## Facts

- An insurer issued a master property policy to a savings bank for July 1, 1993–July 1, 1994, providing “all risk” coverage for “residential” property and limited named-peril coverage for “commercial” property.
- The policy defined “residential property” as a building designed principally for dwelling purposes by not more than four families; “commercial property” meant any building that was not residential.
- The bank acquired a three-story, twelve-unit apartment building in Baltimore through foreclosure and added it as an insured location.
- The building sustained water damage, and the bank submitted a claim characterizing the property as residential and occupied.
- The insurer investigated and paid the bank approximately $158,000 on the claim.
- After payment, the insurer concluded the building did not qualify as “residential” under the policy’s four-family definition and that the water damage loss was not covered under the policy’s commercial-property provisions.
- The insurer sued the bank to recover the payment, asserting multiple theories including restitution/unjust enrichment.

## Issues

1. Whether an insurer may recover, in restitution/unjust enrichment, money paid on a claim when payment resulted from a mistake about coverage and the policy did not require payment.
2. Whether the insurer’s investigation and payment, despite information indicating the building had twelve units, barred restitution under voluntary payment, waiver, or estoppel theories.
3. Whether the insurer was entitled to summary judgment on restitution and what disposition was appropriate for the remaining claims.

## Decision

- The court granted the insurer’s motion for summary judgment on the restitution/unjust enrichment count.
- The court denied the bank’s motion for summary judgment.
- The court dismissed the insurer’s remaining counts without prejudice.

## Legal Principles

- A party who pays money under a material mistake as to liability or coverage may obtain restitution when the recipient would otherwise be unjustly enriched.
- Clear policy definitions control coverage classification; a multi-unit dwelling may be “commercial” under a policy definition even if commonly described as residential.
- Restitution is not automatically barred because the payor could have discovered the relevant facts through more careful investigation.
- Payment made under a mistaken belief of coverage is not necessarily insulated from recovery by voluntary payment, waiver, or estoppel when the policy plainly does not obligate the payment.

## Conclusion

The court held that the insurer’s payment on a water-damage claim was made under a material mistake because the twelve-unit building fell outside the policy’s “residential” definition, and retaining the payment would unjustly enrich the insured; the insurer therefore was entitled to restitution as a matter of law.


Admiral Ins. Co. v. Am. Nat'l Sav. Bank, F.S.B., 918 F. Supp. 150 (D. Md. 1996)