Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
San Francisco County Super. Ct. No. CGC 06449220
Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
This is an appeal from an order denying a motion by appellant Hartford Casualty Insurance Company (Hartford) to disqualify the law firm representing respondents J.R. Marketing, L.L.C., Noble Locks Enterprises, Inc., Jane and Robert Ratto and Penelope Kane (collectively, respondents).
FACTUAL AND PROCEDURAL BACKGROUND
To properly review the trial court’s disqualification order, we must briefly set forth the facts of not one, but three related lawsuits.
The Titan Matter.
In February 2005, Titan PCB West, Inc. (Titan) brought suit against Hytek Services, Inc. (Hytek) for breach of contract and breach of the implied covenant of good faith and fair dealing (Titan matter). In doing so, Titan was represented by Lisa Aguiar of the law firm Squire, Sanders & Dempsey L.L.P. (Squire).
On or about May 31, 2005, Squire was served on Titan’s behalf with a cross-complaint in the Titan matter for breach of contract, breach of the covenant of good faith and fair dealing, implied warranty, negligence, unjust enrichment, unfair competition and injunctive relief. Titan tendered the cross-complaint to Hartford Fire Insurance Company (Hartford Fire), a corporate affiliate of Hartford, for defense and indemnity.
Hartford Fire accepted defense of the Titan matter subject to an extensive reservation of rights that was set forth in a November 4, 2005 letter to Titan. Specifically, Hartford Fire reserved the right “to withdraw from the defense and to disclaim indemnity coverage should it be determined that the alleged damages do not fall within the insuring agreement,” and “to seek allocation of any defense fees and costs incurred and/or paid on behalf of its insureds and to seek to be reimbursed for any defense fees and costs incurred in connection with non-covered claims after the acceptance of the defense.” Further, Hartford Fire informed Titan that its agreement to accept the defense “does not limit any other grounds for reserving or disclaiming coverage if the facts or developing law warrant it,” and “should not be interpreted as a waiver or estoppel on Hartford’s part to assert any terms, conditions, exclusions, policy defenses or limits of liability contained in the policy.”
Hartford Fire also agreed to “allow Ms. Lisa E. Aguiar of [Squire] to continue to defend Titan PCB West, Inc. (Titan),” while reserving the right to withdraw that permission “at anytime, at our discretion, and to assign the defense to counsel of [its] choosing in accordance with [its] right to control the defense as provided in the policy.” Hartford Fire and Ms. Aguiar thus worked out a fee agreement.
The Avganim Matter.
In September 2005, several, but not all, of respondents in this matter were sued by Meir Avganim and others for intentional misrepresentation, breach of fiduciary duty, unfair competition, restraint of trade, defamation, interference with business relationships, conversion, accounting, mismanagement and conspiracy (Avganim matter). Respondents tendered the complaint in the Avganim matter to Hartford, seeking defense and indemnity.
Hartford initially refused to defend or indemnify respondents on the ground, among others, that the acts complained of occurred before the relevant insurance policy’s inception date. This refusal is what triggered the filing of the lawsuit in this matter.
This Matter.
In February 2006, respondents filed a complaint against Hartford for breach of contract, negligence, breach of the duty of good faith and fair dealing, and declaratory relief. Respondents were represented in the lawsuit by Ethan Miller, Mark Goodman and Amy Rose of Squire, the same law firm retained to represent Titan in the Titan matter.
In March 2006, apparently in response to the lawsuit, Hartford reconsidered its initial coverage position, and agreed to provide a defense to respondents in the Avganim matter subject to a reservation of rights. Hartford declined, however, to pay past defense costs or to provide respondents with independent counsel, instead referring the matter for defense to its panel counsel.
In April 2006, respondents moved for summary adjudication. On July 26, 2006, the trial court granted the motion, ruling that Hartford had a duty to defend respondents and to provide and pay for their independent counsel in the Avganim matter.
On August 7, 2006, respondents moved to enforce the trial court’s summary adjudication ruling, arguing that Hartford was still refusing to provide or fund a complete defense in the Avganim matter. The hearing on the motion was set for August 17, 2006, with a tentative order to be issued the day before on August 16, 2006. On the morning of August 16, however, Hartford filed a motion to disqualify Squire as respondents’ counsel, arguing that, even though Ms. Aguiar had left Squire on May 1, 2006, taking the Titan matter with her, Squire had improperly represented Hartford Fire in the Titan matter while concurrently representing respondents against Hartford in this matter. In response to the new motion, the trial court continued the hearing on the enforcement motion until September 2006.
On September 27, 2006, the trial court granted respondents’ motion to enforce the summary adjudication order, finding Hartford “has breached and continues to breach its defense obligations” by failing to pay reasonable and necessary defense costs and to provide independent counsel. On the same day, the trial court also denied Hartford’s disqualification motion, finding that no attorney-client relationship existed between Squire and Hartford in the Titan matter, and thus that no basis existed for ordering Squire’s disqualification. This appeal followed.
DISCUSSION
Hartford contends Squire must, as a matter of law, be disqualified from representing respondents in this matter. Hartford reasons that Squire breached its duty of loyalty to Hartford by representing both Hartford and Titan in the Titan matter, while concurrently representing respondents against Hartford in this matter.
The parties appear to agree that Hartford and Hartford Fire, as corporate affiliates, are indistinguishable for purposes of deciding whether Squire’s disqualification is proper. (See Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 241-246 [treating corporate affiliates the same for disqualification purposes based on the two entities’ “unity of interest”]) As such, we treat Hartford and Hartford Fire as the same entity, referred to as “Hartford,” in our analysis.
On review, we will not disturb a trial court’s decision to deny a disqualification motion absent an abuse of discretion. (DCH Health Services Corp. v. Waite (2002) 95 Cal.App.4th 829, 832; People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143.) Further, we will not substitute our factual findings for the trial court’s express or implied findings so long as they are supported by substantial evidence. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., supra, at p. 1144 [“[w]hen substantial evidence supports the trial court’s factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion”].) “When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.” (Fremont Indemnity Co. v. Fremont General Corp. (2006) 143 Cal.App.4th 50, 63.)
Moreover, in reviewing a disqualification order, we must keep in mind the significant, sometimes conflicting, policy concerns that are implicated, including the parties’ right to choose their own counsel, the clients’ right to confidentiality and trust, and the public’s interest in “the scrupulous administration of justice and the integrity of the bar.” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., supra, 20 Cal.4th at p. 1145.) “On the one hand, a court must not hesitate to disqualify an attorney when it is satisfactorily established that he or she wrongfully acquired an unfair advantage that undermines the integrity of the judicial process and will have a continuing effect on the proceedings before the court. [Citations.] On the other hand, it must be kept in mind that disqualification usually imposes a substantial hardship on the disqualified attorney’s innocent client, who must bear the monetary and other costs of finding a replacement. . . . [¶] Additionally, as courts are increasingly aware, motions to disqualify counsel often pose the very threat to the integrity of the judicial process that they purport to prevent. [Citation.] Such motions can be misused to harass opposing counsel [citation], to delay the litigation [citation], or to intimidate an adversary into accepting settlement on terms that would not otherwise be acceptable. [Citations.] In short, it is widely understood by judges that ‘attorneys now commonly use disqualification motions for purely strategic purposes.’ [Citations.].” (Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 300-301 fns. omitted; Dino v. Pelayo (2006) 145 Cal.App.4th 347, 351-352.)
These significant policy concerns underlying a disqualification order mandate “careful review of the trial court’s exercise of discretion.” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., supra, 20 Cal.4th at p. 1144.)
Here, the trial court declined to order disqualification of Squire after finding that no attorney-client relationship existed between Squire and Hartford. The trial court reasoned that a conflict of interest existed between Titan and Hartford, based on Hartford’s reservation of rights in the Titan matter, that precluded the formation of an attorney-client relationship between those two parties. And without an underlying attorney-client relationship, no valid basis existed for granting Hartford’s motion. We agree.
Disqualification of an attorney requires the existence of a prior attorney-client relationship or some other confidential or fiduciary relationship between that attorney and the party seeking disqualification. (Dino v. Pelayo, supra, 145 Cal.App.4th at p.352; Cooke v. Superior Court (1978) 83 Cal.App.3d 582, 591; Maruman Integrated Circuits, Inc. v. Consortium Co. (1985) 166 Cal.App.3d 443, 447.) This is because, where such relationships exist, so does the potential violation of the lawyer’s duty of confidentiality. (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 706.)
In the insurance coverage context, whether an attorney-client or other confidential or fiduciary relationship exists between the insurer and the attorney retained to defend the insured depends on whether a conflict of interest exists between the insurer and the insured. “In California, it is settled that absent a conflict of interest, an attorney retained by an insurance company to defend its insured under the insurer’s contractual obligation to do so represents and owes a fiduciary duty to both the insurer and the insured. [Citations.]” (Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1406; see also National Union Fire Ins. Co. v. Stites Prof. Law Corp. (1991) 235 Cal.App.3d 1718, 1727 [“[s]o long as the interests of the insurer and the insured coincide, they are both the clients of the defense attorney and the defense attorney’s fiduciary duty runs to both the insurer and the insured”].) Moreover, absent a conflict of interest, the insurer has the right to control defense and settlement of the third party action against the insured, and to otherwise directly participate in the litigation on the insurer’s behalf. (Gafcon, supra, 98 Cal.App.4th at p. 1407.)
When a conflict of interest arises, however, the so-called tripartite relationship between the insurer, the attorney and the insured ends. Because the three parties’ interests are no longer aligned, the insured is entitled under Civil Code section 2860 (section 2860) to independent counsel, also known as Cumis counsel, at the insurer’s expense. (Civ. Code, § 2860, subd. (b); e.g., Gafcon, supra, 98 Cal.App.4th at pp. 1421-1422.) Cumis counsel represents the insured alone, and, although such counsel continues to owe certain limited duties to the insurer to disclose, inform, consult and cooperate regarding nonprivileged information, no attorney-client relationship exists between the counsel and the insurer. (Civ. Code, § 2860, subds. (d), (f); Assurance Co. of America v. Haven (1995) 32 Cal.App.4th 78, 87-88, 90 [“there is no attorney-client relationship between Cumis counsel and the insurer”].)
Section 2860 provides in full:
For purposes of this appeal, we use the terms “Cumis counsel” and “independent counsel” interchangeably.
The term Cumis counsel derives from the doctrine set forth in San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358 (Cumis). There, the court observed that in cases where the insured is sued by a third party and some or all of the allegations in the complaint do not fall within the scope of coverage under the insured’s policy, the commonality of purpose underlying the usual tripartite relationship between the insured, the attorney and the insurer breaks down. (Id. at pp. 364-365.) Where an insurer accepts the defense of an insured subject to a reservation of rights based on the noncovered claims, “[o]pposing poles of interest are represented on the one hand in the insurer’s desire to establish in the third party suit the insured’s ‘liability rested on intentional conduct’ [citation], and thus no coverage under the policy, and on the other hand in the insured’s desire to ‘obtain a ruling . . . such liability emanated from the nonintentional conduct within his insurance coverage.’ [Citation.]” As such, the court held, “in the absence of [the insured’s informed] consent, where there are divergent interests of the insured and the insurer brought about by the insurer’s reservation of rights based on possible noncoverage under the insurance policy, the insurer must pay the reasonable cost for hiring independent counsel by the insured. The insurer may not compel the insured to surrender control of the litigation.” (Id. at p. 375.)
In response to the Cumis decision, our Legislature adopted section 2860 in 1987 to codify and clarify its holding. Although section 2860 does not purport to identify all situations in which the right to Cumis counsel vests, it does state that a conflict of interest “may arise or does exist,” triggering such right, “when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim.” (Civ. Code, § 2860, subd. (b); see also Dynamic Concepts, Inc. v. Truck Ins. Exchange (1998) 61 Cal.App.4th 999, 1007.)
Several California cases have since then sought to delineate those situations in which an insurer’s reservation of rights causes a conflict of interest that triggers the right to Cumis counsel under section 2860. Such cases have generally held that whether the right is triggered “depends upon the nature of the coverage issue, as it relates to the issues in the underlying case.” (Blanchard v. State Farm Fire & Casualty Co. (1991) 2 Cal.App.4th 345, 350; Gafcon, supra, 98 Cal.App.4th at p. 1421; see also Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1395-1396 [section 2860’s language “ ‘does not preclude judicial determination of conflict of interest and duty to provide independent counsel such as was accomplished in Cumis so long as that determination is consistent with the section’ ”].) In particular, where the defense attorney can “control[] the outcome of the [coverage] issue to [the insured’s] detriment, or ha[s] incentive to do so,” Cumis counsel must be provided. (Blanchard, supra, 2 Cal.App.4th at p. 350.) Or, stated otherwise, “ ‘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 . . . a conflict of interest sufficient to require independent counsel, to be chosen by the insured, will arise.’ (State Farm Fire & Casualty Co. v. Superior Court [(1989) 216 Cal.App.3d 1222,] 1226, fn.3.)” (Gafcon, supra, 98 Cal.App.4th at pp. 1421-1422.)
To the contrary, if the coverage issue is “independent of, or extrinsic to, the issues in the underlying action,” no conflict of interest exists requiring Cumis counsel. (Gafcon, supra, 98 Cal.App.4th at p. 1422; see also Foremost Ins. Co. v. Wilkes (1988) 206 Cal.App.3d 251, 261 [“where the reservation of rights is based on coverage disputes which have nothing to do with the issues being litigated in the underlying action, there is no conflict of interest requiring independent counsel”].) Further, a “mere possibility of an unspecified conflict does not require independent counsel. The conflict must be significant, not merely theoretical, actual, [or] . . . potential.” (Dynamic Concepts, supra, 61 Cal.App.4th at p. 1007.)
Applying these legal principles here, we thus must determine whether Hartford’s reservation of rights in the Titan matter created an actual conflict of interest that entitled Titan to have Squire act as Cumis counsel on its behalf. As set forth above, an attorney-client or other fiduciary or confidential relationship must have existed between Hartford and Squire to permit Hartford to seek the firm’s disqualification in this case. (Dino v. Pelayo, supra, 145 Cal.App.4th at p. 352; Cooke, supra, 83 Cal.App.3d at p. 591.) The trial court found no such relationship.
Hartford challenges the trial court’s finding, contending no conflict of interest arose based on its reservation of rights, and thus that Squire was representing the interests of both it and Titan. Respondents, to the contrary, contend such conflict did arise, and that Squire – retained by Titan before it tendered defense to Hartford – was representing Titan alone as Cumis counsel.
As previously stated, while the existence of a conflict of interest is generally decided as a matter of law, the existence of the underlying facts required to establish such conflict is decided as a matter of fact. (Blanchard, supra, 2 Cal.App.4th at p. 350.) “If the trial court resolved disputed factual issues, the reviewing court should not substitute its judgment for the trial court’s express or implied findings supported by substantial evidence. [Citations.] When substantial evidence supports the trial court’s factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion.” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., supra, 20 Cal.4th at pp. 1143-1144.) With this rule in mind, we turn to the evidence underlying the conflict of interest issue in this case, which was indeed disputed.
The evidence before the trial court on the motion for disqualification established that Titan retained Squire to prosecute the Titan matter in February 2005, before Hytek cross-complained against Titan and Titan tendered the defense of the cross-complaint to Hartford. When Hartford thereafter acknowledged the tender, it agreed to “allow [Squire] to continue to defend Titan PCB West, Inc. (Titan),” subject to an extensive reservation of rights. In particular, Hartford reserved the right “to withdraw from the defense and to disclaim indemnity coverage should it be determined that the alleged damages do not fall within the insuring agreement,” and “to seek allocation of any defense fees and costs incurred and/or paid on behalf of its insureds and to seek to be reimbursed for any defense fees and costs incurred in connection with non-covered claims after the acceptance of the defense.” Further, Hartford informed Titan that its agreement to accept the defense “does not limit any other grounds for reserving or disclaiming coverage if the facts or developing law warrant it,” and “should not be interpreted as a waiver or estoppel on Hartford’s part to assert any terms, conditions, exclusions, policy defenses or limits of liability contained in the policy.”
Hartford also set forth for Titan the limits of coverage under the relevant policy. For example, Hartford informed Titan it had “no duty to defend [Titan] against any ‘suit’ seeking damages for . . . ‘property damage’ to which this insurance does not apply.” Specifically, the insurance would apply to “ ‘property damage’ only if . . . [¶] [it] is caused by an ‘occurrence’ that takes place in the ‘coverage territory’ . . . .” The insurance would not apply to “ ‘property damage’ to ‘your product’ ” or to “ ‘impaired property’ . . . arising out of: [¶] (1) A defect, deficiency or dangerous condition in ‘your product’ or ‘your work’ . . . .” Under the policy, “ ‘[i]mpaired property’ means tangible property, other than ‘your product’ or ‘your work,’ that cannot be used or is less useful because: [¶] (1) It incorporates ‘your product’ or ‘your work’ that is known or thought to be defective, deficient, inadequate or dangerous . . . .” “ ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” And “ ‘[p]roperty damage’ means: [¶] a. Physical injury to tangible property, including all resulting loss of use of that property. . . .; or [¶] b. Loss of use of tangible property that is not physically injured.”
Considering this policy language within the context of Hartford’s extensive reservation of rights, we conclude substantial evidence supported the trial court’s finding of underlying facts that established the existence a conflict of interest. As set forth above, whether a conflict of interest exists depends on “the nature of the coverage issue, as it relates to the issues in the underlying case.” (See Blanchard, supra, 2 Cal.App.4th at p. 350.)
Here, with respect to the coverage issue, Hartford made clear its intent to provide no coverage for “ ‘property damage’ to ‘impaired property’ . . . arising out of: [¶] (1) A defect, deficiency, inadequacy or dangerous condition in ‘your product’ or ‘your work’ . . . .” Hartford also intended to provide no coverage unless the “occurrence” resulting in “property damage” to “impaired property” was an “accident.” “Impaired property,” again, is tangible property other than Titan’s product or work that “cannot be used or is less useful” because it incorporates Titan’s product or work “that is known or thought to be defective, deficient, inadequate or dangerous.” These coverage limitations, we conclude, relate directly to at least some of the issues in the underlying Titan matter.
For example, Hytek’s cross-complaint included a claim against Titan for breach of the covenant of good faith and fair dealing. To prevail on such claim under California law, Hytek would be required to prove either that Titan lacked subjective good faith in the validity of its act – which act here would be fulfilling its contractual obligations in connection with its sale to Hytek of circuit boards–or engaged in objectively unreasonable conduct. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 372; Locke v. Warner Bros., Inc. (1997) 57 Cal.App.4th 354, 365-367.) “A lack of good faith . . . suggests a moral quality, such as dishonesty, deceit, or unfaithfulness to duty. [Citation.]” (Storek & Storek, Inc. v. Citicorp Real Estate, Inc. (2002) 100 Cal.App.4th 44, 59, 61-62 & fn. 13; see also Locke, supra, 57 Cal.App.4th at p. 367 [“[t]he implied covenant of good faith and fair dealing obligated [defendant] to exercise [its] discretion honestly and in good faith”].)
“ ‘The general rule [regarding the covenant of good faith] is plainly subject to the exception that the parties may, by express provisions of the contract, grant the right to engage in the very acts and conduct which would otherwise have been forbidden by an implied covenant of good faith and fair dealing. . . . [¶] This is in accord with the general principle that, in interpreting a contract ‘an implication . . . should not be made when the contrary is indicated in clear and express words.’ [Citation.] . . . [¶] As to acts and conduct authorized by the express provisions of the contract, no covenant of good faith and fair dealing can be implied which forbids such acts and conduct. And if defendants were given the right to do what they did by the express provisions of the contract there can be no breach.’ [Citation.]” (Carma, supra, 2 Cal.4th at p. 374.)
Applying this law to the facts before us, we note the very same evidence that could be used to establish Hytek’s claim for breach of the covenant of good faith and fair dealing could be used to support Hartford’s claim that it had no duty to provide certain coverage to Titan. In particular, under the policy, evidence that Hytek’s tangible property “cannot be used or is less useful” because it incorporates Titan’s product or work “that is known or thought to be defective, deficient, inadequate or dangerous” would permit Hartford to avoid coverage. And under the law governing breach of the covenant of good faith and fair dealing, such evidence would also support Hytek’s claim that Titan, by selling circuit boards it knew or thought to be “defective, deficient, inadequate or dangerous,” acted dishonestly, deceitfully, or unfaithfully in performing its contractual obligations to Hytek. (See Locke, supra, 57 Cal.App.4th at p. 367; Carma, supra, 2 Cal.4th at p. 372; Storek & Storek, supra, 100 Cal.App.4th at pp. 59, 61-62 & fn. 13.)
Given the possible use of such evidence against Titan by both Hytek and Hartford, we cannot conclude the coverage issue was “independent of, or extrinsic to, the issues in the underlying [Titan] action.” (Gafcon, supra, 98 Cal.App.4th at p. 1422; see also Foremost Ins. Co. v. Wilkes, supra, 206 Cal.App.3d at p. 261.) Rather, we conclude the basis for Hartford’s reservation of rights in the Titan matter was “such as to cause assertion of factual or legal theories which undermine[d] or [we]re contrary to the positions to be asserted [by Titan] in the liability case [against Hytek].” (Gafcon, supra, 98 Cal.App.4th at p. 1422.) Accordingly, we conclude a conflict of interest had arisen that was sufficient to preclude Squire from representing both Titan and Hartford, and thus to render Squire independent counsel to Titan only. (See ibid.)
In so concluding, we acknowledge Hartford’s arguments that Titan failed to expressly notify it that a conflict of interest had arisen or to demand independent counsel, and that Hartford reasonably believed Squire was its counsel. The law is clear, however, that the insurer has the duty to notify the insured when a conflict has arisen, not the reverse. (Bogard v. Employers Casualty Co. (1985) 164 Cal.App.3d 602, 611.) Moreover, “a client’s subjective belief that an attorney-client relationship exists, standing alone, cannot create such a relationship . . . .” (Zenith Ins. Co. v. O’Connor (2007) 148 Cal.App.4th 998, 1010.)
Indeed, here, in any event, we find little to support Hartford’s alleged subjective belief that an attorney-client relationship existed. In its letter responding to Titan’s tender of the defense, for example, Hartford agreed under the reservation of rights to “allow [Squire] to continue to defend Titan.” The letter further states that a fee agreement had been worked out “with your counsel.” Neither this letter nor any other document we have found suggests that Hartford believed it was retaining Squire as its own counsel.
Hartford also argues that Squire at no point objected to Hartford’s statement that it was reserving the right to withdraw its permission to allow Squire’s representation in the Titan matter “in accordance with our right to control the defense as provided in the policy.” The mere fact that Hartford claimed a right to control the defense, however, does not make the claim true. Rather, the law is again clear: Where Cumis counsel is required, “the insured may have control of the defense if he wishes.” (Cumis, supra, 162 Cal.App.3d at p. 369.) Consistent with that law, Ms. Aguiar, the Squire attorney, declared under oath that she disagreed with Hartford’s statement, and “had no intention of allowing Hartford to dictate how the case would continue.” Given this, Hartford’s argument in this respect fails.
Ms. Aguiar further declared that she had “approximately three” conversations with Hartford regarding the Titan matter, none of which related to litigation strategy, and that she received no information from Hartford other than a publicly available document regarding industry “litigation guidelines.” She left Squire on May 1, 2006, taking the Titan matter with her. The Titan matter settled in July 2006.
Finally, we mention Hartford’s timing in filing its motion to disqualify Squire. The evidence supported the inference that, by no later than January 2006, Hartford had constructive notice, based on information provided to its claims adjuster, Ms. Menezes, that Squire represented its insured in the Titan matter and was adverse to it in this action. Nonetheless, Hartford failed to file its disqualification motion until August 16, 2006, after the trial court ruled against it on summary adjudication with respect to the duty to defend issue, and on the day the trial court was expected to tentatively rule on respondents’ motion to enforce the summary adjudication order. This evidence of delay in bringing the disqualification motion, perhaps for tactical reasons, we conclude, is another circumstance supporting the trial court’s denial of the motion. (In re Marriage of Zimmerman (1993) 16 Cal.App.4th 556, 565.)
In light of our conclusion that, as the trial court found, no attorney-client or other confidential or fiduciary relationship existed between Squire and Hartford, we need not address Hartford’s other arguments for reversing the order denying disqualification. For without such an underlying relationship, the case law is clear that no valid basis exists for ordering Squire’s disqualification. (Dino v. Pelayo, supra, 145 Cal.App.4th at p. 352; Cooke v. Superior Court, supra, 83 Cal.App.3d at p. 591.)
DISPOSITION
The order denying disqualification is affirmed. Appellants shall bear the costs on this appeal.
We concur:
Pollak, Acting P. J., Siggins, J.
“(a) If the provisions of a policy of insurance impose a duty to defend upon an insurer and a conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured unless, at the time the insured is informed that a possible conflict may arise or does exist, the insured expressly waives, in writing, the right to independent counsel. An insurance contract may contain a provision which sets forth the method of selecting that counsel consistent with this section.
“(b) For purposes of this section, a conflict of interest does not exist as to allegations or facts in the litigation for which the insurer denies coverage; however, when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist. No conflict of interest shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an insured is sued for an amount in excess of the insurance policy limits.
“(c) When the insured has selected independent counsel to represent him or her, the insurer may exercise its right to require that the counsel selected by the insured possess certain minimum qualifications which may include that the selected counsel have (1) at least five years of civil litigation practice which includes substantial defense experience in the subject at issue in the litigation, and (2) errors and omissions coverage. The insurer’s obligation to pay fees to the independent counsel selected by the insured is limited to the rates which are actually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of similar actions in the community where the claim arose or is being defended. This subdivision does not invalidate other different or additional policy provisions pertaining to attorney's fees or providing for methods of settlement of disputes concerning those fees. Any dispute concerning attorney’s fees not resolved by these methods shall be resolved by final and binding arbitration by a single neutral arbitrator selected by the parties to the dispute.
“(d) When independent counsel has been selected by the insured, it shall be the duty of that counsel and the insured to disclose to the insurer all information concerning the action except privileged materials relevant to coverage disputes, and timely to inform and consult with the insurer on all matters relating to the action. Any claim of privilege asserted is subject to in camera review in the appropriate law and motion department of the superior court. Any information disclosed by the insured or by independent counsel is not a waiver of the privilege as to any other party.
“(e) The insured may waive its right to select independent counsel by signing the following statement: ‘I have been advised and informed of my right to select independent counsel to represent me in this lawsuit. I have considered this matter fully and freely waive my right to select independent counsel at this time. I authorize my insurer to select a defense attorney to represent me in this lawsuit.’
“(f) Where the insured selects independent counsel pursuant to the provisions of this section, both the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation. Counsel shall cooperate fully in the exchange of information that is consistent with each counsel's ethical and legal obligation to the insured. Nothing in this section shall relieve the insured of his or her duty to cooperate with the insurer under the terms of the insurance contract.”