Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Case Notes
Cumis Counsel on the Hook for Unreasonable Fees
Cumis counsel is an attorney engaged directly by a defendant when there is liability insurance potentially covering the claim, but there is a conflict of interest between the insurance company and the insured defendant. The moniker for this independent counsel comes from the well-known case of San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc., 162 Cal. App. 3d 358, 208 Cal. Rptr. 494 (1984). The most common conflict requiring appointment of Cumis counsel is when the insurer denies or refuses to defend all or part of a claim but pays for some part of the defense under a reservation of rights. In such cases, an insurer may be ordered by a court to provide (and pay for) independent defense counsel under a reservation of rights.
In Buss v. Superior Court, 16 Cal. 4th 35, 49 (1997), the Supreme Court of California held the insured would be unjustly enriched if not ultimately required to pay the cost of defending any claims for which it had not purchased defense or indemnity insurance. Accordingly, the Buss court held the insurer may seek reimbursement from the insured for those defense costs attributable solely to uncovered claims. The court was not asked in Buss to consider the scenario wherein a court order requires the insurer to pay “reasonable and necessary defense costs” but expressly preserves the insurers right to recover payments for “unreasonable and unnecessary” charges by Cumis counsel, and the insurer alleges Cumis counsel padded bills with excessive, unreasonable and unnecessary charges. That multi-faceted question is addressed in the recent case of Hartford Casualty Insurance Company v. J.R. Marketing, L.L.C., California Supreme Court case no. 5211645.
In this recently decided case, Hartford contended it should be able to recoup the overbilled amounts directly from Cumis counsel. The Cumis counsel, Squire Sanders (US) LLP argued that if Hartford had any rights at all to recover purportedly overbilled amounts, such rights run solely against Hartford's insured, J.R. Marketing. Thereafter, if Hartford was successful in getting a judgment against J.R. Marketing, then the latter might have a right of indemnity against Squire Sanders.
The facts underlying the dispute are as follows. In 2005, a lawsuit was filed against J.R. Marketing and others. The defense of this lawsuit was submitted to Hartford, which denied any duty to defend or indemnify, but subsequently agreed to defend subject to a reservation of rights. A coverage action ensued, resulting in a finding that Hartford had a duty to defend and also provided that because of the reservation of rights, Hartford must fund Cumis counsel for J.R. Marketing. The latter selected Squire Sander as Cumis counsel. The order from the trial court in the coverage matter included a statement that Squire Sanders bills must be reasonable and necessary, and to the extent Hartford seeks to challenge any fees or costs as unreasonable or unnecessary, it could do so by way of reimbursement after resolution of the underlying action.
The underlying action was resolved in October 2009, and the coverage action, stayed during its pendency, resumed. Hartford filed a cross-complaint in the coverage action alleging it was entitled to recoup $13.5 million paid to Squire Sanders. The latter was a cross-defendant, and argued that Hartford could assert no legal or equitable claim against Cumis counsel or any other non-insured because Hartford's right to reimbursement depends on the contractual relationship between Hartford and J.R. Marketing. The trial court in the coverage matter agreed with Squire Sanders and ruled that Hartford's right to reimbursement, if any, was limited to J.R. Marketing.
We conclude this discussion in next month's issue. ' Jessica F. Pardi, Morris, Manning & Martin
'
COVID-19 and Lease Negotiations: Early Termination Provisions
During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.
How Secure Is the AI System Your Law Firm Is Using?
What Law Firms Need to Know Before Trusting AI Systems with Confidential Information In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.
Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support
The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.
Authentic Communications Today Increase Success for Value-Driven Clients
As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.
The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies
Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.