• Minding the Cap
  • July 29, 2010 | Author: Philip H. Thompson
  • Law Firm: Nelsen, Thompson, Pegue & Thornton A Professional Corporation - Los Angeles Office
  • Civil Code Section 2860, the codification and clarification of the rule set forth in San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc., 162 Cal. App. 3d 358 (1984), re-quires an insurer to offer independent counsel to represent an insured if "the provisions of a policy of insurance impose a duty to defend" and the insurer "reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim" (em-phasis added), such that a conflict of interest would exist for that attorney. The insurer's ob-ligation to pay Cumis fees is limited to “the rates which are actually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of similar actions in the community where the claim arose or is be-ing defended,” and disputes concerning Cumis fees “shall be resolved by final and binding ar-bitration."