Daily Blast August 10, 2015

The California Supreme Court issued an opinion in Hartford Casualty Insurance Company v. J.R. Marketing, LLC (Aug. 10, 2015, S211645) __ Cal.4th __, analyzing whether after an insured has been ordered to provide independent Cumis counsel to the insured to defend against a third party lawsuit and pay all reasonable and necessary defense costs, can the insurer seek reimbursement of defense fees and costs it considers unreasonable and unnecessary by pursuing a reimbursement action against independent counsel or must the insurer seek reimbursement from its insured? (Slip opn., pp. 2-3.) The Supreme Court held that the insurer may seek reimbursement directly from Cumis counsel. (Id. at p. 3.)

The trial court ordered Hartford Casualty Insurance  Company (“Hartford”) to defend J.R. Marketing LLC in a civil action and to fund Cumis counsel after Hartford denied coverage. (Slip opn., pp. 3-5.) After the civil action was resolved, Hartford sought reimbursement from Cumis counsel for excessive fees. (Id. at pp. 5-6.) The trial court found Hartford must seek reimbursement from its insureds, not directly from Cumis counsel. The Court of Appeal affirmed. (Id. at p. 7.)

The Supreme Court reversed holding that given the facts of this case, a right of reimbursement should run directly against Cumis counsel.  The Supreme Court reasoned that the trial court order, drafted by Cumis counsel, requiring Hartford to pay Cumis counsel’s fees supports its holding.  The trial court order explicitly stated that the fees must be reasonable and necessary and that Hartford could seek reimbursement of amounts it deemed excessive based on restitution principles.  (Slip opn., pp. 11-13.) Therefore, because the order was based on restitution principles and allowed Hartford to challenge Cumis counsel’s bills, then Hartford may seek reimbursement directly from Cumis counsel. (Id. at p. 13.)

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