Can I be sued regarding an insurance overpayment?

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Can I be sued regarding an insurance overpayment?

My son had an accident with one of my cars 4 months ago. I received a check from the insurance company and then a second one. They called me yesterday, telling me that the second check was been sent by mistake, so I have to send it back. The problem is the money is already spent. The man on the phone wants me to tell him right away how I am going to repay the money. I said I need some time to think about it and that I will get back to him. He told me if you don’t start repaying right away we will take you to court.

Asked on January 5, 2017 under Bankruptcy Law, Florida

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

The law disfavors what is known as "unjust enrichment". This can be, as in your case, when an overpayment is mistakenly made. Legally, you cannot keep such money since it is not yours; you have not earned it and are in no other way entitled to it. And think about it, if you have been mistakenly underpaid you would be entitled to the amount you were shorted. As for having spent the money, this is not the insurance company's problem. In fact, it is not asking for a lump sum prepayment; it is willing to set up a repayment plan. I suggest that you do so or you will find yourself being sued. If successful in obtaining a judgment against you, the insurance company can seize your bank account(s), garnish your wages, etc.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Yes, you may be sued if you do not return an overpayment. The law is very clear that being accidentally overpaid in no way entitles you to the money: errors do not let you retain someone else's money. Similarly, having spent the money is no defense: it is not the other side's concern that you cannot readily the money, and figuring out how to do so is your issue. So unless you negotiate a payment plan with them that they agree to and accept, they could sue you for the amount of the overpayment.


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