California courts strictly enforce an insurer’s duty to immediately commence defending its insured. The insurer’s delay in doing so, even if the delay is short, constitutes a breach of this important duty. In fact, California imposes a 40-day time limit for an insurer to provide its written coverage position under the Prompt, Fair and Equitable Settlement of Claims requirements stated in Title 10 of the California Code of Regulations at Section 2695.7.
A breach in this regard results in a waiver of any claimed right of the insurer to control the defense of its insured. This includes a waiver of the insurer’s ability to seek to impose any Civil Code Section 2860 rate limitations for independent counsel. See Travelers Indem. Co. of Connecticut v. Centex Homes, No. 11-CV-03638-SC, 2015 WL 5836947, at *5 (N.D. Cal. Oct. 7, 2015), objections overruled, No. 11-CV-03638-SC, 2015 WL 6164429 (N.D. Cal. Oct. 8, 2015). In Centex Homes, the Court found “that Travelers breached its duty to defend by failing to provide Centex with a defense at least 30 days after the complaints were filed in the [noticed] actions . . . [and therefore] Travelers also lost its right to control Centex’s defense.” Id.
In so ruling, the Centex Homes court relied on the California Court of Appeal and Supreme Court rulings in J.R. Marketing, L.L.C. v. Hartford Casualty Insurance Co. See 216 Cal. App. 4th 1444, 158 Cal. Rptr. 3d 41 (Ct. App.), review granted and opinion superseded sub nom. Hartford Cas. Ins. v. J.R. Mktg., 308 P.3d 860 (Cal. 2013), and aff’d in part, rev’d in part, 61 Cal. 4th 988. In J.R. Marketing, as explained by the court in Centex Homes:
The trial court found that section 2860’s protections were unavailable since the insurer had breached and continued to breach its defense obligations by failing to pay all reasonable and necessary...
