Second District, Division 3 Agrees that Arbitration Premature Until Conflict Exists.
Here is a Cumis arbitration case that should be of interest to insurance practitioners.
In Savvy Property Mgt. v. United National Ins. Co., Case No. B214549 (2d Dist., Div. 3 May 24, 2010) (unpublished), defendants in a tenant uninhabitability suit tendered defense of the matter to their insurance company, which accepted subject to a complete reservation of rights and subject to a right to seek reimbursement of any fees/costs advanced in favor of the insured. Defendants, as plaintiffs, bought a declaratory relief action against carrier, as well as sought an order compelling arbitration of the amount of hourly fees for independent Cumis counsel. The trial court denied the motion to compel arbitration under Civil Code section 2860(c). Plaintiffs appealed.
1868. Library of Congress.
Plaintiffs’ appeal of the order denying the motion to compel arbitration was unsuccessful.
The reason? The request was premature.
The Court of Appeal, in line with prior precedents, rejected the notion that the mere reservation of rights or reservation of the right to seek reimbursement of defense costs under Buss v. Superior Court, 16 Cal.4th 35 (1997) entitles an insured to select Cumis counsel. Before arbitration can occur under section 2860, the parties must agree that independent counsel is necessary or the trial court must make a determination that that the insurer owes a duty to defend and a conflict of interest exists between carrier and insured. (Intergulf Development LLC v. Superior Court, 183 Cal.App.4th 16, 21 (2010); Handy v. First Interstate Bank, 13 Cal.App.4th 917, 925 (1993); Truck Ins. Exch. v. Dynamic Concepts, 9 Cal.App.4th 1147, 1150-1151 (1992).) No determination of whether Cumis counsel was necessary had yet been made in the declaratory relief action, such that the 2860 request was premature.