Insurance Company May Seek Reimbursement for Excessive “Cumis” Counsel Legal Fees

Hartford denied coverage of a fraud, breach of fiduciary duty, unfair competition, and defamation case.  Plaintiff retained a law firm to defend the case and prosecute a breach of contract and “bad faith” case.  Among other things, plaintiff sought an order that it was entitled to independent “Cumis” counsel.  The trial court in the “bad faith” action ruled that there was a duty to defend and “Cumis” counsel was appropriate.  It also held that the insurer was required to pay plaintiff’s attorney fee bills upon submission.  Plaintiff submitted over $15 million in attorney fee bills to Hartford.

Hartford contested the fees as excessive.  However, both the trial court and court of appeals ruled the billing should stand.

The California Supreme Court reversed.  It held that Hartford was entitled to seek reimbursement of the excessive fees.  Hartford alleged that plaintiff had charged Hartford for fees and costs that were unreasonable and unnecessary.  Those facts, if proven, would give Hartford the right to recover against plaintiff’s law firm on a theory of “unjust enrichment.”

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