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

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LexisNexis(R) Headnotes

Insurance Law > Claims & Contracts > Fiduciary Responsibilities

Insurance Law > General Liability Insurance > Conflicts of Interest

[HN1] When a conflict develops, the insurer cannot compel the insured to surrender control of the litigation, and must, if necessary, secure independent counsel for the insured, and the insurer's obligation to defend, after the appearance of a conflict extends to paying the reasonable value of legal services and costs performed by independent counsel selected by the insured.

Business & Corporate Law > Agency Relationships > Duties & Liabilities > Dual Agency

Insurance Law > Claims & Contracts > Reservation of Rights > Independent Counsel

Insurance Law > General Liability Insurance > Conflicts of Interest

[HN2] 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. While it has been said a policy provision requiring the insured to permit the insurer to employ the attorney to defend the third party suit amounts to a consent in advance to the conflict of interest, where the insured affirmatively withdraws that consent by hiring independent counsel, no doubt motivated by the insurer's reservation of rights, any such consent may be deemed withdrawn.

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