Cumis counsel
From Wikipedia, the free encyclopedia
| California law |
|---|
 |
| Constitution |
| Codes |
| Note: There are 29 California codes. |
| Courts of record |
| Areas |
A Cumis counsel is "an attorney employed by a defendant in a lawsuit when there is a liability insurance policy supposedly covering the claim, but there is a conflict of interest between the insurance company and the insured defendant."[1]
The name derives from the case of San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc., which the California Court of Appeal for the Fourth Appellate District decided on December 3, 1984.[2] While Cumis is the best-known appellate precedent on the issue of the appointment of independent counsel for the defense of insureds when their insurance company has a conflict of interest,[3] Cumis was not the first proponent of this principle. The Supreme Court of California expressed its approval of the concept of independent counsel in an earlier 1964 case, which in turn was based upon a 1925 Kentucky case that laid the foundation for appointing independent counsel in the insurer-insured relationship.[3] Cumis innovated beyond existing precedent as of 1984 by holding that the insurer was required to pay for the insured's independent counsel, and that a merely theoretical conflict of interest could be ripened by the insurer's act of sending a reservation of rights letter into an actual conflict of interest, which in turn meant that the insured now had an enforceable right to independent counsel.[3]
Cumis concluded as follows:
We conclude the Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage. If the insured does not give an informed consent to continued representation, counsel must cease to represent both. Moreover, in the absence of such consent, where there are divergent interests of the insured and the insurer brought about by the insurer's reservation of rights based on possible noncoverage under the insurance policy, the insurer must pay the reasonable cost for hiring independent counsel by the insured. The insurer may not compel the insured to surrender control of the litigation ... Disregarding the common interests of both insured and insurer in finding total nonliability in the third party action, the remaining interests of the two diverge to such an extent as to create an actual, ethical conflict of interest warranting payment for the insureds' independent counsel.[4]
In 1987, the California State Legislature enacted a statute governing the right of insured defendants to independent counsel.[5]
A common conflict of interest arises when the insurance company denies or refuses to defend all or part of a claim under a liability insurance policy, such as when an insurance company pays for the defense of a policyholder under a reservation of rights to dispute coverage.[1]
A law firm can still have a conflict of interest, despite the appointment of a Cumis counsel.[6] However, in some states, the appointment can cure a conflict.[7] The appointment of Cumis counsel also raises unusual attorney–client privilege issues.[8]