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Most standard liability insurance policies impose a duty on the insurer to defend its policyholder against suits by third parties seeking damages covered by the policy. However, insurers and policyholders often disagree as to whether the insurer’s duty to defend is triggered by a particular suit, and these disputes can rarely be resolved before the policyholder is required to defend the third party’s suit. As a result, insurers often offer to pay for the defense, while reserving its right to seek restitution if a court later determines that it did not have the duty to do so.

In Nautilus Ins. Co. v. Access Med., LLC, the Ninth Circuit Court of Appeals, under Nevada Rule of Appellate Procedure 5, asked the Supreme Court of Nevada whether an insurer is entitled to reimbursement of costs already expended in defense of its insureds where it has been determined that the insurer owed no duty to defend and the insurer expressly reserved its right to seek reimbursement. The Supreme Court of Nevada concluded that the answer is yes: when a party to a contract performs a disputed obligation under protest and a court later determines that the contract did not require performance, the party may ordinarily recover in restitution. Further, the Court concluded that this rule not only applies to insurance policies, but to any other contract.