The court in Signal rejected that approach and instead ruled that "the NVP provision does not apply to payment of Cumis counsel fees." According to the court, to hold otherwise "would seriously undermine the independence of Cumis counsel who would risk non-payment if their conduct of an insured's defense displeased an insurer.
The Signal court agreed and confirmed that the test is what is "reasonable" in the particular lawsuit: "Having accepted that multiple attorneys may serve as Cumis counsel, there does not appear to be any principled grounds for requiring as a matter of law that all of those attorneys need to be employed at the same law firm."
Brace yourself for demands for Cumis counsel
. Some argue that such policy features create an inherent conflict between insureds and insurers, which creates a right of independent counsel for the policyholder.
As example, damages are claimed in an excess of the policy and punitive damages do not give rise to Cumis counsel
(44) Moreover, where the insured and the insurer have divergent interests, the "insurer must pay the reasonable cost for hiring independent counsel by the insured." (45) This ideology, of the insurer being required to provide Cumis counsel in the event that the insured does not consent to the insurer-appointed counsel, is growing in popularity in jurisdictions across the country.
Mindful of this inherent conflict of interest, many courts require the insurer to pay for independent Cumis counsel, selected by the insured, when electing to defend subject to a reservation of rights.
2d 550, 564 (1998) ("Cumis counsel represents solely the insured"); Employers Ins.
13 (challenge to fees of Cumis counsel upheld in case where conflict of interest divests insurer of right to control defense); Caiafa Prof'l Law Corp.
Because of the reservation of rights and conflict of interests between insured and insurer, Transamerica agreed to pay for independent Cumis counsel.(2)
The designation "Cumis counsel" is derived from San Diego Fed.
Truck Insurance Exchange,(11) the court refused to find that an insurer breached its duty to defend or that a policyholder was necessarily entitled to Cumis counsel
under Section 2860 of the California Civil Code merely because the insurer asserted its rights to recover defense costs that might be attributable to non-covered claims for economic loss.