By Grace Delott
On November 25, 2024, the United States Court of Appeals for the Ninth Circuit addressed a coverage issue arising from the now infamous 2019 lawsuit in which actor Johnny Depp sued his ex-wife Amber Heard for defamation in Virginia state court. The defamation lawsuit was based on a Washington Post opinion editorial in which Heard claimed that Depp had domestically abused her. The coverage dispute, which arose from the defamation suit, concerned Heard’s entitlement to independent counsel.
In New York Marine and General Ins. Co. v. Heard, 2024 WL 4879471 (9th Cir., Nov. 25, 2024), the Ninth Circuit applied Virgina ethics rules to conclude that there was no conflict of interest between New York Marine and Heard. As such, New York Marine had no obligation to provide Heard with independent counsel.
Prior to the defamation litigation, New York Marine issued Heard an insurance policy which provided that New York Marine would defend Heard against lawsuits, including suits for defamation, and indemnify her up to $1,000,000. Before she notified her carrier of the defamation suit, Heard hired a Virginia defense firm. Six months after the suit was initiated, Heard tendered notice to New York Marine.
After receiving notice, New York Marine retained counsel in Virginia for Heard and issued a reservation of rights letter explaining that the insurance policy would not provide coverage if Heard’s conduct was shown to be “willful” and “intentional.” Heard argued that California law should apply (presumably where the policy was issued) and that under San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, 208 Cal. Rptr. 494 (Cal. App. 1984) and Cal. Civ. Code § 2860, New York Marine’s defense, under a reservation of rights, created a conflict of interest, which entitled her to independent counsel.
The Ninth Circuit rejected this and concluded that there was no conflict of interest between New York Marine and Heard. The attorneys retained by New York Marine to represent Heard in the defamation case in Virginia were members of the Virginia bar, and the defamation case was tried in a Virginia court. Under Virginia ethics rules, unlike California, a lawyer appointed by the insurer owes a duty only to the insured, not to the insurer. New York Marine, 2024 WL 4879471, at *2. “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.” Id.
This decision is significant in that the court applied the ethical rules of the state where the underlying action was pending, and not where the insurance policy was issued, to determine the law governing the insurer’s coverage obligations.
About Grace Delott
Grace Delott is an associate in Tressler's Insurance Practice Group in our Chicago office. Grace provides comprehensive coverage analysis and defense in disputes involving a wide range of policies, including commercial general liability coverage, professional liability coverage and reinsurance. Read Grace's full bio here.