DEFINITION of 'Cumis Counsel'

Legal counsel chosen by the insured when the insurer has a conflict of interest. Cumis counsel takes its name from San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc., a 1984 court case in California that established the insured’s right to independent counsel.

BREAKING DOWN 'Cumis Counsel'

When an insurance company underwrites a new policy it not only agrees to protect the insured from losses, but also to defend the insured against any claims. The insurer is able to control the defense of the insured by selecting the defense counsel. In most cases this is permissible because both the insured and the insurer have the same interest which is defeating the claim or limiting the amount of losses that the claim can cause. In other cases, however, the interests of the insured and the insurer are not the same.

One way that an insurer’s interest may differ is if the insurer issues a reservation of rights statement leading up to the court case. The reservation of rights allows the insurer to deny coverage at a later date, and is used if information comes out during the case that suggests that the insured was guilty of an action that was not covered by the policy. The reservation serves as an indicator that the insurer will not seek to vigorously defend the insured since it doesn’t intend on having the insured as a client in the future.

When there is not a conflict of interest, the insurer will pay for the defense of the insured. This same right extends to the insured if there is a conflict of interest. If a claim is made against the insured, the insurer can either sue the insured and receive a declaration of no coverage, agree to defend the insured regardless of the estimated outcome, or issue a reservation of right and allow the insured to choose an independent counsel.

RELATED TERMS
  1. Bureau Rate

    A standard price per unit of insurance set by a state's insurance ...
  2. Assigned Risk

    A risk that an insurance company is required to provide coverage ...
  3. Cooperation Clause

    An insurance contract clause that requires the policyholder to ...
  4. Insurance Premium

    An insurance premium is the amount of money that an individual ...
  5. Total Insurable Value

    Total insurable value is the value of property, inventory, equipment, ...
  6. As Their Interests May Appear (ATIMA)

    Text in an insurance policy that allows other parties to be added ...
Related Articles
  1. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  2. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  3. Insurance

    12 Insurance Questions for High Net Worth Families

    High net worth families should ask themselves these 12 questions regarding comprehensive insurance.
  4. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  5. Insurance

    12 Car Insurance Cost-Cutters

    If car insurance costs are dragging you down, use these tips to free yourself from some of the extra weight.
  6. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  7. Insurance

    5 Tips For Getting The Right Contents Insurance

    There are many options when it comes to insuring the contents of your home.
  8. Insurance

    Add-On Insurance: Do You Need It?

    Insurance is important in certain situations, but there isn't always a need.
  9. Insurance

    Life Insurance

    Life insurance is an important component of basic financial planning. Find out how life insurance works and how insurance companies are able to profit through providing financial security to ...
RELATED FAQS
  1. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  2. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, investing and claims ... Read Answer >>
Hot Definitions
  1. Debt/Equity Ratio

    The D/E ratio indicates how much debt a company is using to finance its assets relative to the value of shareholders’ equity.
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  3. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  4. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability ...
  5. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  6. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component ...
Trading Center