Source: http://dutytodefend.com/test-to-compel-insurer-to-pay-for-cumis-counsel-2/
Timestamp: 2019-04-23 22:25:28+00:00

Document:
“Of course, the insurer may have more than one defense to coverage. In that event, the trial court will need to consider each defense separately to decide whether it can be determined without prejudice to the insured and whether it is amenable to resolution by summary judgment or summary adjudication.” “[T]he California Supreme Court recognized where . . . multiple theories of recovery are alleged and some theories involve uncovered conduct under the policy, a conflict of interest exists. Tomerlin concluded: ‘In actions in which . . . the insurer and insured have conflicting interests, the insurer may not compel the insured to surrender control of the litigation.’” Pursuant to the “no automatic waiver rule”, no basis to deny coverage is waived by an insurer’s failure to mention it in a reservation of rights letter.
A liability insurer that agrees to defend under a reservation of rights and hires dependent counsel to control the policyholder’s defense has a duty to the policyholder to analyze whether its reservation of rights creates a disqualifying conflict of interest and advise the policyholder whether it must pay for independent counsel. Dependent counsel has an independent duty to the policyholder/client to analyze the insurer’s reservation of rights and make written disclosure to the policyholder. The policyholder has no duty to analyze conflicts.
Nothing in a standard insurance policy, the State Bar Act, the Insurance Code, nor the common law imposes upon the policyholder any obligation to an insurer or to a lawyer any duty to analyze conflicts of interest. However, policyholders who sue a breaching insurer or unethical dependent counsel must carry the initial burden of proof to establish a conflict at trial.
Potential conflicts of interest should be addressed and resolved at an early date before they cause harm that is difficult to unwind. It is like planning a cake recipe before starting work rather than trying to extract a whole raw egg from a baked cake.
There are at least ten procedural options available to resolve conflict of interest disputes, some quick and easy, others difficult and expensive and ranging from doing nothing, to talking, to filing motions in the liability lawsuit, to filing additional complaints. However, perhaps the most efficient option is for the policyholder to expressly withhold consent and authorization for dependent counsel’s representation.
Policyholders who are suspicious that an insurer and/or dependent counsel have not properly analyzed conflicts of interest and the insurer’s obligation to pay for independent counsel may send a Coverage Questionnaire to the insurer and an Ethical Compliance Questionnaire to dependent counsel to compel a dialogue of conflict issues by expressly withholding consent and authority to representation pending receipt of satisfactory written responses.
 San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358 (Cumis). Cumis Test.
 Blanchard v. State Farm Fire & Cas. Co. (1991) 2 Cal.App.4th 345, 350).
 See, Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287; (Montrose I) Montrose Chemical Corp. v. Superior Court (Canadian Universal Ins. Co.) (1994) 25 Cal.App.4th 902.
 Montrose I supra, 6 Cal.4th at p. 306.
 Cumis, supra, 162 Cal.App.3d at 369.
 Industrial Indem. Co. v. Great American Ins. Co. (1977) 73 Cal.App.3d 529, 531.
 Berger, Kahn, supra, 79 Cal.App.4th at 131, quoting Dynamic Concepts, supra, 61 Cal.App.4th at 1007-1008.
 Cal. Code Regs. § 2695.4 (ellipses omitted).
 Cumis, supra, 162 Cal.App.3d at 375 (ellipses omitted).
 Santa Clara County Counsel Attorneys Assn. v. Woodside (1994) 7 Cal.4th 525, 546.

References: v. 
 v. 
 v. 
 v. 
 v. 
 § 2695
 v.