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Independent counsel and Cumis counsel: when your insurer must pay for your own lawyer
When an insurer defends under a reservation of rights, a conflict can entitle you to your own lawyer at its expense. How the rule works by state.
Independent counsel is a lawyer you choose, or the two of you agree on, to defend you in a lawsuit while your insurer pays the bill, because the insurer's own lawyer would have a conflict of interest. Lawyers call it "Cumis counsel" after a 1984 California case. Whether you get it turns on your state and on whether the insurer's coverage position and your defense pull in different directions. A reservation of rights alone does not decide it in most places.
If you are defending a lawsuit under a reservation of rights letter, this is the question to ask your coverage lawyer in the first week.
Why the conflict arises
When an insurer owes a defense, it normally picks the law firm, pays it and directs the strategy. The lawyer's client is you. The insurer is the one paying, which is why the arrangement is sometimes called tripartite. It works when your interests and the insurer's line up: both want the plaintiff to lose.
They diverge when the way the case is defended could decide whether the policy pays. Say a roofing contractor is sued after a storm-damaged building leaks. The complaint pleads negligence, which is covered, and alleges the roofer knowingly misrepresented the materials it used, which may fall under an exclusion for knowing or intentional conduct. The insurer reserves its rights on the second claim. If defense counsel steers the evidence toward "it was careless, not knowing," the insured benefits and so does the coverage. If the facts show the roofer knew, the insurer owes nothing for that claim. A lawyer paid by the insurer, who reports to it, has a temptation to develop facts that help the insurer's coverage position. That conflict is what independent counsel solves. (This example is hypothetical; see Roofing contractor insurance.) For the reservation letter itself, read reservation of rights letters: what they mean and how to respond; for the duty that brings the insurer into the case, the insurer's duty to defend: what triggers it and when it ends.
How states handle it
There is no national rule. The states fall into several approaches, and the leading cases are worth knowing by name.
| State | Source of the rule | When it applies |
|---|---|---|
| California | San Diego Navy Federal Credit Union v. Cumis Insurance Society (1984); codified in Civil Code § 2860 | When the insurer reserves rights on an issue that counsel it retains could control. No conflict merely because punitive damages are sought or the claim exceeds limits. |
| Illinois | Maryland Casualty Co. v. Peppers (1976) | When the insurer's coverage defense creates a real conflict, such as a complaint with both negligence and intentional-injury counts; the insured may choose counsel at the insurer's expense. A reservation alone is not enough. |
| Texas | Northern County Mutual Insurance Co. v. Davalos, 140 S.W.3d 685 (Tex. 2004) | When the facts to be decided in the liability suit are the same facts on which coverage depends. A reservation of rights creates a potential conflict only. |
| New York | Public Service Mutual Insurance Co. v. Goldfarb (1981) | When defense counsel's duty to defeat liability on every ground diverges from the insurer's interest in grounds it might cover. |
| Nevada | State Farm v. Hansen (2015) | When an actual ethical conflict exists, insurer must pay counsel chosen by the insured; a reservation alone is not automatically a conflict. |
| Florida | Fla. Stat. § 627.426 | Statute sets deadlines: after a timely reservation, within 60 days the insurer must refuse to defend, obtain a nonwaiver agreement, or retain independent counsel agreeable to the parties. |
| Minnesota | Fabyanske Westra Hart & Thomson v. Western National Mutual (Minn. Ct. App. June 1, 2026) | A recent intermediate-court holding: an actual conflict exists when the facts to be determined in the underlying action are the same facts on which coverage depends. |
Sources: the California statute is at Civil Code § 2860. The Texas holding is described by Thompson Coe, and the Minnesota ruling by Stoel Rives. Check current law, because decisions change and appeals are possible, especially for the 2026 Minnesota ruling. Some states, such as Washington, take another approach, imposing an enhanced duty of good faith on an insurer defending under a reservation without giving the insured the broad right to select counsel at its expense.
What does not usually create a right
- A bare reservation of rights. California and Texas both say the letter alone is insufficient. Boilerplate reservations ("we reserve all rights") do not create a conflict.
- Punitive damages. California's statute says no conflict exists as to allegations of punitive damages, and it adds that a claim exceeding policy limits does not create one either.
- A disagreement over strategy. In Davalos the Texas Supreme Court held that a dispute about venue did not take the insurer's contractual right to run the defense. Wanting a better lawyer is not a conflict.
- A denial of coverage. If the insurer denies the claim outright, the question is different: the insurer is not defending, so there is nothing to conflict with. You hire counsel and fight about the duty to defend later; see coverage litigation and declaratory judgment actions: when you and your insurer end up in court.
What the insurer pays: qualifications and rates
Where independent counsel is owed, the insurer rarely has to pay whatever the firm charges. California's Civil Code § 2860 lets the insurer require that independent counsel have at least five years of civil litigation practice, including substantial defense experience in the subject at issue, and carry errors and omissions coverage. The insurer's fee obligation is limited to the rates it actually pays counsel it retains in the ordinary course for similar actions in the community. Fee disputes the policy does not resolve go to binding arbitration with a single neutral arbitrator. Other states set rate expectations by case law or leave them to negotiation. If the firm you want charges more, you may pay the difference. Ask first.
Your duties when you have independent counsel
Independent counsel does not mean the insurer drops out.
- Disclosure. California's statute requires independent counsel and the insured to disclose to the insurer all non-privileged information about the action and to keep it informed. Privileged material you may hold back, and privilege disputes can be reviewed by the judge privately.
- Cooperation. Your policy's cooperation condition still applies.
- Joint participation. The insurer's counsel and your independent counsel may both participate in the case, and they are expected to share information consistent with their ethical duties.
- Waiver. In California you can waive the right in writing, and the statute includes prescribed waiver language. Do not waive because the adjuster says it is routine.
How to ask for it
- Get a coverage lawyer. Defense counsel appointed by the insurer cannot advise you on this question, since that is the conflict. See when your business is sued: working with your insurer for the first-week sequence.
- Write to the insurer. Cite the reservation letter, the specific grounds you say create the conflict, the issue defense counsel could control, and your state's rule. Ask the insurer to confirm in writing by a date whether it will pay for independent counsel.
- Propose counsel and rates. Name the firm and its rates, and ask whether the insurer will pay at those rates or what rate it says applies.
- Do not drop the insurer's defense yet. In Texas, an insured who rejects a defense without a qualifying conflict gives up the right to recover its own defense costs. Keep the defense in place until the insurer answers.
- Escalate refusals. An insurer that wrongly refuses may face a claim for breach of the duty to defend and, in some cases, insurer bad faith: what it is and the remedies. A complaint to the state insurance department is another route; see how to complain to your state insurance department.
Independent counsel is not the same as personal counsel
Two other situations involve a lawyer of your own, and neither is Cumis. If a demand exceeds your policy limit, the insurer's lawyer will not protect the uninsured portion, and you may hire personal counsel at your own cost to guard that exposure and to press the insurer to settle within limits. Second, where more than one insured is sued, such as a company and an employee whose interests diverge, they may need separate lawyers. Management liability policies work differently again, usually letting the insured select counsel with the insurer's consent and rate guidelines; see Directors and officers (D&O) insurance explained.
This guide is general information, not legal advice. Whether you are entitled to independent counsel depends on your state and on the exact wording of the complaint and reservation letter.
Key takeaways
- Independent counsel (Cumis counsel) is a defense lawyer of your own, paid by the insurer, owed when a real conflict exists between your defense and the insurer's coverage position.
- A reservation of rights on its own does not usually trigger the right; the question is whether insurer-appointed counsel could control the facts that decide coverage.
- California (Civil Code § 2860), Illinois, New York, Nevada, Texas and Florida approach it differently, and rates and qualifications may be capped.
- Ask for it in writing with your coverage counsel, and keep the existing defense in place until the insurer answers.
- Punitive damages or a claim above your limits generally call for personal counsel, not independent counsel.