An insured is not entitled to independent counsel when there is no reason to conclude that an Insurer would admit damages in excess of the policy limits

The Application by an Insured for an Order requiring the Insurer to assume the cost of the appointment of independent counsel to represent the Insured in respect of risk of liability in excess of the policy limits was dismissed where there was no reason to conclude that the Insurer would admit any damages in excess of policy limits.

Theriault v. ING Insurance Co. of Canada, [2006] N.B.J. No. 521, New Brunswick Court of Queen’s Bench, P.S. Creaghan J., November 29, 2006

The Insured was sued for negligently operating a barbecue thereby causing fire damage to an apartment building. The Statement of Claim did not quantify any amount of damages claimed against the Insured. The Insurer argued that its duty to defend was operative only to the extent of policy limits and submitted that it had appointed competent counsel to represent both the Insured’s and its own interests in that regard. The Insured applied for an Order requiring the Insurer to assume the cost of the appointment of independent counsel to represent him in respect of the risk of liability in excess of his policy limits.

The Application was dismissed by the Court. The Court noted that the Insurer had accepted coverage and a responsibility to defend the Insured under the terms of the policy. Competent defence counsel had been appointed by the Insurer. At this point there was no reason to conclude that any liability would arise on the part of the Insured or that, if liability was shown, the Insurer would admit any damages in excess of the policy limits. The Court noted that should the Insurer find itself in the position where such a situation could arise, it must advise the Insured that the potential for conflict existed and that its interests could be at variance with those of the Insured. At that point, the Insured should be able to take control of the defence by retaining counsel or instructing counsel already retained, and from that point the cost of separate counsel representation should be borne by the Insurer.

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