Holding is Narrow, Not Barring Fraudulent Billing Suit of the Right Nature.
J.R. Marketing, L.L.C. v. Hartford Cas. Ins. Co., Case No. A133750 (1st Dist., Div. 3 May 17, 2013) (unpublished) is an interesting case for insurance practitioners following our blog.
There, an insurance carrier was found to have breached a duty to insured to provide separate Cumis counsel and barred from obtaining the rate limitations stated in Civil Code section 2860. Then, after paying over $15 million in submitted bills for defense fees and costs, Hartford sought to sue Cumis counsel for reimbursement for excessive or otherwise improperly-invoiced defense fees and costs based on quasi-contractual/unjust enrichment principles. The trial court sustained a demurrer without leave, a determination affirmed on appeal.
Given that the insurance carrier had lost control of the defense already by the Cumis breach, it would be inequitable for carrier to then seek compensation from the independent counsel hired to represent the interests of the insureds, not the carrier itself. The insurer would suffer no penalty from the Cumis breach if it could do this “end around.”
However, the appellate court did note that its holding was “quite limited,” not ruling whether a direct suit for fraudulent billing practices in connection with the underlying defense of its insured might be proper in the right circumstances.