San diego navy federal credit union et al., Plaintiffs and Respondents, V. Cumis insurance society, inc., Defendant and Appellant Civ. No. 31043 Court of Appeal of California, Fourth Appellate District, Division One


HEADNOTES CALIFORNIA OFFICIAL REPORTS HEADNOTES



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HEADNOTES
CALIFORNIA OFFICIAL REPORTS HEADNOTES

Classified to California Digest of Official Reports, 3d Series


(1a) (1b) (1c) Insurance Contracts and Coverage § 107--Extent of Loss of Insured and of Liability of Insurer--Liability and Indemnity Insurance--Obligation to Defend Insured--Conflict of Interests--Duty to Pay for Independent Counsel. --An insurer with a duty to provide a defense to its insured in an action against it for general and punitive damages arising out of an alleged wrongful discharge was required to pay for independent counsel for its insured, where it reserved the right to assert noncoverage at a later date, denied any coverage for punitive damages, and where it was uncontested the basis for the insured's liability, if any, might rest on conduct excluded by the terms of the insurance policy. When multiple theories of recovery are alleged against the insured and some theories involve uncovered conduct under the policy, a conflict of interest exists. A conflict also arises once the insurer takes the view a coverage issue is present. Moreover, the insurer could not compel the insured to surrender control of the litigation under those circumstances.
(2) Insurance Contracts and Coverage § 107--Extent of Loss of Insured and of Liability of Insurer--Liability and Indemnity Insurance--Obligation to Defend Insured--Conflict of Interest--Waiver. --An attorney having dual agency status is subject to the rule that a conflict of interest between jointly represented clients occurs whenever their common lawyer's representation of the one is rendered less effective by reason of his representation of the other. Accordingly, while it has been said a policy provision requiring an insured to permit the insurer to employ an attorney to defend a third party suit amounts to a consent in advance to the conflict of interest, when the insured affirmatively withdraws that consent by hiring independent counsel any such consent may be deemed withdrawn.



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