Filed 8/12/26 International Patients Network v. Truck Ins. Exchange CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
INTERNATIONAL PATIENTS B345024
NETWORK, INC., et al.,
(Los Angeles County Super.
Plaintiffs and Appellants, Ct. No. 23STCV19281)
v.
TRUCK INSURANCE
EXCHANGE,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Barbara Ann Meiers, Judge. Affirmed.
Pick & Boydston and Brian D. Boydston for Plaintiffs and
Appellants.
Horvitz & Levy, Mitchell C. Tilner, Steven S. Fleischman;
Gordon Rees Scully Mansukhani, Michelle R. Bernard, and
Steven R. Inouye for Defendant and Respondent.
__________________________
International Patients Network, Inc. (IPN) and May and
Tony Dow (collectively, plaintiffs) appeal from the grant of
summary judgment in favor of insurance company Truck
Insurance Exchange (Truck) on their causes of action for breach
of contract and breach of the implied covenant of good faith and
fair dealing. The trial court determined there was no triable
issue that Truck did not breach plaintiffs’ insurance policy by
refusing to pay for independent counsel for plaintiffs’ defense
against a third-party cross-complaint, pursuant to Civil Code
section 28601 and San Diego Federal Credit Union v. Cumis Ins.
Society, Inc. (1984) 162 Cal.App.3d 358 (Cumis). The court
determined Truck had a duty to defend plaintiffs because a
possibility existed the cross-complaint could have been amended
to allege claims and damages that the policy would cover.
However, the court determined the cross-complaint was never
amended to seek damages that would be covered by the policy,
and thus no actual conflict of interest ever arose that triggered a
duty by Truck to provide independent counsel for plaintiffs.
We agree that even if Truck owed a duty to defend
plaintiffs in this circumstance, it had a duty to provide
independent counsel only if there was an actual conflict of
interest. As a matter of law, under the terms of the policy and
based on the allegations of the cross-complaint, no such actual
conflict existed. It is undisputed the fraud and Labor Code
claims and damages alleged in the cross-complaint did not fall
within the policy’s coverage. Because there would be no coverage
under the policy regardless of whether the cross-complainant
prevailed on her claims, plaintiffs’ and Truck’s interests in
1 Undesignated statutory references are to the Civil Code.
2
defending against those claims were never in actual conflict.
Without an actual conflict of interest, Truck was not obligated to
provide plaintiffs with independent counsel and did not breach
the policy by failing to comply with that duty. The fact that
Truck reserved its rights on certain exclusions and limitations
under the policy did not create a conflict of interest when there
would be no coverage of the claims to begin with. Thus, we
affirm.
FACTUAL AND PROCEDURAL BACKGROUND
As alleged in the complaint, IPN “facilitat[es] complex
medical care in the United States for individuals located outside
the United States, including in the Middle East.” Tony Dow is
“an officer and principal of IPN,” and May Dow is a “principal of
IPN.”
The following material facts upon which Truck’s motion for
summary judgment was based and granted are undisputed:
A. The Policy
IPN, Tony, and May were identified as insureds in a
commercial insurance policy issued by Truck.
Under the policy’s general liability coverage, Truck agreed
to indemnify insureds for damages on claims for “bodily injury,”
“property damage,” and “personal and advertising injury” to
which the policy applied. The policy defined “bodily injury” as
“bodily injury, sickness or disease sustained by a person,
including death resulting from these at any time”; “property
damage” as “[p]hysical injury to tangible property, including all
resulting loss of use of that property” and “[l]oss of use of tangible
property that is not physically injured”; and “personal injury” and
3
“advertising injury” collectively as injury, including consequential
bodily injury, arising out of several specified offenses, including
“[f]alse arrest, detention or imprisonment.” The policy further
provided Truck with “the right and duty to defend the insured
against any ‘suit’ seeking those damages” and discretion to settle
any such suit.
B. IPN Sues a Third Party, Who Cross-complains
In January 2015, IPN sued its former employee Maissaa
Mousa to recoup an advance it had paid her (the collection
action).
In February 2015, Mousa filed a cross-complaint against
IPN and the Dows. In July, Mousa filed an amended cross-
complaint that alleged a cause of action against the Dows for
fraud (by intentional misrepresentation, concealment, and
making false promises without intent to perform) and a cause of
action against IPN for violation of Labor Code provisions
governing wages, overtime, and required breaks.
Mousa alleged the following facts: IPN offered her a job as
a caregiver and patient assistant in Lebanon at a monthly salary
of $1,730. Mousa would have the right to leave her employment
at any time, and IPN would pay her return airfare to an
unspecified destination. Mousa traveled to Lebanon to start
work. IPN had promised her a room in Tony Dow’s apartment,
but upon arriving, Tony gave her only a living room sofa to sleep
on.
Tony was nude at all times while in the apartment, he
wanted her to sleep in his bed, and he sexually and emotionally
harassed her throughout her stay in Lebanon. He treated Mousa
like a slave, had a bad temper, and threatened her with violence
if she disobeyed him. He also held her passport and would not
4
allow her to speak with her family, which caused her to feel like a
hostage. The harassment caused her depression and anxiety. In
addition, Mousa was forced to carry heavy objects, which caused
her to suffer joint and back pain.
IPN failed to pay Mousa the agreed monthly salary even
though she worked 16 hours a day, seven days a week, and was
“on call” at all other times. IPN and the Dows also reneged on
their promise to pay her expenses and provide her with health
insurance.
Despite Mousa’s allegations of sexual harassment, bodily
injury (caused by carrying heavy objects), and false
imprisonment, she did not plead a cause of action seeking
damages related to these alleged injuries. (Tony told Truck this
was because they were time-barred.)
After Mousa filed her amended cross-complaint, IPN and
the Dows retained an attorney to defend themselves.
In January 2016, IPN and Tony Dow filed a separate action
against Mousa for slander (the slander action), alleging she had
defamed them by repeating to other persons the allegations
contained in her cross-complaint in the collection action.
C. Truck Learns About Mousa’s Cross-complaint, Agrees To
Provide a Defense, and Appoints Counsel for Plaintiffs
In September 2016, Mousa’s counsel informed Truck about
Mousa’s cross-complaint against its insureds.2 After
2 The policy imposed a duty on plaintiffs to promptly notify
Truck of any claim or suit. The trial court noted in its summary
judgment order that Truck appeared to waive any argument that
plaintiffs failed to comply with this duty. Truck does not argue
otherwise on appeal.
5
investigating the matter, in December 2016, Truck sent a letter
to IPN agreeing to defend IPN against Mousa’s cross-complaint
subject to a reservation of rights. A month later, Truck sent
similar letters to the Dows.
In each letter, Truck acknowledged Mousa’s allegations
that she felt like a hostage and slave created a “potential for
coverage” under the policy’s definition of personal and
advertising injury if a false imprisonment offense arose out of
IPN’s business. Truck also acknowledged Mousa’s allegations
that she suffered joint and back pain from carrying heavy objects
created a “potential for coverage” under the policy’s definition of
bodily injury. However, Truck asserted Mousa’s existing causes
of action for fraud and Labor Code violations “do not meet the
insuring agreement of the policy and are not covered” because
they did not qualify under the policy’s definitions of bodily injury,
property damage, or personal and advertising injury.
Truck appointed three separate attorneys to represent IPN,
Tony, and May, respectively, against Mousa’s cross-complaint.
Truck informed IPN and the Dows they could engage their own
attorneys at their own expense and that the appointed counsel
would cooperate to the fullest extent possible with any selected
counsel. Truck emphasized that, regardless of whether plaintiffs
engaged their own counsel, it would defend the action, at its
expense, in accordance with the policy.
In February 2017, counsel retained by plaintiffs sent a
letter to Truck “object[ing] to” and expressing “serious concerns
with” Truck’s appointment of counsel to defend IPN and the
Dows against Mousa’s cross-complaint. Plaintiffs contended
Truck’s purported reservation of its right “to deny coverage for
intentional conduct” triggered their right to independent counsel
6
paid for by Truck. In response, Truck maintained it owed no
duty to provide independent counsel based on its denial of
coverage for the fraud and Labor Code claims in the cross-
complaint.
Throughout 2017, plaintiffs refused to allow appointed
counsel to formally undertake their representation. A
substitution of counsel form was filed making Truck’s appointed
counsel May’s counsel of record, but Tony later asserted the
substitution had not been authorized.
During the first half of 2018, plaintiffs continued to spurn
appointed counsel’s efforts to submit association of counsel forms
so the attorneys could appear as counsel of record. Tony justified
his refusal to permit appointed counsel to control the defense by
citing his concern that Truck might try to settle the cross-
complaint without requiring Mousa to retract her allegations, an
outcome plaintiffs considered unacceptable. Tony was also
dissatisfied with appointed counsel’s purported failure to provide
“case plans” to plaintiffs’ satisfaction.
In September 2017, February 2018, and March 2018, Truck
issued revised reservation of rights letters that reaffirmed Truck
would defend IPN and the Dows against Mousa’s cross-complaint
and clarified that Truck would not rely on certain policy
limitations and exclusions as coverage defenses.
In May 2018, the slander action went to trial, and the jury
returned a verdict for IPN and Tony. The judgment was affirmed
on appeal. Proceedings in the collection action were stayed until
the appellate decision became final in February 2021.
In April 2021, the court in the collection action dismissed
Mousa’s cross-complaint on the ground of collateral estoppel but
granted Mousa leave to amend. Mousa filed a second amended
7
cross-complaint that asserted a single cause of action for fraud.
The court sustained demurrers to that pleading without leave to
amend, and plaintiffs later prevailed on their claim against
Mousa. Plaintiffs thus incurred no liability to Mousa in the
collection action.
D. Plaintiffs Sue Truck for Failure To Pay for Independent
Counsel
In August 2023, plaintiffs filed their complaint in this case,
alleging causes of action against Truck for breach of contract and
breach of the implied covenant of good faith and fair dealing.
Plaintiffs alleged Truck was obligated to pay for plaintiffs’ chosen
counsel who had defended plaintiffs against Mousa’s cross-
complaint in the collection action, but Truck refused to pay.
Plaintiffs also alleged Truck’s appointed counsel failed to provide
an adequate defense, “badgered” plaintiffs to settle with Mousa
on unacceptable terms, and “failed to perform their duties,” all of
which left plaintiffs “with no choice but to continue to defend
themselves using their own money with their own lawyers.”
Plaintiffs sought damages of not less than $1.5 million, the
amount they claimed to have paid their own counsel to defend
against Mousa’s cross-complaint, plus punitive damages for their
bad faith cause of action.
In August 2024, Truck filed a motion for summary
judgment or, in the alternative, summary adjudication of the
separate causes of action and punitive damages claim. Truck
argued plaintiffs could not prevail on their breach of contract
cause of action because (1) Mousa’s claims for fraud and Labor
Code violations did not qualify as bodily injury, property damage,
or personal and advertising injury and thus were not covered
under the policy, and (2) despite allegations that could give rise
8
to potentially covered claims for sexual harassment, bodily
injury, and personal injury, Mousa had not pleaded causes of
actions seeking damages for such injuries. As a result, Truck
asserted it did not have a duty to defend plaintiffs against
Mousa’s cross-complaint, and even if it had a duty to defend, it
did not have a duty to provide independent counsel. Truck
argued plaintiffs’ inability to establish their breach of contract
cause of action was fatal to their bad faith cause of action and
punitive damages claim.
Plaintiffs opposed the motion. They did not dispute that
Mousa never pleaded a cause of action seeking damages covered
under the policy. Instead, they challenged Truck’s position that a
lack of covered claims in Mousa’s cross-complaint meant Truck
had no duty to defend or duty to provide independent counsel,
and they argued Truck’s reservation of rights to deny coverage for
intentional conduct and employment-related claims triggered a
conflict of interest giving rise to a right to independent counsel.
Plaintiffs pointed to internal communications reflecting Truck
employees’ opinions that Truck’s reservation of rights may have
created these particular conflicts and thus entitled plaintiffs to
independent counsel. For instance, a Truck representative wrote
an internal claim note stating, “[I]t appears that insured might
be entitled to cumis based on the reservation involving employee
v. [independent contractor].”
In reply, Truck asserted the possibility that Mousa might
amend her cross-complaint against IPN to add a covered claim
did not trigger a duty to defend or provide independent counsel,
and no actual conflict of interest ever arose. Truck argued its
reservation of rights to deny coverage for intentional conduct and
employment-related claims was not relevant because those
9
coverage limitations pertained only to claims falling within the
policy and Mousa had not sought damages on such a claim.
The trial court granted summary judgment, noting no party
claimed there remained a triable issue of material fact. The court
concluded that, contrary to Truck’s position, Truck had a duty to
defend plaintiffs because Mousa’s allegations created at least a
“potential for coverage.” But the court determined Truck had no
obligation to provide independent counsel and thus did not breach
its contract by failing to do so. The court explained independent
counsel is required only if appointed counsel faces an actual
conflict of interest and plaintiffs failed to establish such a conflict
existed.3 The court further explained Truck’s internal
communications did not establish a right to independent counsel,
nor was such a right created merely because Truck defended
plaintiffs under a reservation of rights.4 Finally, the court
concluded plaintiffs’ bad faith cause of action and punitive
3 Plaintiffs assert on appeal the trial court reached the
conclusion that there was no such conflict of interest sua sponte.
To the contrary, Truck argued in its summary judgment briefing
that its reservation of rights did not create an actual conflict
requiring independent counsel.
4 As a separate independent ground for granting Truck’s
motion, the court determined as a matter of law Truck
established plaintiffs materially breached the policy by failing to
comply with their contractual duty to cooperate with Truck’s
defense. The court determined there was no triable issue that
plaintiffs prevented Truck’s appointed counsel from associating
into the action and refused to cooperate with appointed counsel.
The court concluded this material breach precluded plaintiffs
from enforcing the contract and constituted a complete defense to
their claim that Truck breached its contractual duty to defend.
10
damage claim failed because Truck complied with its express
contractual duties.
The trial court entered judgment for Truck, and Plaintiffs
timely appealed.
DISCUSSION
A. Standard of Review
“ ‘A motion for summary judgment or summary
adjudication is properly granted only when “all the papers
submitted show that there is no triable issue as to any material
fact and that the moving party is entitled to a judgment as a
matter of law.” ’ ” (Campbell v. FPI Management, Inc. (2024)
98 Cal.App.5th 1151, 1161; see Code Civ. Proc., § 437c, subds. (c)
& (f); Regents of University of California v. Superior Court (2018)
4 Cal.5th 607, 618.) “ ‘We apply a de novo standard of review to
an order granting summary judgment when, on undisputed facts,
the order is based on the interpretation or application of the
terms of an insurance policy.’ ” (Powerine Oil Co., Inc. v. Superior
Court (2005) 37 Cal.4th 377, 390; accord, Terrell v. State Farm
General Ins. Co. (2019) 40 Cal.App.5th 497, 502.)
B. Applicable Law
A standard commercial general liability insurance policy
imposes two major duties on the insurer. (Certain Underwriters
at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945,
957.) First, the standard policy imposes a duty to indemnify the
insured for damages within coverage. (Ibid.) Second, it imposes
a duty to defend the insured in any suit seeking damages for
harm alleged within coverage. (Ibid.) The duty to defend is the
broader of the two duties. It applies to claims that are potentially
11
covered, based on facts alleged or otherwise disclosed, whereas
the duty to indemnify applies only to claims that ultimately are
actually covered. (Swanson v. State Farm General Ins. Co. (2013)
219 Cal.App.4th 1153, 1161-1162 (Swanson); see Blue Ridge Ins.
Co. v. Jacobsen (2001) 25 Cal.4th 489, 497 [“An insurer has the
right and broad duty to defend the insured against third party
claims potentially within the policy’s coverage.”].) Thus, “the
insurer must defend in some lawsuits where liability under the
policy ultimately fails to materialize.” (Montrose Chemical Corp.
v. Superior Court (1993) 6 Cal.4th 287, 299 (Montrose Chemical).)
An insurer may provide a defense for the insured while
reserving its right to later assert noncoverage defenses—that is,
it may provide a defense subject to a “reservation of rights.”
(Blue Ridge Ins. Co. v. Jacobsen, supra, 25 Cal.4th at p. 497.) If
the insurer adequately reserves its right to assert noncoverage
defenses later, it meets its obligation to furnish a defense but will
not be bound by a judgment against the insured for which no
coverage is provided under the policy. (Id. at pp. 497-498.)
“[T]he insurer has an incentive to reserve a broad spectrum of
coverage defenses in order to preserve its right to limit its
obligation to indemnify to covered claims.” (Swanson, supra,
219 Cal.App.4th at p. 1162.)
“When an insurer undertakes defense of its insured, an
attorney selected by the insurer provides dual representation to
the insured and the insurer. An insurer that owes ‘a duty to
defend an insured, arising because there exists a potential for
liability under the policy, “has the right to control defense and
settlement of the third party action against its insured, and is ...
a direct participant in the litigation.” [Citations.] The insurer
typically hires defense counsel who represents the interests of
12
both the insurer and the insured. [Citations.] In this “usual
tripartite relationship existing between insurer, insured and
counsel, there is a single, common interest shared among them.
Dual representation by counsel is beneficial since the shared goal
of minimizing or eliminating liability to a third party is the
same.” ’ ” (Swanson, supra, 219 Cal.App.4th at p. 1162; accord,
Simonyan v. Nationwide Ins. Co. of America (2022)
78 Cal.App.5th 889, 896 (Simonyan).)
If, however, the insurer’s reservation of rights creates a
conflict of interest between the insurer and its insured, the
benefits of dual representation give way, and the insurer must
provide the insured with independent counsel. (Swanson, supra,
219 Cal.App.4th at pp. 1162-1163; see Cumis, supra,
162 Cal.App.3d at pp. 364-365, 375.) “[I]n such cases, the
‘insurer may be subject to substantial temptation to shape its
defense so as to place the risk of loss entirely upon the insured’
[citation], and “[n]o matter how honest the intentions, counsel
cannot discharge inconsistent duties.’ ” (Centex Homes v. St. Paul
Fire & Marine Ins. Co. (2015) 237 Cal.App.4th 23, 31.) Because
this rule was first identified in Cumis, supra, such independent
counsel is often referred to as “Cumis counsel.” (See Hartford
Casualty Ins. Co. v. J.R. Marketing, L.L.C. (2015) 61 Cal.4th 988,
992 (Hartford Casualty); Nede Mgmt. Inc. v. Aspen American Ins.
Co. (2021) 68 Cal.App.5th 1121, 1133 (Nede Mgmt.).)
The Legislature codified (with clarifications) the Cumis
rule in 1987 by enacting section 2860. (Hartford Casualty, supra,
61 Cal.4th at p. 994, fn. 4; Simonyan, supra, 78 Cal.App.5th at
p. 896 [“ ‘section 2860 … “ ‘clarifies and limits’ ” the rights and
responsibilities of insurer and insured as set forth in Cumis’ ”].)
The statute provides that “[i]f the provisions of a policy of
13
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.” (§ 2860, subd. (a); see Nede Mgmt.,
supra, 68 Cal.App.5th at p. 1133 [“section 2860 creates a right for
an insured to obtain independent counsel at the insurer’s expense
whenever their competing interests create an ethical conflict for
the insurer-appointed counsel”].)
Section 2860, subdivision (b), states that a conflict of
interest “does not exist as to allegations or facts in the litigation
for which the insurer denies coverage.” Further, the right to
independent counsel “is not triggered simply because an insurer
defends under a reservation of rights.” (Hartford Casualty,
supra, 61 Cal.4th at p. 1003; see Gafcon, Inc. v. Ponsor &
Associates (2002) 98 Cal.App.4th 1388, 1421 [“a conflict of
interest does not arise every time the insurer proposes to provide
a defense under a reservation of rights”]; Blanchard v. State
Farm Fire & Casualty Co. (1991) 2 Cal.App.4th 345, 350 [“not
every reservation of rights creates a conflict of interest requiring
appointment of independent counsel”].) “It depends upon the
nature of the coverage issue, as it relates to the issues in the
underlying case.” (Blanchard, at p. 350.)
Section 2860, subdivision (b), provides that a disqualifying
conflict of interest “may exist” where “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.” (See Gafcon, Inc. v. Ponsor & Associates,
14
supra, 98 Cal.App.4th at p. 1421.) “ ‘ “It 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 sufficient to require independent counsel, to be chosen by
the insured, will arise.” ’ ” (Centex Homes v. St. Paul Fire &
Marine Ins. Co. (2018) 19 Cal.App.5th 789, 798; see McGee v.
Superior Court (1985) 176 Cal.App.3d 221, 226 [“The crucial fact
in Cumis … was that the insurer’s reservation of rights on the
ground of noncoverage was based on the nature of the insured’s
conduct, which as developed at trial would affect the
determination as to coverage.”].) 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.’ ” (Federal
Ins. Co. v. MBL, Inc. (2013) 219 Cal.App.4th 29, 42 (Federal Ins.
Co.); accord, Nede Mgmt., supra, 68 Cal.App.5th at p. 1133
[“ ‘California law is settled that “there is no entitlement to
independent counsel where the coverage issue is ‘ “independent
of, or extrinsic to, the issues in the underlying action” ’ ” ’ ”].)
While an insurer must provide a defense to its insured “if
the complaint might be amended to give rise to a liability that
would be covered under the policy” (Montrose Chemical, supra,
6 Cal.4th at p. 299), an insurer must provide independent counsel
only where there exists an actual conflict of interest, not merely a
theoretical or potential one (Swanson, supra, 219 Cal.App.4th at
p. 1164). To be disqualifying and trigger the duty to pay for
independent counsel, the conflict of interest must be
“ ‘ “significant, not merely theoretical, actual, not merely
potential.” ’ ” (Ibid.; accord, Centex Homes v. St. Paul Fire &
15
Marine Ins. Co., supra, 19 Cal.App.5th at p. 798.) “Alleging
‘anticipated circumstances’ that ‘have not occurred yet in the
underlying litigation’ is insufficient to state a claim that
independent counsel is required.” (Simonyan, supra,
19 Cal.App.5th at p. 898.)
C. Breach of Contract
Plaintiffs argue the trial court erred in granting Truck
summary judgment. They do not contend a triable issue of
material fact exists but instead assert the undisputed facts show
Truck breached the policy by failing to provide them with
independent counsel to defend against Mousa’s cross-complaint
in the collection action. Plaintiffs are incorrect.
Truck moved for summary judgment on the ground that
Mousa’s claims of fraud (as to the Dows) and Labor Code
violations (as to IPN) were not covered under the policy because
Mousa did not seek to recover damages for any bodily injury,
property damage, or personal and advertising injury. Truck thus
contended it did not have a duty to defend, much less a duty to
provide independent counsel. Plaintiffs did not dispute that
Mousa’s cross-complaint did not include a cause of action seeking
damages covered by the policy, but they argued Truck still had
duties to defend and to provide independent counsel.
Plaintiffs argue Truck had a duty both to defend them and
to provide them independent counsel based on a potential conflict
of interest that existed because the allegations of Mousa’s cross-
complaint left open the reasonable possibility that she could
amend her cross-complaint to add a covered claim. They assert
Mousa could have amended her cross-complaint to add claims
seeking recovery for injuries based on her allegations that
plaintiffs treated her like a hostage and slave and caused her to
16
suffer joint and back pain from being forced to carry heavy
objects. But even if (as the trial court found) Truck had a duty to
defend plaintiffs because Mousa may have been able to amend
her cross-complaint to allege a covered claim (Montrose Chemical,
supra, 6 Cal.4th at p. 299), Truck had a duty to provide
independent counsel only if an actual conflict of interest existed
(Swanson, supra, 219 Cal.App.4th at p. 1164). None existed.
While Truck agreed to defend plaintiffs against Mousa’s
cross-complaint because her allegations created a “potential for
coverage” for bodily injury and personal and advertising injury,
the claims Mousa actually alleged—fraud and Labor Code wage-
and-hour violations—qualified as neither and were not covered
under the policy. Under those circumstances, Truck had no duty
to provide plaintiffs with independent counsel because there was
no actual conflict of interest. Perhaps Mousa could have
amended her cross-complaint to add a covered claim based on the
allegations that gave rise to a potential for coverage. But until
she did so, there existed only a theoretical or potential conflict of
interest, which did not trigger Truck’s duty to provide
independent counsel.
Regardless of whether plaintiffs were found liable for
damages on Mousa’s fraud and Labor Code claims—the only two
claims in the cross-complaint—Truck was not obligated to
provide coverage under the policy. Therefore, Truck’s interest
was never in conflict with plaintiffs’, and a duty to provide
plaintiffs with independent counsel never arose. (Civ. Code,
§ 2860, subd. (b) [“a conflict of interest does not exist as to
allegations or facts in the litigation for which the insurer denies
coverage]; accord, Hartford Casualty, supra, 61 Cal.4th at
p. 1003; see also Long v. Century Indemnity Co. (2008)
17
163 Cal.App.4th 1460, 1471 [conflict between insured and insurer
exists only to the extent that “if liability is found, their interests
diverge in establishing the basis for that liability”].)
Plaintiffs make several arguments that Truck’s specific
reservations of rights created a conflict of interest. First, they
argue that a conflict existed because coverage would differ
depending on whether Mousa was found to be an employee or an
independent contractor and whether any damages arose from an
“occurrence” within the meaning of the policy. Truck reserved its
rights to deny coverage on these issues.5 Plaintiffs contend
appointed counsel were thus able to control coverage issues
because appointed counsel could seek to “ensure that the trier of
fact found that [Mousa] was [plaintiffs’] employee and not an
independent contractor” and engineer a finding there had been no
“occurrence” within the meaning of the policy.
However, these issues would become relevant only if Mousa
amended her cross-complaint to allege claims that could trigger
coverage under the policy. Because Mousa’s fraud and Labor
Code claims were not covered under the policy, applying these
coverage limitations to those claims would never be necessary. In
other words, the limitations were “ ‘ “ ‘ “independent of, or
5 The policy excluded coverage for (1) bodily injury to an
employee of the insured arising out of and in the course of
employment by the insured and (2) bodily injury and personal
injury arising out of the insured’s employment-related practices.
The policy defined “occurrence” as “an accident” and provided
coverage for “bodily injury” and “property damage” that “is
caused by an ‘occurrence’ that takes place in the ‘coverage
territory.’ ” In its initial reservation of rights letters, Truck cited
these exclusions and limitations in reserving its right to deny
coverage.
18
extrinsic to, the issues in the underlying action,” ’ ” ’ ” and Truck’s
reservation of rights to apply the limitations did not create a
conflict requiring independent counsel. (Nede Mgmt., supra,
68 Cal.App.5th at p. 1133; see Federal Ins. Co., supra,
219 Cal.App.4th at p. 42 [no conflict of interest where “ ‘the
reservation of rights is based on coverage disputes which have
nothing to do with the issues being litigated in the underlying
action’ ”]; McGee v. Superior Court, supra, 176 Cal.App.3d at
pp. 227-228 [no conflict of interest shown where reservation of
rights under policy exclusion “not founded on the possibility that
coverage will be determined or affected by the nature of [the
insured’s] conduct at trial”].)
Finally, we reject plaintiffs’ contention that Truck
employees’ internal communications constitute binding
admissions that Truck had a duty to provide independent
counsel. “It is well settled that the interpretation of an insurance
policy is a legal rather than a factual determination [citations].
Consistent therewith, it has been held that opinion evidence is
completely irrelevant to interpret an insurance contract.”
(Chatton v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th
846, 865.) “Without more, writings or memos by insurance
company personnel venturing their opinions as to whether a
defense should be afforded do not constitute ‘admissions’ of a
defense duty.” (Quan v. Truck Ins. Exchange (1998)
67 Cal.App.4th 583, 601-602.) Thus, as a matter of law, Truck
employees’ internal communications do not constitute evidence to
establish plaintiffs’ right to independent counsel. (See id. at
p. 602 [“The insureds in this case improperly seek to substitute
insurance company employee musings concerning the defense
duty decision for actual facts that might demonstrate the
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potential for covered liability. The fact that insurance company
employees may have questioned, in writing, whether denial of a
defense obligation was proper based on the facts cannot
demonstrate that those facts gave rise to potentially covered
liability. As a matter of law they did not.”].)
The duty to provide an insured with independent counsel
arises only where a disqualifying conflict of interest exists.
(§ 2860, subds. (a)-(b); Hartford Casualty, supra, 61 Cal.4th at
p. 1003; Swanson, supra, 219 Cal.App.4th at pp. 1163-1164;
Federal Ins. Co., supra, 219 Cal.App.4th at pp. 41-42.) In the
absence of such a conflict, Truck had no duty to provide plaintiffs
with independent counsel. Accordingly, it was entitled to
summary judgment on plaintiffs’ breach of contract claim.6
D. Breach of Implied Covenant of Good Faith and Fair Dealing
and Claim for Punitive Damages
Plaintiffs concede their cause of action for breach of the
implied covenant of good faith and fair dealing fails without a
viable breach of contract claim. “The covenant of good faith and
fair dealing ‘is implied as a supplement to the express contractual
covenants, to prevent a contracting party from engaging in
conduct that frustrates the other party’s rights to the benefits of
the agreement.’ [Citation.] Absent an underlying contractual
right, ‘the implied covenant has nothing upon which to act as a
6 Because we conclude Truck did not have a duty to provide
plaintiffs with independent counsel, we need not reach the
alternative ground for summary judgment that plaintiffs
breached the contract by refusing to allow appointed counsel to
participate in the defense and thus are precluded from pursuing
their own breach of contract claim.
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supplement, and “should not be endowed with an existence
independent of its contractual underpinnings.” ’ ” (Behnke v.
State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1469.)
As discussed, Truck was entitled to summary judgment on the
breach of contract cause of action because it did not breach the
insurance contract in refusing plaintiffs’ request for independent
counsel. “Because there was no breach of contract, there was no
breach of the implied covenant.” (Everett v. State Farm General
Ins. Co. (2008) 162 Cal.App.4th 649, 663; accord, Behnke, at
p. 1470.)
Finally, because summary judgment was properly granted
in Truck’s favor on the cause of action for bad faith, it follows
there is no basis for an award of punitive damages. (569 East
County Boulevard LLC v. Backcountry Against the Dump, Inc.
(2016) 6 Cal.App.5th 426, 429, fn. 3 [“there is no separate cause
of action for punitive damages”; rather, “a claim for punitive
damages is merely an additional remedy that is dependent on a
viable cause of action”].)
DISPOSITION
The judgment is affirmed. Truck is entitled to its costs on
appeal.
STONE, J.
We concur:
SEGAL, Acting P. J. FEUER, J.
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