Haven

In this case, a liability insurer defended its insured under a reservation of rights that created a conflict of interest between the two of them. The issue on appeal is whether a liability insurer can sue its insured’s Cumis counsel for negligence based on a breach of statutory duty for failing — in contravention of Civil Code section 2860 — to inform and consult with the insurer in a timely manner, to disclose to the insurer all nonprivileged information, and to cooperate in exchanging information with insurer-provided counsel. (Civ. Code, § 2860, subds. (d), (f).) We conclude the answer is yes where these failures encompassed nonprivileged information known to Cumis counsel and precluded the insurer, as alleged here, from timely asserting a complete defense to an entire action or to a cause of action that had been brought against its insured.

We also conclude that Cumis counsel cannot be held negligently or statutorily liable to the insurer for failing to investigate, prepare, assert, establish, or perform similar functions regarding that complete defense. In line with Civil Code section 2860 (which codified and clarified the Cumis decision) and the recognized…