Hartford Casualty Ins. Co. v. J.R. Marketing, L.L.C.

Hartford Casualty Ins. Co. v. J.R. Marketing, L.L.C.

Opinion

 [***602]  [**321]   CUÉLLAR, J.—This court has long maintained that if any claims in a third party complaint against a person or entity protected by a commercial general liability (CGL) insurance policy are even potentially covered by the policy, the insurer must provide its insured with a defense to all the claims. (E.g., Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081 [17 [*992]  Cal. Rptr. 2d 210, 846 P.2d 792].) The insurer's provision of an immediate, complete defense in such a “mixed” action, [****3]  we have explained, is “prophylactically” necessary, even if outside of the policy's strict terms, to protect the insured's litigation rights with respect to the potentially covered claims. (Buss v. Superior Court (1997) 16 Cal.4th 35, 49 [65 Cal. Rptr. 2d 366, 939 P.2d 766] (Buss).) Nevertheless, we concluded in Buss that the insured would be unjustly enriched at the insurer's expense if not ultimately required to bear the cost of litigating those claims for which the insured had never purchased defense or indemnity protection. Accordingly, we held in Buss that the insurer may seek reimbursement from the insured of defense fees and expenses solely attributable to the claims that were clearly outside policy coverage. (Ibid.)

We had no occasion in Buss to consider the related question presented here: From whom may a CGL insurer seek reimbursement when (1) the insurer initially refused to defend its insured against a third party lawsuit; (2) compelled by a court order, the insurer subsequently provided independent counsel under a reservation of rights—so-called Cumis counsel (see San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal. App. 3d 358 [208 Cal. Rptr. 494] (Cumis); ¹ see also Civ. Code, § 2860²)—to defend its insured in the third party suit; (3) the court order required the insurer to pay all “reasonable and necessary defense costs,”  [**322]  but expressly preserved [****4]  the insurer's right to later challenge and recover payments for “unreasonable and unnecessary” charges by counsel; and (4) the insurer now alleges that independent counsel “padded” their bills by charging fees that were, in part, excessive, unreasonable, and unnecessary?

The insurer urges that it may recoup the overbilled amounts directly from Cumis counsel themselves. Cumis counsel respond that, if the insurer has any right at all under the facts of this case to recover overbilled amounts, the insurer's right runs [****5]  solely against its insureds. Cumis counsel's erstwhile clients might then have a right of indemnity from these counsel.

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