Cumis Counsel: What Employers Need to Know about California Conflicts Counsel

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Employers have more on their plate than providing a product or service.  Keeping up with California employment law matters is a full-time job in itself.  When employers must defend against legal claims, they rely on their insurer to handle the matter.  But what happens when the insurer’s interest conflicts with the employer insured’s interest? That’s when an employer has a right to Cumis counsel, independent counsel for California employer defense.

A California Employer’s Right to Cumis Counsel

Employers leverage risk in a variety of areas by securing insurance, such as general liability insurance, professional liability insurance, employment practices liability insurance (EPLI), property insurance, and business interruption insurance, to name a few.  The type of loss covered may change from one type of policy to another, but most types of coverage include a duty to defend.  In other words, the insurer agrees to provide a defense for the insured in the event of a claimed loss. 

The system works well when everyone is on the same page, but sometimes the insurer’s and employer insured’s interests don’t align.  When a conflict of interest arises, how can the employer insured be sure whose interests the insurer-supplied attorney is protecting? When an insurer has a conflict of interest with a California employer insured, the latter may be entitled to independent counsel, called Cumis counsel, chosen by the insured but paid for by the insurer.  Understanding what triggers independent counsel rights and how to assert them is critical for employers seeking to protect their interests. 

What Is Cumis Counsel?

When an insured must defend against a covered loss, the insurer generally appoints panel counsel or allows the employer insured to choose from panel counsel, a set of attorneys contracted to the insurer to provide defense against covered losses.  However, problems can arise when the interests of the insurer conflict with the interests of the employer insured.   

The name “Cumis counsel” comes from the 1984 case San Diego Navy Federal Credit Union v. Cumis Ins. Society.  There, the insured faced claims of breach of contract, wrongful interference with a contract, wrongful discharge, and breach of the covenant of good faith and fair dealing.  When the insured received a reservation of rights letter regarding claims involving willful conduct, it hired independent counsel and sought the resulting legal expenses from the insurer.  In subsequent litigation on the insurer’s duty to defend, the California Court of Appeal held that an insurer must allow the insured to obtain and must pay for independent counsel when a conflict of interest exists on a non-coverage issue between the insurer and the insured. 

What Triggers Cumis Counsel?

After the Cumis doctrine established an insured’s right to independent counsel, the California State Legislature codified that right when it passed California Civil Code § 2680.  The statute dictates when an insurer is required to provide independent counsel to an insured.  However, the conflict of interest must be actual and significant — a mere potential for a conflict of interest is insufficient to trigger the requirement for insurer-paid independent counsel.

The right to independent counsel is not limited to cases involving a straight insurer-insured relationship.  Rather, a conflict of interest may arise in situations in which the party seeking independent counsel is an additional insured under another business’s policy.  For example, a developer may be an additional insured under a subcontractor’s insurance policy.

Where to Turn for Help When You Need California Conflicts Counsel

Insureds often rely on the counsel provided by the insurer, assuming such attorneys to be experienced in insurance defense and in the particular types of claims at issue in the case.  An employer insured with an actual conflict of interest with its insurer also needs experienced counsel but must start from scratch in the search for independent counsel. Where do they turn?

The search for independent counsel for California employer insureds should start and end with the Law Offices of Susan A. Rodriguez, APC.  Susan A. Rodriguez and her team offer over 30 years of experience representing and defending California employers in areas like these:

If you have a non-coverage conflict of interest with your insurer, you may be entitled to independent counsel on the insurer’s dime.  For a consultation on your eligibility for Cumis counsel and how Susan A. Rodriguez and her team can help, call (213) 943-1323 or complete this online contact form.

Posted by Susan A. Rodriguez, Esq.

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