In a decision on August 10, 2015, the California Supreme Court answered the following question of great public importance, tweaked here with a question mark at the end of the quotation:
Who is "unjustly" enriched if independent counsel representing the insured, but compensated by the insurer, are allowed to retain payments that were unreasonable and unnecessary for the insureds' defense against any claim?
Hartford Cas. Ins. Co. v. J.R. Marketing, L.L.C., ___ Cal. ___ ___, ___ P.3d ___, 190 Cal. Rptr. 3d 599, 2015 WL 4716917, *6 (2015).
The high Court's answer to its own question was that the lawyers are the ones who are unjustly enriched in such a case. The Court was careful to point out that it was assuming "unreasonable and unnecessary" fees for the sake of argument, so to speak.
Further, the California Supreme Court emphasized the unique posture of the case before it. The trial court entered an order requiring the lawyers to bill "reasonable and necessary" fees in their defense of insureds in their role as Cumis or conflict counsel, and allowing the carrier to sue the lawyers "in a subsequent reimbursement action" if the lawyers' fees were unreasonable and unnecessary. The California Supreme Court accepted this ruling as a "given" and limited themselves to addressing the question whether the carrier may seek reimbursement directly from the lawyers as distinct from, say, the insured. Hartford Cas. Ins. Co. v. J.R. Marketing, L.L.C., ___ Cal. ___ ___, ___ P.3d ___, 190 Cal. Rptr. 3d 599, 2015 WL 4716917, *6 (2015).
To say again, the California high Court held that the carrier could sue the lawyers in this case. Future cases may present different trial court orders and differing circumstances. Some of those cases will arise in California and some will not. Until then, it is fair to say that J.R. Marketing is unique.
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