If there is a conflict of interest between an insurer and an insured, the insured may be entitled to counsel of his or her choice in defending an action commenced against him or her

An application by the Insured for an order declaring that the Insurer defend and indemnify him and that he be permitted to appoint counsel of his choice was allowed. The Court found that the issue of the Insurer’s duty to defend and indemnify was res judicata, having already been decided in favour of the Insured on a summary judgment motion. The Insured was also allowed his choice of independent counsel, to be paid for by the Insurer, on the basis that there was a conflict of interest between the Insured and Insurer.

Coakley v. Allstate Insurance Co. of Canada, [2009] O.J. No. 1832, May 5, 2009, Ontario Superior Court of Justice, T.P. Herman J.

The Insured brought an application for an order declaring that the Insurer had a duty to defend and indemnify him in a claim arising out of the Insured’s alleged assault or negligence. He also sought an order that, notwithstanding the Insurer’s duty to defend, he be permitted to continue with his own counsel and that the Insurer be required to pay the legal fees and disbursements. The Insurer denied its duty to defend or indemnify on the basis of an exclusion in the policy for intentional or criminal acts.

Prior to the application at bar, the Insurer had brought a motion for summary judgment in which the motions judge held that the Insurer had a duty to defend and indemnify the Insured. The Court therefore found that the issue was res judicata and, the summary judgment not having been appealed by the Insurer, refused to reconsider the matter.

With regard to the appointment of counsel, the court relied both on the Ontario Court of Appeal decision in Appin Realty Corp Ltd. v. Economical Mutual Insurance Co., (2008) O.R. (3d) 654 and Glassford v. TD Home and Auto Insurance Co., [2009] O.J. No. 1011. In both those cases the Insured was concerned that the Insurer might have an interest in steering the defence of the case to an outcome that would not be covered by the insurance policy. In both cases the Court concluded that there was a conflict between the Insurer and Insured because the coverage question depended on an aspect of the Insured’s own conduct that was the issue in the litigation. They were therefore permitted to appoint counsel of their choice and the Insurer was required to pay legal fees and disbursements.

Accordingly, the Court followed the decisions in Appin and Glassford and allowed the Insured’s application.

This case was originally summarized by Natasha D. Morley and originally edited by David W. Pilley.

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