Carrier Prevails on Cumis Counsel

December 18, 2023

Congratulations to Sara J. Savage for obtaining a significant victory on behalf of firm client, Scottsdale Insurance Company/Nationwide Insurance Company. 

On November 13, 2023, the U.S. District Court for the Central District of California ruled in a bench trial on the specific legal and technical issue of whether an insurance carrier, Scottsdale Insurance Company, defending its insured under a reservation of rights, is obligated to provide Independent Counsel, under the Independent Counsel statute as codified in Civil Code §2860, if another carrier’s reservation of rights contained an exclusion (e.g., intentional or expected) that created the potential for a conflict thus triggering the Independent Counsel Statute.  (By way of background, three carriers agreed to defend their mutual insured under a shared defense agreement, and only one of the three defending carriers’ reservation of rights contained an exclusion possibly triggering the Independent Counsel statute).  

Factually, the three carriers assigned defense counsel and the insured’s personal counsel sought to have defense counsel opine on the carriers’ reservation of rights and whether a conflict existed requiring defense counsel to obtain conflict waivers and similarly, whether any of the carriers’ reservation of rights created a right to independent counsel.  Defense counsel objected indicating it was outside the scope of its retention.  The insured and its personal counsel, while not expressly demanding Independent Counsel, intimated that it was the duty of one carrier to provide independent counsel if another carrier’s reservation of rights triggered Independent Counsel under a shared defense agreement.  The underlying actions resolved and Scottsdale filed suit against its insured seeking reimbursement for fees and costs it incurred in defending and settling pursuant to its Blue Ridge rights.  The insured contended that Scottsdale was prohibited from recovering under Blue Ridge because it had failed to provide independent counsel, not based on Scottsdale reservation of rights, but based upon another carrier’s reservation of rights.

The Court, in a detailed analysis, ruled that Scottsdale had no legal or other duty to provide independent counsel if its own reservation of rights did not trigger Civil Code §2860 even if there was a joint defense or shared defense agreement.  The Court held that in analyzing whether a conflict exists supporting appointment of Independent Counsel, the analysis is between the insurer and the insured and the specific factual allegations being reserved upon because not every reservation of rights creates an actual conflict requiring the appointment of independent counsel.

Congratulations Sara! 

Selman Leichenger Edson Hsu Newman & Moore LLP provides this information for educational purposes. Case results depend upon a variety of factors unique to each case. Case results do not guarantee or predict a similar result in any future case. This information should not be construed or relied on as legal advice or to create a lawyer-client relationship.