The insured contractor was not entitled to independent Cumis counsel despite suing the insurer in a cross-claim. Centex Homes v. St. Palu Fire & Marine Ins. Co., 2018 Cal. App. LEXIS 45 (Cal. Ct. App. Jan. 22, 2018).

     Homeowners sued Centex Homes for construction defects. Centex tendered defense of the suit to St. Paul, the insurer for one of the subcontractors who included Centex as an additional insured under its policy. St. Paul agreed to defend under a reservation of rights. St. Paul reserved the right to deny indemnity for any claims by the homeowners not covered by the policy. St. Paul also reserved its right to reimbursement of costs incurred defending uncovered claims. St. Paul appointed attorney David Lee to represent Centex and defend against the homeowners' claims. 

    Centex filed a cross-complaint against subcontractors alleging breaches of written, oral and implied contracts to indemnify defend and obtain insurance. The cross-complaint included a seventh cause of action for declaratory relief against St. Paul, seeking a declaration that Centex was entitled to independent counsel under Cumis and California statute because St. Paul's reservation of rights created conflicts of interest.

    St. Paul moved for summary judgment on the seventh cause of action. St. Paul introduced evidence that Lee only represented Centex with respect to its defense of the complaint and did not represent Centex, its insured subcontractor, nor St. Paul in connection with the cross-complaint. At his deposition, Lee explained that St. Paul did not place any limitations on his representation of Centex and never dictated or controlled what he could do regarding the prosecution of Centex's cross-complaint. The trial court granted St. Paul's motion.

     The court of appeals affirmed. Under California case law and statute, Centex had the right to obtain independent counsel paid for by St. Paul, as Centex's insurer, whenever their competing interests created an ethical conflict for counsel. Whether independent counsel was required depended upon the nature of the coverage issue as it related to the issues in the underlying case.

    In support of its argument that Lee could have influenced the outcome of the causation question, Centex provided only citations to its own summary judgment briefing, evidence that the trial court deemed inadmissible, evidence that did not fully support Centex's arguments. Because Centex was strictly liable for construction defects, causation would not necessarily have been litigated in the underlying action. Therefore, Centex failed to establish a triable issue of material fact on the question of whether Lee could have controlled the coverage disputed between St. Paul and Centex.

    Consequently, the judgment of the trial court was affirmed.