Picture this: you are driving and cause a car crash (Defendant’s usually call it a car accident, but accidents imply no person is at fault). Let’s say this Defendant Driver feels bad and wants to use her insurance to pay for the car crash…but her Insurance Company does not want to pay…does that create a conflict of interest between the Attorney that represents both the Insurance Company (as a company) and the Defendant Driver (as a person)?
As I usually say, the answer is “it depends.” Today the case Simonyan v. Nationwide Insurance Company of America was published on this exact issue. The case cite right now is 2022 WL 1538294, although this may update as this citation is from the 4/19/22 filing and not today’s publication. Meaning it’s too hot off the presses!
What happened in Simonyan?
Simonyan is the middle car in a 3-car crash. Per Simonyan, he stops at an intersection, is hit from behind by another vehicle, which pushes him into the Plaintiff in front of Simonyan.
Simonyan’s insurance company (Nationwide) finds him at fault. Simonyan disagrees and retains his own lawyer to pursue a bad faith claim against Nationwide. Oh, and “Nationwide raised Simonyan’s policy premiums based on its determination that he was at fault for the October 2017 collision and removed various discounts” because of this crash.
What is the law?
This case gives solid quotes about this area of law: whether Nationwide here was acting in bad faith.
First, ‘[there] is an implied covenant of good faith and fair dealing in every contract [including insurance policies] that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.’” This is Simonyan citing Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573.
“[A] liability insurance policy’s purpose is to provide the insured with a defense and indemnification for third party claims within the scope of the coverage purchased, and not to insure the entire range of the insured’s well-being.”
Well-being…which I read: “to you as a person.”
“Generally, an insurer owing a duty to defend an insured, arising because there exists a potential for liability under the policy, ‘has the right to control defense and settlement of the third party action against its insured, and is … a direct participant in the litigation.’ The insurer typically hires defense counsel who represents the interests of both the insurer and the insured. In this ‘usual tripartite relationship existing between insurer, insured and counsel…”
If you disagree with your Insurance Company with how they are representing you, you can retain your own lawyer, called Cumis Counsel. This stems from the case San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358 which later codified into California Code of Civil Procedure 2860.
“Civil Code section 2860 provides, in relevant part:
‘(a) If the provisions of a policy of insurance impose a duty to defend upon an insurer and a conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured unless, at the time the insured is informed that a possible conflict may arise or does exist, the insured expressly waives, in writing, the right to independent counsel….’”
“The duty to provide independent counsel “ ‘is not based on insurance law but on the ethical duty of an attorney to avoid representing conflicting interests.’” Although “[t]he conflict must be significant.
“Some of the circumstances that may create a conflict of interest requiring the insurer to provide independent counsel include: (1) where the insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by the insurer’s retained counsel [citations]; (2) where the insurer insures both the plaintiff and the defendant [citation]; (3) where the insurer has filed suit against the insured, whether or not the suit is related to the lawsuit the insurer is obligated to defend [citation]; (4) where the insurer pursues settlement in excess of policy limits without the insured’s consent and leaving the insured exposed to claims by third parties [citation]; and (5) any other situation where an attorney who represents the interests of both the insurer and the insured finds that his or her ‘representation of the one is rendered less effective by reason of his [or her] representation of the other.’”
Does California also have California Rules of Professional attorney conduct which apply?
Yep. We have California Rules of Professional Conduct Rule 1.7(b) “which provides, in relevant part: ‘A lawyer shall not … represent a client if there is a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person, or by the lawyer’s own interests.’”
“One of the comments to the rule explains this paragraph applies where “there is a significant risk that a lawyer’s ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited as a result of the lawyer’s other responsibilities, interests, or relationships, whether legal, business, financial, professional, or personal.” (Com. 4 to Rules Prof. Conduct, rule 1.7(b).)” “The mere possibility of subsequent harm” is insufficient. (Ibid.) “The critical questions are the likelihood that a difference in interests exists or will eventuate and, if it does, whether it will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of each client.” Internal citations kept.
What happened to Simonyan here?
To be blunt, he lost. The Court here thought his insurance acted appropriately within their insurance policy contract.
