{"id":293,"date":"2015-08-17T01:58:44","date_gmt":"2015-08-17T01:58:44","guid":{"rendered":"http:\/\/bknlawyers.com\/?p=293"},"modified":"2024-04-30T08:29:14","modified_gmt":"2024-04-30T08:29:14","slug":"insurers-gain-potential-new-leverage-against-cumis-counsel-under-hartford-v-j-r-marketing-decision","status":"publish","type":"post","link":"https:\/\/bknlawyers.com\/?p=293","title":{"rendered":"Insurers gain new leverage against cumis counsel under the Hartford v. J.R. Marketing decision"},"content":{"rendered":"

The story so far<\/strong><\/p>\n

So here\u2019s the basic situation. The insured (J.R. Marketing) asks its insurer (Hartford) to cover its defense against a claim and to pay cumis counsel (Squire Sanders) to provide this defense. Hartford finally agrees to pay Squire Sanders after being ordered by the court to cover all \u201creasonable and necessary\u201d fees incurred in the defense.<\/p>\n

Upon getting the final bill, however, Hartford claims that Squire Sanders padded its bills by charging unreasonable fees. Squire Sanders, in a tremendous show of loyalty, promptly turns around and points the finger at J.R. Marketing, claiming that J.R. Marketing should have to compensate Hartford for the overbilling and even going so far as blaming J.R. Marketing for failing to prevent the overbilling in the first place.<\/p>\n

Not surprisingly, the California Supreme Court disagreed with Squire Sanders. After a lengthy discussion, the Court concluded that if Squire Sanders has been unjustly enriched by being paid for unreasonable work, under the circumstances of this case (i.e. the trial court\u2019s order to only pay reasonable defense costs, which was drafted by Squire Sanders) Hartford was entitled to recover directly against Squire Sanders. Additionally, the Court found there was no compelling reason that J.R. Marketing should bear the responsibility for handling the overbilling of Squire Sanders.<\/p>\n

Insurers gain new leverage against cumis counsel<\/strong><\/p>\n

Why does this matter? Simply put, this holding significantly reduces the practical independence of cumis counsel in certain circumstances. Under California\u2019s cumis counsel statute, an insured is entitled to obtain independent counsel who solely represents its interests when there is a conflict between itself and the insurer. Previously, this mean that cumis counsel is controlled by the insured, answers to the insured and is independent of the insurer, with the insurer quietly footing the bill.<\/p>\n

By allowing an insurer to recover directly against cumis counsel for unreasonable fees under certain circumstances, however, the Court appears to have reduced that independence substantially. Now, although an insurer cannot tell cumis counsel how to defend the insured, by controlling the purse strings an insurer can \u2013 by the now-present threat of a direct unjust enrichment claim \u2013 influence how cumis counsel ultimately decides to conduct its defense of the insured.<\/p>\n

That is, cumis counsel may now be less willing or altogether unwilling to pursue a defense completely at odds with the insurer\u2019s wishes out of concern that they may ultimately not be compensated for providing such a defense. Indeed, attorneys may refuse to serve as cumis counsel altogether or even counsel their clients not to seek insurance coverage for their defense in order to avoid the complication of an unjust enrichment claim. In short, by injecting scrutiny and accountability into the previously silent relationship between insurer and cumis counsel, the Court has given insurers a tool by which they can significantly affect the actions of cumis counsel.<\/p>\n

It’s all about the contract<\/strong><\/p>\n

All of that said, the conditional nature of the Court\u2019s holding provides a clear take home lesson for insurers, insureds and cumis counsel alike. The Court relied heavily on the arrangement between Hartford and Squire Sanders that provided only “reasonable and necessary” fees would be paid to Squire Sanders in deciding to allow Hartford to proceed directly against Squire Sanders on an unjust enrichment claim, again noting that its ruling was made under the particular circumstances of the case and not as a general rule. As such, insurers seeking to invoke Hartford should strongly consider the language of their agreements with any cumis counsel their insured may retain.<\/p>\n

Hartford Cas. Ins. Co. v. J.R. Marketing, LLC, et al.<\/em> (2015)
\nhttp:\/\/law.justia.com\/cases\/california\/supreme-court\/2015\/s211645.html<\/p>\n

TLDR: In certain circumstances, an insurer can require cumis counsel to justify the reasonableness of its work on behalf of the insured under threat of a reimbursement claim.<\/p>\n

———————————<\/p>\n

If you\u2019re involved in a lawsuit or risk management and have any questions regarding current or potential legal issues, we would urge you to contact an attorney as soon as possible to obtain advice, guidance and representation. At Baker, Keener & Nahra, we have the experience, skill and drive to get the best possible results for our clients, no matter the size of the case or the scope of the problem. So if we can be of any assistance to you, please contact us and let us know how we can help.<\/p>\n","protected":false},"excerpt":{"rendered":"

The story so far So here\u2019s the basic situation. The insured (J.R. Marketing) asks its insurer (Hartford) to cover its defense against a claim and to pay cumis counsel (Squire Sanders) to provide this defense. Hartford finally agrees to pay Squire Sanders after being ordered by the court to cover all \u201creasonable and necessary\u201d fees […]<\/p>\n","protected":false},"author":1,"featured_media":1347,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/posts\/293"}],"collection":[{"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=293"}],"version-history":[{"count":10,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/posts\/293\/revisions"}],"predecessor-version":[{"id":1335,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/posts\/293\/revisions\/1335"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=\/wp\/v2\/media\/1347"}],"wp:attachment":[{"href":"https:\/\/bknlawyers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=293"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=293"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bknlawyers.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=293"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}