Related Attorneys
In this California Supreme Court proceeding, Horvitz & Levy LLP successfully represented appellant Hartford Casualty Insurance Company in its action seeking to bring a direct claim against Cumis counsel for reimbursement of unreasonable and excessive attorney fees.
Hartford’s insureds and others were sued for various business torts. Hartford accepted the defense under a reservation of rights. However, the trial court held Hartford breached the duty to defend between the time when the insureds tendered the claim and Hartford accepted the defense. The trial court also held the insureds had a right to independent, Cumis counsel. Cumis counsel then obtained an order precluding Hartford from arbitrating fee disputes under Civil Code section 2860 and permitting a challenge to the reasonableness of the fees only after the underlying litigation concluded. Once the underlying litigation concluded, Hartford sought to recoup some of the $13.5 million it paid to Cumis counsel. Cumis counsel successfully demurred to Hartford’s action on the ground that Hartford’s right of reimbursement ran only against the insureds. The Court of Appeal affirmed the trial court’s dismissal of Hartford’s action against counsel.
Horvitz & Levy obtained review, and then a reversal, in the California Supreme Court. The Court held that where Cumis counsel, “operating under a court order that expressly provided that the insurer would be able to recover payments of excessive fees, sought and received from the insurer payment for time and costs that were fraudulent, or were otherwise manifestly and objectively useless and wasteful when incurred, Cumis counsel have been unjustly enriched at the insurer’s expense” and would therefore be the proper party to reimburse the insurer. The Court agreed with Hartford’s argument that there was “no convincing reason” why counsel “should be absolutely immune from liability for enriching themselves in this fashion” or why “financial responsibility for their excessive billing should fall first on their own clients.”
