State Farm Fire & Cas. Co. v. E. Bay Mun. Util. Dist.

Today we consider whether an insurer that promptly pays the claim of its insured is barred from subrogation from the actual tortfeasor because the insurer could have legitimately denied the claim as excluded. From time to time and in a variety of situations, the “volunteer” rule has been invoked to curtail an insurer’s ability to pursue equitable subrogation against a tortfeasor who caused damage to its insured. As a general rule equitable subrogation has not been awarded to one who has officiously, and as a mere interloper, paid the debt of another without any moral or legal duty to do so. (Guy v. Du Uprey (1860) 16 Cal. 195, 199-200 ; Grant v. de Otte (1954) 122 Cal.App.2d 724, 728-729 [ 265 P.2d 952 ]; Caito v. United California Bank (1978) 20 Cal.3d 694, 704 [ 144 Cal.Rptr. 751 , 576 P.2d 466 ].)

We hold that an insurer does not necessarily act as a mere volunteer when it pays its insured under a valid homeowners policy and where the loss falls under the general grant of coverage, even though coverage in all likelihood is precluded under policy exclusions. This is especially true when, as here, the tortfeasor delays accepting responsibility while the insureds are…