ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-412486-00B1
DATE: 20150817
BETWEEN:
RANJIT PABLA
Plaintiff
– and –
CARISSA BARBARA SINGH,
DENISE SINGH AND PHILLIP ADDO
Defendants
– and –
THE CORPORATION OF THE CITY OF MISSISSAUGA, THE REGIONAL MUNICIPALITY OF PEEL, and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AS REPRESENTED BY THE MINISTER OF TRANSPORTATION
Third Parties
– and –
JOE DAMIANI & SONS HAULAGE AND EXCAVATING INC., and LOMBARD GENERAL INSURANCE COMPANY OF CANADA
Fourth Parties
No one appearing for Plaintiff
No one appearing for Defendants
Shaneka Taylor, for The Regional Municipality of Peel
Steven Simpson, for Lombard General Insurance Company of Canada
HEARD: August 14, 2015
ENDORSEMENT
Diamond J.:
Overview
[1] The plaintiff has sued the defendants for damages arising out of multiple motor vehicle collisions which took place on December 16, 2008. It is alleged that the collisions occurred at the intersection of Derry Road and Mavis Road in the City of Mississauga, Ontario.
[2] The defendants Carrissa Barbara Singh and Denise Singh commenced Third Party proceedings against inter alia, The Regional Municipality of Peel (“Peel”) seeking contribution and indemnity for any amounts owing to the plaintiff. The Third Party claim alleges that Peel failed to maintain, plow, salt or treat the snow and ice on the subject roadway on the date of the collisions.
[3] Peel defended both the Third Party claim and the main action. On or about January 23, 2015, Peel commenced Fourth Party proceedings against Joe Damiani & Sons Haulage and Excavating Inc. (“Damiani”) and Lombard General Insurance Company of Canada (“Lombard”) for: (a) contribution and indemnity in respect of any judgment rendered against Peel in the Third Party proceedings, and (b) declaratory relief that Lombard is obliged to both defend Peel in the main action and Third Party claim, and indemnify Peel for any amounts found to be owing to the Defendants in the Third Party claim.
[4] The Fourth Party claim alleges that Damiani was contractually retained to carry out winter maintenance activities for the roadway, and that on the date in question Damiani failed to do so.
[5] Damiani purchased an insurance policy with Lombard naming Damiani as the insured and Peel as an additional insured.
[6] Peel now brings a motion seeking an order: (a) requiring Lombard to defend Peel pursuant to the terms of the insurance policy, and (b) entitling Peel to appoint and instruct counsel of its choice at the expense of Lombard in respect of defending the main action as well as the Third Party and Fourth Party proceedings.
Partial Settlement
[7] On the eve of motion, Peel and Lombard entered into Minutes of Settlement which resolved most of the issues to be argued. In summary, Lombard acknowledged its duty to defend Peel, agreed to pay Peel its defence costs of the proceedings (subject to a reapportionment of Peel’s defence costs based upon any finding of liability by the court), and agreed that Peel appoint Blaney McMurtry LLP (“Blaney”) as its defence counsel for the balance of the proceedings.
[8] Peel and Lombard further agreed to make best efforts to negotiate an amount to be paid towards Peel’s defence costs incurred to the date of the motion, and those efforts are ongoing. To the extent that a resolution cannot be achieved, the parties are at liberty to file further written submissions to my attention and I will determine the quantum of those costs.
[9] The sole issue argued before me at the return of Peel’s motion was whether Blaney is under an obligation to report to and/or seek instructions from Lombard during the lifespan of these proceedings. Peel took the position that due to the inherent conflict of interest between itself and Damiani, Peel’s interests would be significantly undermined and compromised if Blaney was to disclose, inter alia, strategic decisions or legal advice to Lombard who remains Damiani’s insurer in these proceedings. Lombard’s responding position is that no sufficient conflict of interest exists, and that reporting safeguards can be ordered by the court to address Peel’s concerns if necessary.
[10] The issues to be determined are therefore:
Is there a conflict of interest between Peel and Damiani?
If such a conflict of interest exists, must Blaney as counsel for Peel report to and seek instructions from Lombard?
Decision
[11] Having acknowledged its duty to defend Peel, Lombard would typically be entitled to take carriage of the defence of the Third Party proceedings and appoint counsel of its own choosing. However, as stated by the Court of Appeal for Ontario in Brockton (Municipality) v. Frank Cowan Co. (2002), 2002 7392 (ON CA), 57 O.R. (3d) 447 (C.A.), an insurer’s right to control the defense of an action is not absolute. The relevant jurisprudence discloses many instances of an insured being permitted to appoint counsel of its choice and conduct its own defence.
[12] Often, an insured expresses concern that its insurer may have an interest in steering the defence of the case towards an outcome that could be excluded by the terms of the insurance policy. In such circumstances, if a reasonable person would perceive this as a possible conflict of interest, the insured would likely be permitted to appoint its own counsel and conduct its own defence.
[13] Such duty to defend cases concern coverage issues. As held by Justice Brown (as he then was) in Glassford v. TD Home and Auto Insurance Co., 2009 10397 (ON SC), [2009] O.J. No. 1011 (S.C.J.), where a question of coverage depends upon an aspect of the insured’s own conduct, and that conduct is an issue in the underline litigation, a conflict of interest between the insurer and the insured exists and the insured will be permitted to appoint counsel of its choice, with the insurer required to reimburse the reasonable legal fees and disbursements.
[14] At this stage of the litigation, Lombard has not conceded that there is coverage for the losses claimed against Peel in the Third Party proceedings. The issue of coverage as between Peel and Damiani/Lombard remains a live one. As such, the question of whether Peel and/or Damiani will be indemnified under the insurance policy depends upon the determination and characterization of their respective actions in the litigation.
[15] Lombard relies upon the following paragraph in Brockton wherein the Court considered the comments of LeBel J.A. in Zurich of Canada v. Renaud & Jacob, [1996] J.R.Q. 2160 (C.A.):
“LeBel J.A. concluded that the potential intention which inheres in the relationship between the insurer and the insured and which is manifested by the reservation of rights by the insurer is not per se sufficient to require the insurer to surrender control of the defense. It would too quickly cost the insurer the right it contracted for. Rather, the focus must be on the mandate given by the insurer to the counsel it appoints to conduct the defense. Do the circumstances of the particular case create a reasonable apprehension of conflict of interest if that counsel were to act for both the insurer and the insured in defending the action? If the insurer puts counsel in a position of having conflicting mandates, it must surrender control of the defense to an insured who wishes to retain its own counsel paid for by the insurer.”
[16] I agree with Lombard that the presence of conflicting mandates in instructing counsel is a relevant consideration for the determination of the presence of a conflict of interest. However, in my view it is not the sole consideration. As stated above, the Court will often embark upon a characterization of the circumstances of the particular case, including a party’s conduct in the litigation, to determine whether an issue of coverage creates a risk of conflict of interest.
[17] Lombard further relies upon the decision of Justice Thorburn in PCL Constructors Canada Inc. v. Lumbermens Mutual Casualty Co. 2009 32915 (ON SC), 2009 CarswellOnt 3695 (S.C.J.). In that case, Justice Thorburn allowed a duty to defend application on terms which ordered the insurer to create and abide by various safeguards designed to provide meaningful protection and lessen the insurer’s concerns. Those safeguards included creating a “wall” between legal counsel and coverage counsel.
[18] In PCL Constructors, Justice Thorburn did not find the presence of a conflict of interest. Lombard submits that even if I do find the presence of a conflict of interest in this case, I should order similar safeguards to protect Peel’s interests.
[19] The facts before me are quite different. Not only is there a potential coverage issue, but unlike the decisions in Brockton and PCL Constructors, this is a situation where one insured (Peel) is suing the other insured (Damiani). The potential, and arguably real, conflict of interest transcends the issue of coverage; Peel is alleging that Damiani failed to honor the terms of its contract, while Damiani has defended those allegations and takes the position that any failure to maintain the roadway lies squarely with Peel. The litigation strategy to be employed by Peel in defending the Third Party claim and prosecuting the Fourth Party claim could, and likely will, run contrary to Damiani’s litigation strategy in defending the Fourth Party claim.
[20] With Lombard’s consent, it is Peel who is retaining Blaney and the sanctity of the solicitor/client relationship trumps Lombard’s desire to control, or be privy to, Peel’s defence. In an “insured versus insured” case, the confidential communications between one insured and its chosen counsel ought not to be shared with the adverse insured.
[21] I do not see the need, nor the desire, for Lombard to implement safeguards in the circumstances of this case. This is an exercise of my discretion, and there is appellate authority supporting the refusal to implement such proposed safeguards. (see: Appin Realty Corp. Ltd. v. Economical Mutual Insurance Co. (2008), 2008 ONCA 95, 89 O.R. (3d) 654 (C.A.).)
[22] I therefore find the presence of a conflict of interest, and order that Blaney (as newly appointed counsel for Peel) need not report to Lombard in this litigation. This decision does not preclude Lombard from bringing a motion in the future, on presumably new evidence, to revisit this issue.
[23] I was advised by counsel for both parties that the issue of costs of this motion had been resolved. Subject to the need to file further submissions as set out in paragraph 8, I make no order as to costs.
Diamond J.
Released: August 17, 2015
COURT FILE NO.: CV-10-412486-00B1
DATE: 20150817
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RANJIT PABLA
Plaintiff
– and –
CARISSA BARBARA SINGH,
DENISE SINGH AND PHILLIP ADDO
Defendants
– and –
THE CORPORATION OF THE CITY OF MISSISSAUGA, THE REGIONAL MUNICIPALITY OF PEEL, and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AS REPRESENTED BY THE MINISTER OF TRANSPORTATION
Third Parties
– and –
JOE DAMIANI & SONS HAULAGE AND EXCAVATING INC., and LOMBARD GENERAL INSURANCE COMPANY OF CANADA
Fourth Parties
ENDORSEMENT
Diamond J.
Released: August 17, 2015