The California Supreme Court Lets Stand The Federal Ins. v. MBL Cumis Decision

On November 26, 2013, the California Supreme Court denied MBL’s petition for review from the Court of Appeal’s recent decision in Federal Ins. Co. v. MBL (2013) 219 Cal.App.4th 29. In addition, the Supreme Court also denied eight different requests to depublish the decision filed by parties aligned with the insured.

As previously reported here, the MBL decision holds that: (1) the timing of property damage is not something defense counsel can control in the underlying case, and therefore a reservation of rights as to property damage outside the policy period does not give rise to a conflict of interest requiring independent counsel; (2) that “general” reservations of rights “create a theoretical, potential conflict of interest—nothing more” and therefore do not give rise to a conflict of interest triggering Cumis counsel; (3) an insurer’s reservation of rights regarding its absolute pollution exclusion does not give rise to independent counsel because whether the underlying claim is the result of a governmental clean-up order is not a fact that defense counsel can control; (4) an insurer’s defense of other insureds in the same underlying action does not give rise to a conflict of interest without a showing of a “‘significant, not merely theoretical, actual, not merely potential’ conflict of interest;” and (5) where an insured insists on independent counsel but is ultimately not entitled to it, the insured’s refusal to accept the insurer’s counsel relieves that insurer of the duty to defend, and where an insurer had paid independent counsel fees in that situation, that insurer can seek reimbursement of those fees from the insured.

Duane Morris represented one of the insurers in the case.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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