The California Court of Appeal recently disposed of a novel
attack on bad faith law launched by Zurich American Insurance
Company. In Miller Marital Deduction Trust, et al. v. Zurich
American Insurance Company, 2019 DJDAR (October 23, 2019),
Zurich was called upon to defend a cross complaint arising in
connection with long-tail pollution claims. Despite an extensive
reservation of rights and a conflict of interest, Zurich refused to
pay for independent counsel (Cumis counsel, in California
parlance) and instead appointed panel counsel to defend. While the
underlying environmental case was pending in federal court, the
Millers filed a state court action against Zurich asserting that
the insurer's appointment of counsel answerable to the
insurance company, in violation of the Millers' right to
independent counsel, constituted breach of contract and a breach of
the covenant of good faith and fair dealing.
