New Ninth Circuit Ruling Clarifies Insurance Carrier Obligations for Independent Counsel in Non-Cumis Jurisdictions

Carriers may need to take a second look at their obligation to pay for Independent (or “Cumis”) counsel when the underlying litigation is filed in a state that does not require it, even if it is a California policy (or issued in any other state that follows the “Cumis” doctrine). On November 25, 2024, the Ninth Circuit Court of Appeals issued its decision in the case of New York Marine and General Insurance Company v. Amber Heard, 2024 WL 4879471. The underlying case, filed in Virginia, involved the infamous defamation litigation between actors Johnny Depp and Amber Heard. The issue in this opinion was whether NY Marine was required to pay for independent counsel in addition to defense counsel. The policy was issued and delivered in California, and that state’s laws applied to issues of contract interpretation. Based on this, Heard argued that independent counsel was required under California law. However, the Ninth Circuit affirmed a California District Court decision that independent counsel was not required. The key fact was that under VA bar rules (and case law interpreting them), counsel appointed by an insurance carrier to defend an insured owes a duty only to the insured, not the carrier. Accordingly, there was no conflict requiring independent counsel.

Carriers have long been in a difficult position when an insured requests independent counsel on litigation filed in a state that does not require it, but the policy is issued in California or another state that follows the Cumis doctrine. There has been little case law to guide carriers in these situations—until now. Careful attention should be paid to the duties of defense counsel appointed by the carrier to defend an insured, but if the state’s law where the underlying litigation is filed is consistent with this Virginia law, most courts should follow this Ninth Circuit opinion. I suspect there are a lot of carriers with cases fitting this description, and they should take a careful look at these cases and whether they have an obligation to continue paying for independent counsel.

If you have any questions or want to discuss, contact Duane Cochenour or any member of the Insurance Coverage Practice Group at Hall Booth Smith.

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