People purchase and carry insurance policies to safeguard them for unexpected situations. There are times when an insurance policy covers a claim, but there is a conflict of interest between the insurance company and the insured defendant. In that case the defendant needs to hire an attorney to handle the lawsuit to eliminate the conflict. Such a conflict might arise if the insurance company is denying full or partial coverage.
States have taken varying approaches to the insurer's duty to provide independent counsel. Some states require independent counsel to be provided in a broad range of cases. Other states do not require insurers to provide independent counsel but instead rely on the state's rules of professional conduct for attorneys to govern any actual or potential conflict of interest in the representation. California has struck a middle ground, offering a statutory framework that protects policyholders from certain actual and significant conflicts but that is limited in scope and largely favorable to insurers.
In California, a policy holder-defendant can demand their insurance company pay the attorney fees of a selected attorney, known as Cumis counsel, rather than use an insurance company lawyer.
Cumis Counsel. This term is derived from the name of a landmark case - San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc. (1984), in which a California Appellate Court established an insured's right to independent counsel where a conflict of interest arises with the insurer. Insurance companies have the duty to hold their insured harmless for a loss and defend their insured in lawsuits involving a claim under the insured's insurance policy. At the same time insurance companies have to protect their own bottom line and have to answer to shareholders. While insurance companies and their insureds often share a common interest in limiting the liability of the insured, sometimes the interests of the parties diverge creating a conflict of interest between the insured and the insurance company.
In these situations, the defense counsel selected by the insurance company cannot simultaneously defend the competing interests of the insurance company and the insured causing an additional conflict of interest to arise. The Cumis decision allows insureds to protect their interests, by giving them the right to demand an independent Cumis Counsel, such as The Simmons Law Firm, be appointed to eliminate the conflict and ensure that the insured is properly represented.