Case Notes

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.