Nede Management, Inc. v. Aspen American Insurance Co.
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In the underlying action, the insureds were sued by victims of a fire that occurred at the insureds' property. The insurer, Aspen, and managing underwriter, D&H, defended the action, which ultimately settled without any out-of-pocket payment from the insureds. The insureds then filed this action against Aspen and D&H, seeking a declaration that a conflict of interest existed in the underlying case between them and Aspen and D&H, so they were entitled to so-called "Cumis" counsel under Civil Code section 2860. The trial court sustained a demurrer without leave to amend and entered judgment for Aspen and D&H.
The Court of Appeal concluded that the demurrer was the incorrect procedural vehicle to resolve the insureds' declaratory judgment claim against Aspen and D&H. However, the insureds' family suffered no prejudice because the second amended complaint (SAC) did not allege a conflict of interest entitling them to independent counsel pursuant to section 2860 as a matter of law. Accordingly, the court modified the judgment to declare the rights adverse to the insureds and affirmed the trial court's judgment.
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