In The News

Daily Journal: Principal David Ezra on Appellate Review of Insurer-Appointed Defense Attorneys

(filed under: In The News | September 16, 2013)

Principal David Ezra examines the upcoming review on aspects of a recent decision by the Third Appellate district — Schaefer v. Elder, 217 Cal.App.4th 1 (2013) which discusses an interesting nuance in insurance law regarding insurer-appointed defense attorneys.

Loose lips sink ships: panel counsel and confidentiality
By David Ezra       

In Schaefer v. Elder, 217 Cal. App. 4th 1 (2013), the 3rd District Court of Appeal held that the policyholder was entitled to independent counsel when a liability insurer reserved the right to decline coverage if the insured’s workers were independent contractors rather than employees. The insurer-appointed defense attorney was disqualified and removed from the case.

This second holding — that panel counsel can be disqualified in cases involving reserved rights and conflicting interests — could seriously disrupt an important part of the “Cumis” compromise that has long guided California policyholders and insurers.

Virtually every California attorney who litigates will confront “Cumis counsel” issues. The need for Cumis or “independent” counsel may arise when a liability insurer defends a policyholder under reservation of rights. The insurance company often appoints a defense attorney it supplies with many assignments (a “panel” attorney). When the issues to be litigated overlap with the insurance company’s coverage reservations, the panel attorney may face a conflict of interest.

Let’s take a simple example. Two men collide on a dance floor; one falls down and breaks his arm. He sues the other dancer for negligence and battery. The defendant dancer’s insurance company agrees to defend the suit, but it reserves the right to decline coverage based on the intentional acts exclusion. Two witnesses will testify that the plaintiff was interacting with the defendant’s wife moments before the collision, and after a heated verbal exchange, the policyholder was seen quickly moving across the dance floor when he ran into the plaintiff. Was it an accident? Or was the policyholder trying to knock the plaintiff over?

In Long v. Century Ind. Co., 163 Cal. App. 4th 1460, 1471 (2008), the court described this dichotomy (intentional/accidental) as the prototypical case where Cumis counsel may be required. In our bad dancer hypothetical, a defense attorney who benefitted from noncoverage might be tempted to develop some sort of “he had it coming to him” defense strategy. If the jury accepts the argument and blames the plaintiff, there is no liability. If the jury rejects the defense, there is no covered liability. Either way, the liability insurer is a “winner.” At least that’s the theory.

And that is why, at least since Executive Aviation, Inc. v. National Ins. Underwriters, 16 Cal. App. 3d 799, 810 (1971), was decided, California courts have recognized situations where the “insurer’s desire to exclusively control the defense must yield” and the policyholder selects independent counsel, at the insurer’s expense. This occurs when the “basis for the reservation of rights is such as to cause assertion of factual or legal theories which undermine or are contrary to the positions to be asserted in the liability case.” State Farm Fire & Casualty Co. v. Superior Court, 216 Cal. App. 3d 1222, 1226 fn. 3 (1989).

In 1984, the “Cumis” moniker was affixed to independent counsel. In San Diego Fed. Credit Union v. Cumis Ins. Soc’y, 162 Cal. App. 3d 358, 361 (1984), the court broadly ruled that “when an insurer provides its own counsel but reserves its right to assert noncoverage at a later date … there is a conflict of interest … and therefore the insured has a right to independent counsel paid for by the insurer.”

This statement left many unanswered questions. After all, not every reservation of rights creates a conflict. In 1987, the Legislature enacted Civil Code Section 2860. Instead of calling for disqualification of panel counsel, Section 2860(f) seems to mandate the opposite approach: “[B]oth the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation.”

The justices who decided Schaefer seemed to read Section 2860(f) as if it contemplated a panel attorney who only represents the insurer. According to the court, “[i]f the Koeller firm had not simultaneously represented Elder and CastlePoint, but instead represented CastlePoint only, it might be allowed  [660]  to further participate in the litigation.” The court was concerned that the policyholder may have given panel counsel confidential information pertaining to the coverage dispute.

But was disqualification really required? Before Section 2860 took effect, many assumed that only the independent attorney would defend the insured in conflict-producing reservation of rights situations. But Section 2860 was interpreted to “envision[] both the independent counsel and a carrier-appointed counsel cooperating on each case.” Rich Moratti, Note, “Reconstructing Cumis: What The California Legislature Got Wrong About California Civil Code Section 2860 And How To Fix It,” 60 Hastings L. J. 881, 889 (2009).

This dual-counsel arrangement, while not universal, has become a common and accepted approach. Panel and independent counsel work together to defend the case. See Novak v. Low Ball & Lynch, 77 Cal. App. 4th 278, 284 (1999) (characterizing the argument that panel counsel represented only the insurer’s interests as “an amazing proposition”). Independent counsel, in contrast, has very limited duties to the insurer. Independent counsel does not represent the insurer. Assurance Co. of America v. Haven, 32 Cal. App. 4th 78, 88-89 (1995).

A panel firm typically represents the policyholder as an attorney of record. While the panel firm also protects the insurer’s interest in defending, the panel firm is not there to be a “coverage spy” for the insurer. Dynamic Concepts, Inc. v. Truck Ins. Exch., 61 Cal. App. 4th 999, 1008.

The Schaefer court assumed disqualification was required because the panel defense attorney may have obtained confidential information. But that may not require disqualification. As the court mentioned in Dynamic Concepts, panel “defense counsel owes [a] duty not to reveal” the policyholder’s “confidential information … regarding coverage.”

A formal State Bar ethics opinion emphatically articulates the rule — even if “the attorney gains information during the course of representation which the attorney believes demonstrates that the insured is actually not entitled to coverage — the attorney nevertheless owes a duty to the insured/client not to reveal this information to the insurer.” Formal Opinion No. 1995-139.

Where a panel firm faces a conflict, Section 2860 seems to assume independent counsel’s presence protects the policyholder. Both independent and panel counsel have a duty to protect confidential or privileged information pertaining to the reserved coverage issues. The independent attorney’s ability to advise the client and control defense strategy alleviates any concern that panel counsel might make strategy decisions that will reduce or eliminate coverage.

Depending on the particular circumstances, decisions such as which defenses to advance, what evidence to try to develop through discovery, etc. are decisions for the policyholder client and its independent attorney. However, nothing stops the panel attorney (allowed “to participate in all aspects of the litigation”) from offering advice or carrying out these strategy decisions.

In fact, the “I only represent the insurer” approach Schaefer suggests seems impracticable, if not impossible. We cannot expect insurer-appointed attorneys to tell juries they represent the defendant’s liability insurer. Attorneys are either in the case, representing the policyholder, arguing motions and appearing at trial, or are merely monitoring the case for the insurer, without becoming an attorney of record.

A “monitoring” attorney acts either as a coverage attorney for the insurer, or as attorney who passively provides defense strategy suggestions to the policyholder’s attorney (or a second opinion on liability, damages and verdict range potential.) But monitoring attorneys do not make court appearances for policyholders. They generally do not have private discussions with policyholders.

Instead of disqualifying panel defense attorneys who receive confidential information relating to coverage, we should expect panel attorneys to carefully maintain client confidentiality and to vigilantly guard against inadvertent disclosures that pertain to disputed coverage issues. In those (hopefully) few instances when panel attorneys improperly disclose confidential information, the remedy Dynamic Concepts suggested ranges from “malpractice liability” or “disciplinary actions” to a “possible loss of coverage defenses by” the liability insurer.

With that serious potential downiside looming for panel attorneys who improperly share policyholder confidences (and for the insurers who appoint them), one would think the dual-counsel arrangement that has endured for 25 years can persist. And it can persist without persistent motions to disqualify panel counsel becoming a new routine feature of garden variety litigation.

David Ezra is a shareholder with the Berger Kahn law firm in Irvine. His practice concentrates on insurance law.

 

xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonxosokeonhacaiketquabongdalichthidau7m.newskqbdtysokeobongdabongdalufutebol ao vivofutemaxmulticanaisonbethttps://bsport.fithttps://onbet88.ooohttps://i9bet.bizhttps://hi88.ooohttps://okvip.athttps://f8bet.athttps://fb88.cashhttps://vn88.cashhttps://shbet.atbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩa开云体育开云体育开云体育乐鱼体育乐鱼体育乐鱼体育亚新体育亚新体育亚新体育爱游戏爱游戏爱游戏华体会华体会华体会IM体育IM体育沙巴体育沙巴体育PM体育PM体育AG尊龙AG尊龙AG尊龙AG百家乐AG百家乐AG百家乐AG真人AG真人<AG真人<皇冠体育皇冠体育PG电子PG电子万博体育万博体育KOK体育KOK体育欧宝体育江南体育江南体育江南体育半岛体育半岛体育半岛体育凯发娱乐凯发娱乐杏彩体育杏彩体育杏彩体育FB体育PM真人PM真人<米乐娱乐米乐娱乐天博体育天博体育开元棋牌开元棋牌j9九游会j9九游会开云体育AG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88