219 Cal. App. 4th 29
Cal. Ct. App.2013Background
- CERCLA action in Lyon action traced Halford's contamination to a Modesto dry cleaner; third-party actions added MBL as a defendant.
- MBL supplied dry-cleaning solvents; insurers defended MBL under reservations of rights; MBL demanded independent Cumis counsel at insurer expense.
- Insurers appointed defense counsel; MBL refused independent counsel, leading to declaratory relief actions by insurers.
- Trial court granted summary judgment for insurers; held no actual conflict of interest requiring independent counsel.
- Great American paid MBL's independent counsel costs but reserving rights to seek reimbursement; appeal deemed moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does a conflict of interest under §2860 require independent counsel here? | MBL contends reservations create conflict; Cumis counsel required. | Insurers argue no real conflict; reservations insufficient. | No conflict; independent counsel not required. |
| Can general reservations of rights create a duty to provide independent counsel? | General reservations could imply conflict affecting defense. | General reservations are theoretical, not triggering independent counsel. | General reservations do not create a conflict warranting independent counsel. |
| Do specific policy exclusions (pollution) create a conflict justifying Cumis counsel? | Pollution exclusions and related reservations could control coverage, creating conflict. | Exclusions involve contract interpretation; counsel cannot control coverage outcome. | No resulting conflict from pollution exclusions. |
| Does defense of other insureds in Lyon create a significant conflict of interest? | Representing adversarial insureds creates potential conflict. | Different firms and files were kept separate; no adversarial conflict proven. | No substantial conflict; independent counsel not required. |
Key Cases Cited
- San Diego Federal Credit Union v. Cumis Ins. Society, Inc., 162 Cal.App.3d 358 (Cal. App. Dist. 4th 1984) (Cumis rule: conflict requires independent counsel when reserved rights affect coverage)
- Buss v. Superior Court, 16 Cal.4th 35 (Cal. 1997) (codified Cumis; defines when conflicts trigger independent counsel duty)
- Dynamic Concepts, Inc. v. Truck Ins. Exchange, 61 Cal.App.4th 999 (Cal. App. 1998) (limits on when reservations create conflicts; requires significant, not theoretical, conflicts)
- Blanchard v. State Farm Fire & Casualty Co., 2 Cal.App.4th 345 (Cal. App. 1991) (conflicts tied to coverage issues related to underlying action)
- Foremost Ins. Co. v. Wilks, 206 Cal.App.3d 251 (Cal. App. 1988) (not every reservation creates an independent counsel duty; punitive damages excluded)
- Golden Eagle Ins. Co. v. Foremost Ins. Co., 20 Cal.App.4th 1372 (Cal. App. 1993) (attorney control of coverage outcome is one example of conflict; not the only scenario)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (duty to defend continues unless coverage foreclosed by later developments)
- Maryland Casualty Co. v. Nationwide Mut. Ins. Co., 81 Cal.App.4th 1082 (Cal. App. 2000) (equitable contribution principles among coinsurers)