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Ninth Circuit Affirms Axing of Heard’s Indemnity Action
Opinion Says Counterclaims Alleging That Insurer Breached Duty to Defend Her in Defamation Action Initiated by Actor Johnny Depp Fail as Matter of Law
By a MetNews Staff Writer
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AMBER HEARD actor
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The Ninth U.S. Circuit Court of Appeals held yesterday that counterclaims by actor Amber Heard against an insurer asserting that the carrier breached its duty to defend her—in the highly publicized defamation action filed against her by her ex-husband, actor/musician Johnny Depp in 2019—when it declined to provide her with independent counsel after she claimed a conflict of interest, finding no such conflict existed.
At issue was whether the carrier, New York Marine and General Insurance Company, created a conflict of interest when it agreed to defend her in the Depp litigation under a California liability policy, subject to a general reservation of rights which stated that “to the extent California law does not permit an insurer to indemnify the insured, no indemnity can be provided.”
Pursuant to the 1984 decision by Div. One of the Fourth District Court of Appeal in San Diego Federal Credit Union v. Cumis Insurance Society Inc., an insurer is required, under California law, to pay for independent counsel—now known as Cumis counsel—for an insured when the carrier provides for representation but reserves its right to assert noncoverage at a later date, as the reservation creates a potential conflict of interest.
Under California law, the insurer-provided attorney has duties to both parties.
Underlying Litigation
Heard notified New York Marine of the lawsuit approximately six months after Depp filed a complaint asserting that an op-ed published in The Washington Post on Dec. 18, 2018, which Heard wrote and in which she identified herself as “a public figure representing domestic abuse,” contained defamatory statements. The action was filed in Virginia because The Washington Post’s Internet servers are located in that jurisdiction.
New York Marine agreed to allow the Virginia firm of Cameron McEvoy PLLC to continue to represent Heard in the matter. Heard, however, requested that the insurer appoint her new “independent” counsel under Cumis.
New York Marine denied her request.
Heard then retained her own “independent” counsel and Cameron McEvoy withdrew. Travelers Insurance Company—with which Heard had a homeowners’ policy purportedly covering damages due to allegations of defamation—stepped in and partially covered the costs of her new attorneys. In June 2022, a jury found that Heard acted with actual malice and found her liable.
Heard was ordered to pay Depp $10.35 million in damages but the parties agreed to settle the case for $1 million.
Travelers paid the entire amount of the settlement and New York Marine contends that it contributed $600,000 to Travelers for its share of the defense.
Insurance Litigation
New York Marine filed suit against Heard in July 2022, seeking a declaration that it had fulfilled its duty to defend her when it continued the appointment of Cameron McEvoy. The complaint cites Insurance Code §533 which provides that “[a]n insurer is not liable for a loss caused by the willful act of the insured” and asserts that the jury’s finding in the Depp litigation relieves it of any further obligations to Heard.
Heard counterclaimed, asserting that the company breached its duty to defend her by declining to appoint independent counsel and breached an implied covenant of good faith and fair dealing.
Senior District Court Judge George Wu of the Central District of California dismissed Heard’s counterclaims with prejudice. Wu acknowledged that the issues were complicated by the fact that the underlying litigation occurred in Virginia, and under Virginia law, unlike California’s view, an insurer-appointed defense counsel represents only the insured, not the insurer, and owes a duty of loyalty to the covered party.
Under those circumstances, he reasoned that the murky nature of the “choice/conflict-of-law questions did not matter” because there was no conflict of interest that could arguably give rise to a duty to appoint Cumis counsel. He wrote that “the whole point here is that NY Marine’s ‘interests’ did not ‘conflict’ with Heard’s and a ‘conflict [had not] arise[n]’ because Virginia counsel had no obligation to NY Marine while they were representing Heard.”
Wu found that the dismissal of Heard’s counterclaims rendered any declaratory relief moot.
The Ninth Circuit affirmed in a memorandum decision signed by Circuit Judge Roopali H. Desai, Senior Circuit Judge Andrew D. Hurwitz, and Second Circuit Judge Barrington D. Parker, sitting by designation.
No Breach
Hurwitz, Desai, and Parker wrote:
“New York Marine did not breach its duty to defend Heard. New York Marine agreed to ‘provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent.’ New York Marine fulfilled that duty by continuing the appointment of Cameron McEvoy.”
Unpersuaded by Heard’s contention that a conflict of interest arose because the insurer reserved the right to deny coverage if her conduct was willful or intentional, they said:
“There was no conflict of interest between New York Marine and Heard. Cameron McEvoy’s attorneys litigated the defamation case in Virginia, were members of the Virginia bar, and were bound by Virginia’s, and not California’s, ethics rules. Unlike California, Virginia’s ethics rules provide that a lawyer appointed by an insurer owes a duty only to the insured, not to the carrier.”
As a result, the panel reasoned:
“Potential disputes between an insurer and insured over indemnification therefore do not put Virginia lawyers in a conflicted position. New York Marine had no obligation to provide Heard with independent counsel, and thus did not breach its duty to defend her.”
Implied Covenant
Turning to Heard’s counterclaim for breach of implied covenant of good faith and fair dealing, they remarked:
“The district court did not err in dismissing Heard’s counterclaim for breach of an implied covenant of good faith and fair dealing. For Heard’s counterclaim to survive, she must have alleged facts that would establish that ‘(1) benefits due under the policy [were] withheld; and (2) the reason for withholding benefits [was] unreasonable or without proper cause.’ ”
The jurists pointed out in a footnote that “after dismissing her breach of contract counterclaim, the district court granted Heard leave to amend her bad faith claim, but she declined” and so reasoned that “her breach of the implied covenant claim rested entirely on her allegation that New York Marine failed to provide independent counsel.” Under these circumstances, they opined:
“New York Marine fulfilled its duty to defend under the Policy….Heard has therefore failed to plausibly allege facts establishing the withholding of a benefit due under the Policy. The district court thus correctly dismissed Heard’s breach of an implied covenant claim.”
They declared that “[b]ecause we affirm the dismissal of Heard’s counterclaims, we also affirm the district court’s dismissal of New York Marine’s declaratory judgment action as moot.”
The case is New York Marine and General Insurance Company v. Heard, 23-3399.
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