Palm Trees (Photo by Dennis Wall)
In Colony Ins. Co. v. Glenn E. Newcomer Constr., No. 20-cv-00480-DMR, 2021 WL 23277 (N.D. Cal. January 4, 2021), an amended counterclaim was dismissed because the policyholder did not clearly allege (1) a conflict that gave rise to a Cumis duty to defend under California's Cumis statute, or (2) in what way any such duty was breached. Newcomer, 2021 WL 23277, at *4.
Under California Cumis law, there can be a duty to provide independent counsel when a liability carrier defends an insured under a reservation of rights. However, in order for a Cumis duty to arise, the carrier has to assert the kind of coverage defense that would impose a conflict on the lawyer defending the insured depending on how the defense was conducted, i.e., depending on how the law or facts are developed in the insured's defense. Newcomer, 2021 WL 23277, at *4.
There being no insurance coverage in this case, the Court also dismissed the policyholder's amended counterclaim for insurer bad faith. Where there is no insurance coverage, there is no breach of the implied covenant of good faith and fair dealing under California law. Newcomer, 2021 WL 23277, at *6.
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