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

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 legislation, quite than the policyholder’s favored California legislation, underscores the potential for alternative of legislation to have case-dispositive implications.

Background

New York Marine insured Amber Heard underneath a legal responsibility insurance coverage coverage which, like most legal responsibility insurance coverage insurance policies, included a broad responsibility 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 legislation agency of Cameron McEvoy PLLC. Upon receiving discover of the claims towards Heard, the insurer agreed to defend the claims underneath 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 impartial counsel. Heard ultimately employed her personal impartial counsel and Cameron McEvoy subsequently withdrew from the litigation. 

Heard insisted that New York Marine cowl the price of her impartial counsel as a result of a battle of curiosity arose when New York Marine reserved the fitting to disclaim protection based mostly on info which, if confirmed, would undermine Heard’s authorized protection. Heard based mostly her argument on the rule of California legislation that requires an insurer to supply impartial 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 impartial 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, sure 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 response to 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 subsequently 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 the next moral customary than in California. Regardless, the insurer’s reservation to exclude protection based mostly on info that may doubtless be adduced via the protection of the underlying litigation appear to recommend a transparent battle the place the policyholder’s counsel could develop the info that finally defeat protection. Second, though the Ninth Circuit’s determination 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 legislation ought to management the events’ respective duties underneath the insurance coverage coverage. But the court docket nonetheless determined the attraction within the face of conflicting jurisdictional outcomes. Even with out conducting a alternative of legislation evaluation, nonetheless, the choice illustrates the possibly outcome-determinative penalties choice-of-law can have on an insurance coverage protection dispute, even the place the dispute issues what’s in any other case thought-about a broad responsibility to defend.

Takeaways for Policyholders

The Ninth Circuit’s determination demonstrates the significance of understanding how software of 1 state’s legislation (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 partaking in a correct choice-of-law evaluation, which apparently didn’t happen right here. Certainly, realizing the place the insurance coverage coverage was issued and the place the allegedly injurious conduct occurred are among the many most essential elements when assessing which states’ legislation controls protection. Policyholders can be well-served, subsequently, to interact protection counsel to evaluate choice-of-law options and decide which variables would possibly most enormously impression end result.