Cumis counsel

From Wikipedia, the free encyclopedia

A Cumis counsel is "an attorney employed by a defendant in a lawsuit when there is an insurance policy supposedly covering the claim, but there is a conflict of interest between the insurance company and the insured defendant." [1]

The title of this type of lawyer comes from the Cumis case from California, which was decided by the California Court of Appeal for the Fourth Appellate District on December 3, 1984. This was the first appellate endorsement of the appointment of independent counsel for a tort defense when an insurance company had a conflict of interest.[2]

The most important paragraph from the Cumis decision is as follows:

We conclude the Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage. If the insured does not give an informed consent to continued representation, counsel must cease to represent both. Moreover, in the absence of such consent, where there are divergent interests of the insured and the insurer brought about by the insurer's reservation of rights based on possible noncoverage under the insurance policy, the insurer must pay the reasonable cost for hiring independent counsel by the insured. The insurer may not compel the insured to surrender control of the litigation ... Disregarding the common interests of both insured and insurer in finding total nonliability in the third party action, the remaining interests of the two diverge to such an extent as to create an actual, ethical conflict of interest warranting payment for the insureds' independent counsel.[3]

The California State Legislature subsequently enacted a statute governing the right of insured defendants to independent counsel.[4]

A common conflict is when the insurance company denies or refuses to defend all or part of a claim, such as when an insurance company pays for the defense of a policyholder under a reservation of rights.[5] A "reservation of rights" letter usually states that the insurance company reserves its rights to later deny the claim should facts surface that prevent coverage, such as facts which would preclude coverage under a policy term or exclusion.

A law firm can still have a conflict of interest, despite the appointment of a Cumis counsel.[6] However, in some states, the appointment can cure a conflict. [7] The appointment of Cumis counsel also raises unusual attorney-client privilege issues.[8]

[edit] References

  1. ^ Definition from Law.com's Law Dictionary (based on the People's Law Dictionary)
  2. ^ San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc., 162 Cal. App. 3rd 358 (1984).
  3. ^ Id. at 375.
  4. ^ See California Civil Code section 2860.
  5. ^ Definition at the Legal Explanations Web site.
  6. ^ "Cumis Conundrum" from Duane Morris newsletter.
  7. ^ Findlaw.com, citing Finley v. The Home Insurance Co., 1998 WL 905218 (Haw. 1998).
  8. ^ See the State Bar of California ethics opinion on the issue of privileged records.

[edit] See also

[edit] External links

  • Detailed discussion of Cumis case law: [1].