Can an insurer obtain reimbursement from the insured for defense costs that can be allocated solely to a claim that is not even potentially covered?

The insurer has a duty arising out of the policy as a contract to defend as to a claim, or a part of a claim, that is at least potentially covered because it may possibly embrace some triggering harm of the specified sort within the policy period caused by an included occurrence. It has been held [17 Cal.4th 69] that, under principles of the law of contract, the insurer may not obtain reimbursement from the insured for defense costs that can be allocated to a claim that is at least potentially covered: "With regard to defense costs" of this sort, "the insurer has been paid premiums by the insured. It bargained to bear these costs. To attempt to shift them would upset the arrangement." (Buss v. Superior Court, supra, 16 Cal.4th at pp. 49-50, 65 Cal.Rptr.2d 366, 939 P.2d 766.) Implicit in this holding is the proposition that the insurer may not obtain reimbursement from the insured for defense costs that can be allocated to a part of a claim that is at least potentially covered. It follows that, pursuant to contract, defense costs that can be allocated to a claim, or a part of a claim, that is at least potentially covered cannot be allocated to the insured.

By contrast, the insurer does not have a duty arising out of the policy as a contract--but may have one imposed by law in support thereof--to defend as to a claim, or a part of a claim, that is not even potentially covered because it does not even possibly [948 P.2d 928] embrace any triggering harm of the specified sort within the policy period caused by an included occurrence. It has been held that, under principles of the law of restitution, the insurer may obtain reimbursement from the insured for defense costs that can be allocated solely to a claim that is not even potentially covered: "With regard to defense costs" of this sort, "the insurer has not been paid premiums by the insured. It did not bargain to bear these costs. To attempt to shift them would not upset the arrangement. [Citation.] The insurer therefore has a right of reimbursement that is implied in law as quasi-contractual...." (Buss v. Superior Court, supra, 16 Cal.4th at pp. 50-51, 65 Cal.Rptr.2d 366, 939 P.2d 766.) Implicit in this holding is the proposition that the insurer may obtain reimbursement from the insured for defense costs that can be allocated solely to a part of a claim that is not even potentially covered. It follows that, pursuant to quasi-contract, defense costs that can be allocated solely to a claim, or a part of a claim, that is not even potentially covered can be allocated to the insured.

On the allocation of defenses costs to the insured, it is the insurer that must carry the burden of proof, and it must do so by the preponderance of the evidence. What we said above we say here: "Evidence Code section 500 provides that, generally, a party desiring relief must carry the burden of proof thereon," and "Evidence Code section 115 ... provides that the burden of proof that is generally applicable is proof by a preponderance of the evidence." (Buss v. Superior Court, supra, 16 Cal.4th at p. 53, 65 Cal.Rptr.2d 366, 939 P.2d 766.) We discern no reason to make an exception here.