"[1] The name derives from the case of San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc., which the California Court of Appeal for the Fourth Appellate District decided on December 3, 1984.
The Supreme Court of California expressed its approval of the concept of independent counsel in an earlier 1964 case, which in turn was based upon a 1925 Kentucky case that laid the foundation for appointing independent counsel in the insurer-insured relationship.
If the insured does not give an informed consent to continued representation, counsel must cease to represent both.
[4]In 1987, the California State Legislature enacted a statute governing the right of insured defendants to independent counsel.
Under those earlier cases, it was held that if an insurer withdrew a defense after failing to reserve their rights, they could be (and were actually often held to be) liable for all damages suffered by the insured, including damages in excess of the policy's limits of coverage.