Rejection of Amber Heard Protection Protection Underscores Significance of Alternative of Regulation

The Ninth Circuit has affirmed victory for New York Marine and Normal Insurance coverage Co. in its authorized battle with Amber Heard over the price of defending defamation claims introduced towards the actress by ex-husband, Johnny Depp. New York Marine and Gen. Ins. Co. v. Heard, No. 23-3399 (ninth Cir. Nov. 25, 2024). The choice, premised on Virginia regulation, fairly than the policyholder’s favored California regulation, underscores the potential for selection of regulation to have case-dispositive implications.

Background

New York Marine insured Amber Heard beneath a legal responsibility insurance coverage coverage which, like most legal responsibility insurance coverage insurance policies, included a broad obligation to cowl the price of Heard’s authorized protection. Previous to notifying the New York Marine of the claims of defamation introduced towards her by ex-husband, Johnny Depp, Heard had retained the regulation agency of Cameron McEvoy PLLC. Upon receiving discover of the claims towards Heard, the insurer agreed to defend the claims beneath a reservation of rights. Heard continued to make use of Cameron McEvoy for her protection, however claimed that the reservation of rights created a battle of curiosity that required New York Marine to supply Heard with unbiased counsel. Heard ultimately employed her personal unbiased counsel and Cameron McEvoy subsequently withdrew from the litigation. 

Heard insisted that New York Marine cowl the price of her unbiased counsel as a result of a battle of curiosity arose when New York Marine reserved the fitting to disclaim protection based mostly on information which, if confirmed, would undermine Heard’s authorized protection. Heard based mostly her argument on the rule of California regulation that requires an insurer to supply unbiased counsel when the insurer’s reservation of rights creates a possible battle of curiosity with its insured. San Diego Navy Fed. Credit score Union v. Cumis Ins. Soc’y, 50 A.L.R. 4th 913 (Cal. App. 1984); Cal. Civ. Code § 2860.

The Ninth Circuit rejected Heard’s argument, discovering that regardless of the insurer’s reservation of rights, no battle of curiosity existed ample to warrant appointment of unbiased counsel. The court docket reasoned that as a result of the underlying protection in Depp v. Heard was litigated in Virginia, and since Heard’s counsel have been members of the Virginia bar and, thus, certain by Virginia’s guidelines of ethics, no battle of curiosity arose since, in Virginia, attorneys are ethically obligated to prioritize their shopper’s pursuits, which in keeping with the court docket eradicated any potential battle. Because the court docket defined:

In contrast to California, Virginia’s ethics guidelines present {that a} lawyer appointed by an insurer owes an obligation solely to the insured, to not the service. . . . Potential disputes between an insurer and insured over indemnification due to this fact don’t put Virginia attorneys in a conflicted place.

The court docket’s reasoning raises a number of points. First, whereas it’s unclear whether or not the court docket supposed to attract an moral dichotomy between California and Virginia, the choice means that attorneys in Virginia could also be held to a better moral normal than in California. Regardless, the insurer’s reservation to exclude protection based mostly on information that might seemingly be adduced by way of the protection of the underlying litigation appear to counsel a transparent battle the place the policyholder’s counsel might develop the information that in the end defeat protection. Second, though the Ninth Circuit’s resolution activates a distinction amongst two states’ guidelines {of professional} conduct, the court docket by no means engaged in a real choice-of-law evaluation to find out which states’ substantive regulation ought to management the events’ respective duties beneath the insurance coverage coverage. But the court docket however determined the attraction within the face of conflicting jurisdictional outcomes. Even with out conducting a selection of regulation evaluation, nevertheless, the choice illustrates the possibly outcome-determinative penalties choice-of-law can have on an insurance coverage protection dispute, even the place the dispute considerations what’s in any other case thought of a broad obligation to defend.

Takeaways for Policyholders

The Ninth Circuit’s resolution demonstrates the significance of understanding how utility of 1 state’s regulation (and moral guidelines) over one other can have an effect on the result of an insurance coverage protection dispute. The choice additionally illustrates the significance of participating in a correct choice-of-law evaluation, which apparently didn’t happen right here. Certainly, figuring out the place the insurance coverage coverage was issued and the place the allegedly injurious conduct occurred are among the many most necessary components when assessing which states’ regulation controls protection. Policyholders can be well-served, due to this fact, to interact protection counsel to evaluate choice-of-law alternate options and decide which variables may most vastly affect final result.