B-167760, OCTOBER 2, 1969, 49 COMP. GEN. 222

B-167760, OCTOBER 2, 1969, 49 COMP. GEN. 222

PAYMENTS -- ERRONEOUS -- RESTITUTION BY GOVERNMENT THE PAYMENT TO THE GOVERNMENT BY AN INSURANCE COMPANY TO COVER DAMAGES TO GOVERNMENT PROPERTY BY A CAR INSURED BY THE COMPANY WHERE THE DATE OF THE ACCIDENT WAS ERRONEOUSLY SHOWN AS FALLING WITHIN THE PERIOD OF THE POLICY COVERAGE MAY BE REIMBURSED TO THE COMPANY. THE RULE THAT AN INSURANCE COMPANY MAY RECOVER PAYMENTS MADE UNDER A MISTAKE OF FACT, WHICH WAS DUE TO ITS OWN NEGLIGENCE OR FORGETFULNESS, UNLESS THE PAYEE HAS SO CHANGED HIS POSITION THAT IT WOULD BE INEQUITABLE TO REQUIRE RESTITUTION IS APPLICABLE TO THE GOVERNMENT, AS PERSONS RECEIVING ERRONEOUS PAYMENTS FROM THE GOVERNMENT ACQUIRE NO RIGHTS TO THE PAYMENTS, AND IT IS ONLY FAIR AND EQUITABLE THAT WHEN THE GOVERNMENT IS THE RECIPIENT OF AN ERRONEOUS PAYMENT THAT THE MONEY BE RETURNED. THE GOVERNMENT WAS NOT PREJUDICED IN THE MATTER AND MAY STILL RECOVER THE COST OF THE DAMAGE REPAIR FROM THE TORTFEASOR.

TO DWIGHT HUMPHREY, DEPARTMENT OF THE ARMY, OCTOBER 2, 1969:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 4, 1969 (NAOCT-F), REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF PAYMENT OF A VOUCHER IN FAVOR OF THE TRAVELERS INSURANCE COMPANY TO REIMBURSE IT FOR PAYMENT ERRONEOUSLY MADE TO THE GOVERNMENT.

ON JULY 24, 1968, A CAR DRIVEN BY MR. LLOYD C. COOK FAILED TO NEGOTIATE A CURVE AND DAMAGED GOVERNMENT PROPERTY. MR. COOK DID NOT REPORT THE ACCIDENT AND IT WAS ONLY THROUGH THE EFFORTS OF THE ASSISTANT DISTRICT COUNSEL, NORFOLK DISTRICT, CORPS OF ENGINEERS, THAT TRAVELERS LEARNED OF IT. WHEN THE INSURANCE COMPANY'S REGIONAL OFFICE IN RICHMOND SENT THE FILE TO THE LOCAL OFFICE IN NORFOLK, THE DATE OF THE ACCIDENT WAS ERRONEOUSLY NOTED AS JULY 27, 1967. THIS DATE FELL WITHIN THE PERIOD OF COVERAGE OF THE POLICY, WHICH WAS MAY 17, 1967, TO MAY 17, 1968. TRAVELERS WILLINGLY AND FULLY COOPERATED IN THE INITIAL INVESTIGATION OF THE ACCIDENT AND AGREED TO PAY THE COST OF THE REPAIR WORK.

THEREFORE, WHEN ON MARCH 13, 1969, A LETTER OF DEMAND WAS SENT TO MR. COOK WITH A COPY TO TRAVELERS, THE INSURANCE COMPANY PAID PROMPTLY. THE LETTER OF DEMAND CITED THE CORRECT DATE OF THE ACCIDENT BUT THE DISCREPANCY WAS NOT DETECTED UNTIL AFTER PAYMENT WAS MADE. UPON DISCOVERY OF ITS ERROR, THE INSURANCE COMPANY REQUESTED A REFUND OF ITS MONEY. THE COMPANY HAS SUBMITTED EVIDENCE SHOWING THAT THE DATE OF THE ACCIDENT WAS OUTSIDE THE INITIAL PERIOD OF THE POLICY AND THAT THE POLICY WAS NOT RENEWED.

IT HAS BEEN SAID THAT WHEN AN INSURANCE COMPANY IS NEGLIGENT IN INVESTIGATING AND MAKING PAYMENT ON A CLAIM, IT IS BARRED FROM RECOVERY OF ITS MONEY. SEE PENNSYLVANIA CASUALTY CO. V BROOKS, 24 SO. 2D 262 AND METROPOLITAN LIFE INSURANCE CO. V MUNDY, 167 SO. 894.

THE BETTER RULE, HOWEVER, IS THAT AN INSURANCE COMPANY MAY RECOVER PAYMENTS MADE UNDER A MISTAKE OF FACT, WHICH WAS DUE TO ITS OWN NEGLIGENCE OR FORGETFULNESS, UNLESS THE PAYEE HAS SO CHANGED HIS POSITION THAT IT WOULD BE INEQUITABLE TO REQUIRE RESTITUTION. IN THE SUBJECT MATTER THE GOVERNMENT HAS NOT BEEN SO PREJUDICED AND IT MAY STILL RECOVER FROM THE TORTFEASOR. SEE 167 A.L.R. 470 ANNOTATION "RIGHT OF INSURER TO RESTITUTION OF PAYMENTS MADE UNDER MISTAKE"; 44 AM. JUR. "INSURANCE," SECTION 1806; AND 46 CJS "INSURANCE," SECTION 1203.

WE DO NOT BELIEVE THE FACT THE GOVERNMENT IS A PARTY OF THIS TRANSACTION SHOULD AFFECT THE APPLICATION OF THIS RULE. SEE, FOR EXAMPLE, UNITED STATES V STATE BANK, 96 U.S. 30, 35. IT IS WELL SETTLED THAT PERSONS WHO RECEIVE ERRONEOUS PAYMENTS FROM THE GOVERNMENT ACQUIRE NO RIGHTS TO SUCH PAYMENTS. THE COURTS CONSISTENTLY HOLD THAT SUCH PERSONS ARE BOUND IN EQUITY AND GOOD CONSCIENCE TO MAKE RESTITUTION. SEE B-164330, DATED OCTOBER 30, 1968; UNITED STATES V NORTHWESTERN NATIONAL BANK AND TRUST CO. V UNITED STATES, 164 U.S. 190; UNITED STATES V BENTLEY, 107 F. 2D 382, 384. OF MINNEAPOLIS, 33 F. SUPP. 484, 486; WISCONSIN CENTRAL RAILROAD THEREFORE, WHEN THE GOVERNMENT IS THE RECIPIENT OF ERRONEOUS PAYMENTS, IT IS ONLY FAIR AND EQUITABLE FOR IT TO RETURN THE MONEY.

ACCORDINGLY, THE VOUCHER WHICH IS RETURNED HEREWITH MAY BE CERTIFIED FOR PAYMENT IF OTHERWISE CORRECT.