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obligations to their clients. The insured still has a duty to cooperate with the insurer as described in the policy contract.
As Section 2860(b) implies, not every reservation of rights creates a conflict of interest. As California courts have explained, “[i]t is only when the basis for the reservation of rights is such as to cause assertion of factual or legal theories which undermine or are contrary to the positions to be asserted in the liability case that a conflict of interest suf- ficient to require independent counsel, to be chosen by the insured, will arise.” Park Townsend, LLC v. Clarendon Am. Ins. Co., 916 F.Supp.2d 1045 (N.D. Cal. 2013) (citing Gafcon, Inc. v. Ponsor & Assocs., 98 Cal. App. 4th 1388, 1404, 120 Cal. Rptr. 2d 392, 403 (2002)).
The conflict of interest must be “significant, not merely theo- retical, and actual, not merely potential.” Dynamic Concepts, Inc. v. Truck Ins. Exch., 1007, 71 Cal. Rptr. 2d 882, 887 (Cal. Ct. App. 4th 1998). It appears that California courts will look to the facts of each situation in an attempt to reconcile the differing interests of insurer and insured.
Time for Providing Insured with Reservation of Rights
• Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to facts or applicable law for denial of a claim or for the compromise of a settlement» constitutes an unfair claim settlement practice. Cal. Ins. Code § 790.03(h) (13) (2006).
• An insurer must accept or deny a claim within 40 days of receiving proof of a claim. Cal. Code Regs. tit. 10, § 2695.7(b).
• If more time is needed to investigate a claim, the insurer must notify the insured of that fact within 40 days of its receipt of a proof of loss, setting forth the reasons that additional time for investigation
is required and every 30 days thereafter until the determination is made or legal action is served. Cal. Code Regs. tit. 10, § 2695.7(c)(1).
2018 ReseRvation of Rights - special edition
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