Understanding Cumis Counsel and Its Impact on Claims

Table of Contents

1. Introduction
2. What is Kuma's Counsel?
3. Circumstances that Trigger an Insurer's Obligation to Provide Independent Counsel
4. The Kuma's Case and the Birth of the Kuma's Statute
5. Other States with Similar Statutes
6. Examples of Scenarios that Trigger Conflict of Interest
7. Exceptions to Kuma's Counsel Requirement
8. Distinguishing Conflicts that Trigger and Don't Trigger Kuma's Counsel
9. Selection of Kuma's Attorneys and Their Duties
10. How Attorneys' Hourly Fees are Established
11. Resolving Disputes over Kuma's Counsel Rates

📝 Introduction

Welcome to the Best Insurance Law Podcast! In this episode, we will be discussing Kuma's Counsel and its impact on insurance claims. Our guest today is Attorney Tim Agarjan, a partner at the national law firm Ropers Majeski. Tim is highly experienced in representing corporations and insurers in various litigation matters. He will be shedding light on the circumstances that trigger an insurer's obligation to provide independent counsel and explaining the intricacies of Kuma's Counsel. Let's dive in!

📝 What is Kuma's Counsel?

Kuma's Counsel, also known as independent counsel, refers to the legal representation provided by an attorney retained by the insured but paid for by the insurance company. This unique arrangement is obligated in certain circumstances where a conflict of interest arises between the insurer and insured, requiring the insured to have separate legal representation.

📝 Circumstances that Trigger an Insurer's Obligation to Provide Independent Counsel

The obligation to provide independent counsel is triggered under specific circumstances. According to California Civil Code Section 2860, conflict of interest does not exist when the insurer denies coverage for allegations or facts in the litigation. However, when the insurer reserves its rights on a coverage issue that could be controlled by the insured's retained counsel, a conflict of interest may arise. Additionally, conflict of interest is not deemed to exist solely because the insurer is sued for punitive damages or for an amount exceeding the policy limits.

📝 The Kuma's Case and the Birth of the Kuma's Statute

The term "Kuma's Counsel" originated from a 1984 California court case, San Diego Navy Federal Credit Union v. Kumas Insurance Society, Inc. In this case, the court ruled that insureds defended by insurance companies could choose their own counsel and have the insurance companies cover the legal fees. This decision led to the enactment of California Civil Code Section 2860, also known as the Kuma's Statute, which outlines the circumstances requiring insurance companies to provide independent counsel.

📝 Other States with Similar Statutes

California is not the only state with statutes or common law triggering the right to independent counsel. Several other states have similar provisions in place to ensure insureds receive proper legal representation when conflicts of interest arise during litigation.

📝 Examples of Scenarios that Trigger Conflict of Interest

There are various scenarios that may trigger the need for independent counsel. One common scenario is when the insurer reserves its right on an issue that could be controlled by the insured's retained counsel. This occurs in the majority of cases where independent counsel is required under the Kuma's Statute. Another example is when the insurer provides coverage for both the plaintiff and the defendant, creating an obvious conflict of interest. Furthermore, if the insurer files a lawsuit against the insured, regardless of its relation to the underlying litigation, the insurer is obligated to provide a defense.

📝 Exceptions to Kuma's Counsel Requirement

While the Kuma's Statute outlines specific circumstances that require the provision of independent counsel, there are exceptions to this requirement. For instance, in construction defect cases where the workmanship did not result in damages, the need for independent counsel may be waived. It is crucial to understand these exceptions to determine when the insurer's obligation to provide independent counsel arises.

📝 Distinguishing Conflicts that Trigger and Don't Trigger Kuma's Counsel

Determining whether a conflict of interest triggers the obligation to provide independent counsel is not always straightforward. Each situation must be evaluated individually, considering factors such as the nature of the claims, the insured's behavior, and the reservation of rights by the insurer. Additionally, the duty to provide independent counsel is based not only on insurance law but also on the ethical duty of attorneys to avoid representing conflicting interests.

📝 Selection of Kuma's Attorneys and Their Duties

When selecting Kuma's Counsel, several requirements must be considered. The attorney must have at least five years of civil litigation practice, including substantial defense experience in the subject matter of the litigation. Furthermore, their fees are limited to the rates paid by the insurer to attorneys retained in similar actions in the community where the claim arose. The insured has the right to select counsel and maintain control over the litigation, including the selection of expert witnesses.

📝 How Attorneys' Hourly Fees are Established

Attorneys' hourly fees for Kuma's Counsel are established based on various factors. While rates charged by panel counsel firms might be used as a reference, other factors such as the complexity of the case, potential exposure, and expertise of the attorney are taken into consideration. In cases where a dispute arises over the hourly rates, binding arbitration is used to resolve the issue.

📝 Resolving Disputes over Kuma's Counsel Rates

Disputes over Kuma's Counsel rates are commonly resolved through binding arbitration. The arbitrator has the sole discretion to determine the appropriate hourly fees based on various factors, including the complexity of the case and the location of the claim. It is essential for insurers to agree to disagree on the rates initially and continue paying fees based on the rates they deem fair. This approach ensures that the insurer does not waive their rights to challenge the hourly rates through binding arbitration.

📝 Conclusion

Understanding Kuma's Counsel and its implications for insurance claims is crucial for insurers and insureds alike. By knowing the circumstances that trigger the need for independent counsel, the exceptions to this requirement, and how attorneys' fees are established and resolved, parties involved can navigate the complexities of insurance litigation more effectively.

Resource: www.ams.com

Highlights

• Kuma's Counsel, also known as independent counsel, provides legal representation paid for by the insurance company but retained by the insured.
• Conflict of interest triggers the obligation to provide independent counsel under specific circumstances outlined in California Civil Code Section 2860.
• The Kuma's Statute was enacted based on the 1984 California court case San Diego Navy Federal Credit Union v. Kumas Insurance Society, Inc.
• Several other states have similar statutes or common law provisions requiring the provision of independent counsel.
• Exceptions to the obligation to provide Kuma's Counsel exist in cases where the damages are not covered by the policy or when workmanship defects do not result in damages.
• Selecting Kuma's Counsel requires consideration of specific qualifications, including five years of civil litigation practice and familiarity with errors and omissions coverage.
• Hourly fees for independent counsel are established based on factors such as case complexity, potential exposure, and attorney expertise.
• Disputes over Kuma's Counsel rates are resolved through binding arbitration, where the arbitrator determines the appropriate fees based on various factors.
• Insurers should agree to disagree on hourly rates to retain their rights for challenging fees through arbitration.

FAQ

Q: What is Kuma's Counsel? A: Kuma's Counsel, also known as independent counsel, refers to the legal representation provided by an attorney retained by the insured but paid for by the insurance company.

Q: When does the obligation to provide independent counsel arise? A: The obligation to provide independent counsel arises when a conflict of interest exists between the insurer and insured. This occurs in specific circumstances outlined in California Civil Code Section 2860.

Q: Are there exceptions to the requirement of providing independent counsel? A: Yes, exceptions include cases where damages are not covered by the policy or when workmanship defects do not result in damages.

Q: How are attorneys' fees for Kuma's Counsel established? A: Attorneys' fees for Kuma's Counsel are established based on various factors, including the complexity of the case, potential exposure, and the attorney's expertise.

Q: How are disputes over Kuma's Counsel rates resolved? A: Disputes over Kuma's Counsel rates are typically resolved through binding arbitration, where an arbitrator determines the appropriate fees based on several factors.

Resource: www.ams.com