Memorandum of law cumis rule the cumis

Download 39 Kb.
Size39 Kb.
  1   2



In San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358 (Cumis) California joined eight other jurisdictions1 to rule that when a liability insurer reserves its rights to deny coverage to its policyholder in a plaintiff’s lawsuit, the insurer must discharge its promise to defend by adequately funding competent counsel2 of the policyholder’s choice to control the defense.3 The insurer’s reservation of rights is a challenge to coverage that creates conflicts of interest between the insurer and the policyholder.4 Lawyers selected and directed by the insurer always represent the interests of the insurer and represent the policyholder as a defendant.5 A California lawyer who represents the interests of joint clients with potential conflicts of interest must comply with Rules of Professional Conduct, Rule 3-310.6 The so-called tripartite relationship, that harmoniously permits dependent counsel to represent the insurer and policyholder when there are no conflicts of interest,7 is “torn and shredded” when conflicts of interest emerge.8

“The Cumis decision held that where the insurer provides a defense, but reserves the right to contest indemnity liability under circumstances suggesting that the insurer’s interest may diverge from that of its insured, a conflict arises between insured and insurer. In such circumstances, a single counsel cannot represent both the insurer and the insured unless the insured gives informed consent. Absent the insured’s consent to joint representation, the insurer must pay the insured’s “reasonable cost” for hiring independent counsel to represent the insured’s litigation interests under the insured’s control.”9

California courts have elaborated on the scope of the Cumis Rule. Because the insurer is not licensed to practice law, it must hire counsel to conduct the defense.10 The insurer must defend immediately.11 The insurer must defend the entire action.12 The insurer must adequately fund the defense.13 “Potential” not “actual” conflicts require the lawyer to comply with Rule 3-310.14 “[A] distinction between ‘potential’ and ‘actual’ conflicts of interest which is invalid and unworkable.”15 Both dependent counsel16 and the insurer17 have an affirmative duty to initiate disclosure of potential conflicts. Dependent counsel’s conflicts analysis must be thorough.18

Download 39 Kb.

Share with your friends:
  1   2

The database is protected by copyright © 2022
send message

    Main page