Wiggin and Dana Convinces California Supreme Court to Reverse in Major Insurance Case

August 13, 2015

The California Supreme Court sided unanimously on Monday with Wiggin and Dana on behalf of its client Hartford Casualty Insurance Co. in Hartford Casualty Ins. Co. v. J.R. Marketing LLC, a major insurance case. Law360 has written several articles on the case, covering it in its Appellate, Insurance and California newsletters.

The decision reversed an earlier decision by the California Court of Appeals, which had found that Hartford could not pursue reimbursement of up to $13.5 million in unreasonable and excessive fees it paid Squire Patton Boggs LLP (formerly Squire Sanders), its insureds' independent counsel in underlying business litigation. Hartford initially denied coverage in the matter, but after its insureds provided extrinsic evidence that established the potential for a defense under a reservation of rights, Hartford appointed panel counsel.

The insureds sued Hartford, seeking defense by independent "Cumis" counsel and payment of several months of defense fees incurred from the time of tender. The court agreed with the insureds and entered an order requiring Hartford to pay off all Squire Sanders' bills promptly and without challenge, and denied Hartford access to relief under a state statute that provided for arbitration of billing disputes. The order allowed Hartford to seek reimbursement of any unnecessary or unreasonable fees it paid at the end of the underlying litigation.

When the underlying litigation concluded, Hartford sued Squire Sanders and its insureds for up to $13.5 million in unreasonable and excessive fees. Squire Sanders argued that only the insureds, its clients, were responsible for those fees, and that an insurer could not seek reimbursement from Cumis counsel without destroying Cumis counsel's independence. The trial court and the intermediate appellate court agreed, and Hartford then retained Wiggin and Dana to assist on the California Supreme Court appeal.

The Supreme Court reversed, holding that where an insurer has been precluded from invoking statutory arbitration of fee disputes and has paid defense fees pursuant to an order preserving its right of reimbursement, the insurer has a direct right of reimbursement against Cumis counsel – not just its insureds. The Court rejected Squire Sanders' claim that seeking reimbursement directly from Cumis counsel would undermine the independence of the attorney/client relationship, and found that the direct right of reimbursement was consistent with California's longstanding principles of restitution and unjust enrichment.

Jonathan Freiman, Chair of Wiggin and Dana's Appellate and Complex Legal Issues Group, argued the appeal in San Francisco in May, facing off against the head of Gibson Dunn's appellate group, Theodore Boutros, in a "head to head" battle featured on Law360. Freiman was assisted in the case by appellate group members Kim Rinehart, Benjamin Daniels and David Roth. Hartford Casualty was also represented on the brief by Horvitz Levy and Locke Lord.

Monday's victory follows closely on the heels of two other major appellate victories by Freiman for Hartford affiliates. In July, Freiman and his appellate group colleagues convinced the Connecticut Supreme Court to reverse a $35 million trial court judgment against Hartford Fire Ins. Co. In April, Freiman and his colleagues convinced the federal Eleventh Circuit Court of Appeals (in Atlanta) to reverse a summary judgment decision against Hartford affiliate Twin City Fire Insurance Co. in a $10 million claim against a law firm.