Insurer Did The Right Things, With No Conflict Of Interest Appearing And With The Insurer Obtaining Summary Judgment On The Cumis Issue.
Pacific Intercultural Exchange v. Scottsdale Ins. Co., Case No. D071478 (4th Dist., Div. 1 June 26, 2018) (unpublished) is a textbook example of how an insurer treats an insured correctly such that no obligation arises to pay a Cumis counsel desired by the insured.
What insurer did well here was to appoint a defense counsel and make no major reservation of rights except for punitive damages or damages beyond policy limits. In fact, insurer wanted to tender a policy limits settlement, but insured wanted to get a better deal. Insurer moved for, and obtained, summary judgment on the Cumis counsel request of insured to pay for an independent counsel in addition to insurance defense counsel.
Here is what the appellate court determined in line with the lower court’s analysis:
- Reserving rights with respect to punitive damage claims and claims for damages in excess of the policy limits does not present a conflict of interest under Civil Code section 2860(b);
- Insurer did not specifically reserve on any exclusion in the operative liability coverage form (such that any coverage disputes unrelated to issues being litigated in the underlying litigation are inconsequential);
- Insurer did exactly what it should do to avoid a conflict of interest in settlement negotiations by offering a policy limits settlement early in the litigation, with the insurer given exclusive right to control settlement negotiations in such a context; and
- Dissatisfaction with assigned defense counsel does not alone create a conflict with the insurer, because assigned defense counsel acts as an independent contractor such that the insurer does not become liable for trial counsel’s legal malpractice.
Summary judgment affirmed.