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Thomas Spoon and Maria Spoon appealed the decision of the Pulaski County Circuit Court granting summary judgment in favor of appellees Chester Lee Bolds and Linda Bolds in the Boldses’ civil action for damages related to insurance proceeds.
FACTS
IN Thomas Spoon And Maria Spoon v. Chester Lee Bolds And Linda Bolds, 2023 Ark.App. 244, No. CV-22-277, Court of Appeals of Arkansas, Division II (April 26, 2023) The Boldses purchased the Spoons’ house by warranty deed on July 2, 2020. In November 2020, the Boldses filed an insurance claim because they discovered the roof was leaking. The Boldses’ insurance coverage would not pay because there was pre-existing damage to the roof. The Boldses then filed a claim against Spoon’s homeowner’s insurance. That insurer accepted the claim but paid the money in dispute ($5,219.48) to the Spoons. When the Spoons failed to turn over the money paid on the insurance claim to the Boldses, the Boldses sued, alleging breach of contract, declaratory judgment, and unjust enrichment.
The Boldses then moved for summary judgment because the Spoons’ had no insurable interest. The Spoons argued that they are entitled to the money because they were the owners of the property at the time of the loss. They argue that unjust enrichment cannot be fairly applied because the Boldses did not pay for the insurance.
The court’s order found that any interest the Skedars may have had in the house ceased and was extinguished upon the sale of the house to the Boldses, and it ordered the Skedars to reimburse the Boldses for the roof repairs.
The Spoons argued that summary judgment was not proper because the court did not address the issues of contract protection, standing, statute of frauds, or timing. In support of their argument, they argue that the general rule is that policies are personal agreements between the insured and the insurer and that the Boldses were not a party to the original agreement or aware of it.
ANALYSIS
The issues of breach of contract, unjust enrichment and declaratory judgment were referred to the circuit court. To find unjust enrichment, a party must have received something of value to which he or she is not entitled and which he or she must restore. There must also be some operative act, intention or situation to make the enrichment unjust and compensable. One who is free from fault cannot be considered unjustly enriched merely because he or she has chosen to exercise a legal or contractual right. Further, if one has money belonging to another, which he in fairness and good conscience ought not to keep, it may be recovered even if there is no privity between the parties.
It was undisputed that the Skedars received the insurance money paid out to repair the roof of a house in which they no longer had an interest.
Undue enrichment constituted an alternative, independent basis for the circuit court’s ruling, which has remained unchallenged by the Spoons. Consequently, the Boldses were entitled to the compensation.
The insurer erred in paying spoons because they had no insurable interest. The Spoons kept the money they weren’t entitled to and owed the Boldses for selling them a house with a leaky roof. The Spoons were clearly unjustly enriched and owed the Boldses the cost of fixing their roof. What the court failed to consider, because it was not a party, the insurer that paid the Spoons did not owe them compensation and paid a claim it did not owe. Since the insurer didn’t care and the Boldses did, they were entitled to the funds.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com
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