Midiman

An insured company contends it was forced to settle copyright and trademark infringement claims when its insurer refused to provide Cumis counsel. [1] The issue raised by this appeal is whether the insured was entitled to a presumption establishing (1) that the underlying claim was legitimate and that the insured was liable in the amount which it agreed to pay in settlement and, at the same time, (2) that the insured had valid defenses to the underlying claim which it was precluded from presenting by the insurer's refusal to pay for independent counsel, justifying recovery of lost profits from its insurer. We conclude that the insured was entitled to no such contradictory and illogical presumption. We further conclude, in connection with the insurer's cross-appeal, that the trial court erred in ruling that Cumis counsel was required at the inception of the underlying litigation.

Appellant Midiman and its partners, appellants Timothy D. Ryan, Gordon T. Odell, and Thomas A. Turner, Jr., (collectively referred to herein as Midiman) were in the business of manufacturing electronic musical devices and accessories, among which was a product known as the "MIDI GMan." [2]

In…