Appellant insured sought review of declaratory

Appellant insured sought review of declaratory judgments from the Superior Court of Santa Clara County (California), which ruled that respondent liability insurers had no duty to provide the insured with independent counsel to defend environmental cleanup lawsuits. In a related appeal, an insurer that had paid independent counsel’s fees sought to preserve a right to equitable contribution from the other insurers if the insured’s appeal succeeded.

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Overview

The insurers provided a defense subject to reservations of rights on various issues. In addition to general reservations of rights, the insurers reserved the right to deny coverage for damages occurring outside their respective policy periods, and one insurer reserved rights under an absolute pollution exclusion. The court held that the insured was not entitled to insurer-paid independent counsel because no conflict of interest existed under Civ. Code, § 2860. The general reservations could do nothing more than create a theoretical, potential conflict of interest, which did not require independent counsel. The issue of when the alleged damages occurred was irrelevant to defense counsel jointly retained by multiple insurers, all of whom had an interest in defeating liability, and the insured provided no evidence to establish how defense counsel could have controlled the issue. Whether the absolute pollution exclusion barred coverage was not at issue in the underlying actions and was strictly a matter of contract interpretation, which also was not controlled by counsel. The insured presented no evidence to show a conflict of interest arising from the defense of third parties.

Outcome

The court affirmed the declaratory judgments in favor of the insurers and dismissed as moot the appeal regarding equitable contribution.

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