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PA’s Highest Court – A Successful Carrier Can’t Always Get Its Money Back.

August 25, 2010

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In the case of <i>American and Foreign Insurance Company, et al. v. Jerry’s Sport Center, et al.</i>, the insurers assigned defense counsel (under a ROR) to defend a number of gun dealers who had been sued by the NAACP for the “negligent creation of a public nuisance by virtue of the industry’s failure to distribute firearms reasonably and safely.” After investigating the facts, the carriers commenced a declaratory judgment action to obtain a declaration of no coverage – an endeavor that was successful. After winning, the carriers asked the court to require the insureds to reimburse the insurers for all paid defense fees as, to require otherwise, would confer an unjust enrichment upon the insureds. The trial court agreed. Appeals resulted.
The question presented to PA’s highest court was whether the issuance of a ROR created a right of reimbursement (which is the majority US view), or if the insurance contract itself required a provision authorizing reimbursement (which is the minority US view). The PA Supreme Court adopted the minority view. It held that the right of reimbursement must be expressly set out in the insurance contract or it does not exist. <a href=""></a> and <a href=""></a>
If you have any questions about this post, please contact Bob Cosgrove at <a href=""></a>.


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