Mass. Appeals Court holds that insurer must pay market rate to Cumis counsel

When an insurer defends a case under a reservation of rights, the insured has the option of choosing his or her own attorney (often called Cumis counsel after a California case) and having the insurer pay the reasonable charges of that attorney. What has been undetermined, until now, is whether the insurer is obligated to pay that attorney's usual hourly rate, or if it may pay the generally much lower rate it would pay to its usual insurance defense panel counsel.

In Northern Security Ins. Co., Inc. v. R.H. Realty Trust, 78 Mass. App. Ct. 691 (2011), the Appeals Court held that reasonable rates must be based on market rates rather than panel counsel rates.

The court also held that where an attorney agrees to accept a discounted rate from the insured, he or she cannot recover more than that rate from the insurer.

Thanks to Mike Tracy of Rudolph Friedmann LLP for bringing this case to my attention.