Top Appellate Reversals: Hartford Casualty Insurance Co. v. J.R. Marketing LLC

Insurance

California Supreme Court

Plaintiff's lawyers: Horvitz & Levy LLP, David M. Axelrad, Emily V. Cuatto, Andrea A. Ambrose; Wiggin & Dana LLP, Jonathan M. Freiman; Mendes & Mount LLP, Dean B. Herman, Catherine L. Rivard; Edwards Wildman Palmer LLP, Ira G. Greenberg

Defense lawyers: Gibson, Dunn & Crutcher LLP, Theodore J. Boutrous Jr, Julian W. Poon; Squire Patton Boggs (US) LLP, Mark C. Dosker, Ethan A. Miller, Barry D. Brown Jr., Michelle M. Full, Pierre H. Bergeron

It was a fee fight for big stakes. An August state Supreme Court ruling reversed numerous contrary decisions and held that insurance underwriters can sue for overbilling the law firms they hire to defend customers.

The battle pitted Hartford Casualty Insurance Co. against the firm it hired and accused of inflating its $15 million bill, Squire Patton Boggs (US) LLP.

The unanimous high court, in an opinion by Justice Mariano-Florentino Cuellar, analyzed the problems that can arise when an insurer, due to a conflict of interest with a customer facing civil claims, must pay outside counsel to handle the customer's defense. Outside firms hired in such situations are known as Cumis counsel.

Squire argued that if Hartford had a problem with its billing, it should seek repayment from Hartford's customer, J.R. Marketing LLC, which faced an unfair competition suit. Hartford Casualty Insurance Co. v. J.R. Marketing LLC, 61 Cal.4th 988 (Cal. Sup. Ct., filed June 27, 2013).

Hartford, represented by appellate lawyers at Horvitz & Levy LLP and other firms, argued otherwise.

The high court decision reversed a state appellate panel and held for the first time in California that an insurer can file a direct action against its own Cumis counsel to recover for overbilling and need not look to their own customers for fee refunds.

Cuellar's opinion stressed that there is "no convincing reason" why Cumis counsel "should be absolutely immune from liability for enriching themselves" or why "financial responsibility for their excessive billing should fall first on their own clients."

The Horvitz & Levy partners who worked on the case could not be reached. The firm said in a statement, "The decision is likely to influence the law far beyond the state's boundaries. The extensive briefing on the merits attests to the importance of the issue, as do the numerous amicus briefs filed in support of both sides' positions."

- John Roemer