and the principles at stake in them arise in litigation often, even if they usually take less colorful form. They seem like basic questions that most law school graduates would be able to answer, but they aren't. For historical reasons, mostly flukes, most lawyers are never taught much about recovery for unjust enrichment. I've tried to make it easy and fun in this book. I encourage you to check it out if you've enjoyed this week's discussion. Thanks to Eugene and the rest of the crew for having me in!