2009 California Civil Code - Section 2860 :: Title 13.5. Obligation To Defend Action


2860.  (a) If the provisions of a policy of insurance impose a duty
to defend upon an insurer and a conflict of interest arises which
creates a duty on the part of the insurer to provide independent
counsel to the insured, the insurer shall provide independent counsel
to represent the insured unless, at the time the insured is informed
that a possible conflict may arise or does exist, the insured
expressly waives, in writing, the right to independent counsel. An
insurance contract may contain a provision which sets forth the
method of selecting that counsel consistent with this section.
   (b) For purposes of this section, a conflict of interest does not
exist as to allegations or facts in the litigation for which the
insurer denies coverage; however, when an insurer reserves its rights
on a given issue and the outcome of that coverage issue can be
controlled by counsel first retained by the insurer for the defense
of the claim, a conflict of interest may exist. No conflict of
interest shall be deemed to exist as to allegations of punitive
damages or be deemed to exist solely because an insured is sued for
an amount in excess of the insurance policy limits.
   (c) When the insured has selected independent counsel to represent
him or her, the insurer may exercise its right to require that the
counsel selected by the insured possess certain minimum
qualifications which may include that the selected counsel have (1)
at least five years of civil litigation practice which includes
substantial defense experience in the subject at issue in the
litigation, and (2) errors and omissions coverage. The insurer's
obligation to pay fees to the independent counsel selected by the
insured is limited to the rates which are actually paid by the
insurer to attorneys retained by it in the ordinary course of
business in the defense of similar actions in the community where the
claim arose or is being defended. This subdivision does not
invalidate other different or additional policy provisions pertaining
to attorney's fees or providing for methods of settlement of
disputes concerning those fees. Any dispute concerning attorney's
fees not resolved by these methods shall be resolved by final and
binding arbitration by a single neutral arbitrator selected by the
parties to the dispute.
   (d) When independent counsel has been selected by the insured, it
shall be the duty of that counsel and the insured to disclose to the
insurer all information concerning the action except privileged
materials relevant to coverage disputes, and timely to inform and
consult with the insurer on all matters relating to the action. Any
claim of privilege asserted is subject to in camera review in the
appropriate law and motion department of the superior court. Any
information disclosed by the insured or by independent counsel is not
a waiver of the privilege as to any other party.
   (e) The insured may waive its right to select independent counsel
by signing the following statement:
"I have been advised and informed of my right to select independent
counsel to represent me in this lawsuit. I have considered this
matter fully and freely waive my right to select independent counsel
at this time. I authorize my insurer to select a defense attorney to
represent me in this lawsuit."
   (f) Where the insured selects independent counsel pursuant to the
provisions of this section, both the counsel provided by the insurer
and independent counsel selected by the insured shall be allowed to
participate in all aspects of the litigation. Counsel shall cooperate
fully in the exchange of information that is consistent with each
counsel's ethical and legal obligation to the insured. Nothing in
this section shall relieve the insured of his or her duty to
cooperate with the insurer under the terms of the insurance contract.

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