California workers’ compensation insurance claims are managed by the employer’s workers’ compensation insurance provider. When disputes arise, the insurer provides legal representation for itself and the insured. Occasionally, a conflict of interest prevents the insurer’s attorney or attorneys from being able to represent both the insurer and the insured ethically. In these cases, the employer may be entitled to independent representation, called Cumis counsel in California, to provide for its workers’ compensation defense.
When Do Workers’ Compensation Claims Trigger Cumis Counsel in California?
The workers’ compensation insurance system in California is intended to protect employees and provide for their prompt care and treatment if they are injured on the job while also shielding employers from excess liability. Most workers’ compensation claims are managed within the system and do not require the employer to obtain legal representation.
When claims turn into disputes and the employer has appropriate workers’ compensation insurance coverage, the insurer has a duty to defend the claim. In most of these cases, the interests of the insured and insurer are aligned, and the insurer’s attorneys represent both parties. However, when the manner of defense may be beneficial to the insurer but could adversely affect the insured, the employer may be entitled to Cumis counsel.
An Insured’s Right to Cumis Counsel in California
The right to independent counsel in cases involving a conflict of interest between an insurer and insured was first recognized by the courts in California in San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc. The concept was later incorporated into state law as California Civil Code § 2860.
The law states that the insurer must provide (and cover the costs of) independent legal counsel for an insured when it has a duty to defend and a conflict of interest exists unless the insured waives the right to independent counsel in writing. The statute does not specify all criteria to establish a conflict of interest, but it states that a denial of coverage does not constitute a conflict. Instead, Cumis counsel may be required when the insurer reserves its rights on a coverage issue and the claim could be defended by the insurer’s counsel in a manner that conflicts with the interests of the insured.
Employer Risk in Workers’ Compensation Claims
California Labor Code § 3602 deems workers’ compensation the sole remedy for compensation related to workplace injuries in California. Employers who are compliant with California workers’ compensation regulations are not subject to civil liability for work-related injuries, with a few exceptions.
The need for independent counsel may be created by these exceptions or other facts and circumstances of the case, although a court must decide if Cumis counsel is warranted and the insurer must cover the related costs.
The situations in which an employer may want or need to seek independent counsel for workers’ compensation defense include the following:
- The employer is accused of serious, willful misconduct leading to a workplace injury, and is, therefore, subject to civil liability.
- The employer is accused of wrongful termination or retaliation related to the workers’ compensation claim.
- The injury resulted from faulty materials or equipment manufactured by the employer, subjecting it to additional liability.
- The injury resulted from negligence or wrongdoing on the part of a third party, particularly if that party is represented by the same insurer.
This is not a complete list of potential scenarios in which it may be beneficial for an employer to seek outside counsel. Further, determining if the case triggers the requirement for the insurer to provide Cumis counsel can be a complex process. Consulting with an experienced California workers’ compensation defense attorney can be beneficial to employers who are unsure of their rights and best means of defense.
A California employer attorney can also help businesses and other entities proactively mitigate the risks of workers’ compensation claims and additional liabilities by providing counsel on policies, procedures, workplace safety programs and insurance coverage.
When California Cumis Counsel Is Required in Workers’ Compensation Cases
When Cumis counsel is determined by the court to be necessary, California law allows insurers to require that the attorney or attorneys representing the insured meet certain qualifications. The Cumis statute states that the insurer may require that the insured’s attorney has a minimum of five years of experience in civil litigation with substantial experience in the matter at issue—in this case, workers’ compensation. The insurer may also require that the attorney has active errors and omissions insurance coverage.
While Cumis counsel solely represents the interests of the employer insured, California Civil Code § 2860 imposes a duty that independent counsel inform and consult with the insurer regarding matters related to the case. The insured employer is also still bound to cooperate with the insurer under the terms of its insurance policy and contract.
Contact the Law Offices of Susan A. Rodriguez for Employer Workers’ Compensation Defense
Employers with concerns about excess liability or conflicts of interest with their insurer related to workers’ compensation defense should consult with an experienced California employment defense lawyer who can assist them in identifying and forging the best path forward.
Susan A. Rodriguez at the Law Offices of Susan A. Rodriguez, APC has more than 30 years of experience counseling and defending employers in a range of legal matters, including workers’ compensation. Schedule a consultation by calling (213) 943-1323 or completing this online contact form.
Posted by Susan A. Rodriguez, Esq.
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