Newsletter > July 2008
In this issue: 1. Firm News 2. Jurisdiction Clause Upheld 3. Waiver of Subrogation Enforced 4. Limits on Reasonable Foreseeability 5. Duty to Defend and Choice of Counsel
1. Firm News
- Rui Fernandes and Gordon Hearn have both been included in the 2007-2008 Best Lawyers In Canada listing in the area of Transportation Law.
- Kim Stoll will be speaking at the Canadian Transport Lawyers Association Annual meeting in Quebec City on September 26th, 2008. Gordon Hearn will be moderating the panel on which Kim is speaking titled “Getting to the Bottom of It: Official Investigations and Data Recorded Evidence”
2. River Rafting Regulations
In the recent Federal Court of Appeal decision in Mitsui O.S.K. Lines Ltd. v. Mazda Canada Inc. 2008 FCA 219, the Court had occasion to consider application of a jurisdiction clause in a bill of lading. We see a further watering down of s. 46 of the Marine Liability Act which allows a claimant to sue in Canada despite a jurisdiction clause requiring suit in another jurisdiction.
This civil action for damages arose out of the loss of 4,813 Mazda automobiles and 110 Isuzu trucks and salvage costs when THE COUGAR ACE, the ship carrying them from Japan to New Westminster, B.C., Tacoma, Washington and Port Hueneme, California, took on a severe list of 60 degrees on July 24, 2006 while engaged in a routine ballasting operation on the high seas. Mazda Canada Inc., eventually lost 1563 automobiles that it had purchased, and Mazda Motors of America Inc. (Mazda USA) lost the rest of the Mazda vehicles
The ship, owned by MOB Cougar (PTE) Ltd., and chartered to MITSUI O.S.K. Lines Ltd. (Mitsui), was eventually towed to Portland, Oregon where the damaged vehicles were unloaded, inspected and later scrapped.
Mazda Canada instituted the action in the Federal Court. Mitsui then sued in Japan, seeking a declaration of non-liability for the accident. It alleged that the loss was caused by an error of management of the ship which operates as a complete defence under the Hague-Visby Rules. It denied that the ship was not seaworthy and that the crew was not properly trained, as alleged by Mazda Canada in the Canadian action.
The bill of lading contained the following clause:
28. LAW AND JURISDICTION The contract evidenced by or contained in this Bill of Lading shall be governed by Japanese law except as may be otherwise provided for herein. Unless otherwise agreed, any action against the Carrier thereunder must be brought exclusively before the Tokyo District Court in Japan. Any action by the Carrier to enforce any provision of this Bill of Lading may be brought before any court of competent jurisdiction at the option of the Carrier.
The Federal Court of Appeal did recognize that the Marine Liability Act had changed the law in Canada with respect to jurisdiction clauses. It stated:
It is clear that subsection 46(1) of the Maritime Liability Act S.S. 2001, c.6 eclipses the former Canadian law in cases where parties by contract choose the jurisdiction in which the case will be tried. Such a clause in a contract of carriage is no longer controlling in Canada, but it may be considered as one of the factors to consider in deciding whether an allegation of forum non conveniens is made out ((OT Africa Line Ltd. v. Magic Sportswear Corp., 2006 FCA 284).
However, the Federal Court of Appeal further dilutes s. 46 by stating:
This provision in subsection 46(1) merely opens the door for Canadian plaintiffs, allowing an action to be instituted. However, the Court may still decline the jurisdiction on the basis of forum non conveniens. (OT Africa, supra). Section 46(1) applies here because the intended port of discharge of the vehicles was New Westminster, B.C. The Plaintiff may therefore institute proceedings here, but forum non conveniens arguments remain available to the Defendants.
The Federal Court of Appeal went on to find that the trial judge correctly understood these principles and sought to apply them, taking into account the established law governing the issue of forum non conveniens. The court listed the factors that a judge must take into consideration when deciding a forum:
a) the parties’ residence, and that of witnesses and experts b) the location of the material evidence; c) the place where the contract was negotiated and executed; d) the existence of proceedings pending between the parties in another jurisdiction; e) the location of the defendants’ assets; f) the applicable law; g) advantages conferred upon the plaintiff by its choice of forum, if any; h) the interests of justice; i) the interests of the parties; j) the need to have the judgment recognized in another jurisdiction.
The Federal Court of Appeal reiterated the law that to stay an action because of forum non conveniens in Canada, it must be established that another forum is clearly more appropriate.
The Federal Court of Appeal, however, found that the trial judge had erred, stating:
Having considered the analysis of the Trial Judge, I have concluded that his discretion was, in all the circumstances, not properly exercised and must be reversed. He made errors of law requiring this Court to reassess his reasoning. He undervalued some factors (a), d), f)) to which he should have given greater weight. He placed weight on some factors which he should not have placed weight on. Also, there are important new facts in relation to factor a) that arose following his decision so that he was unable to take them into account. In short, Japan, not Canada, is clearly the most appropriate forum for this litigation. …
The most significant factor that affects this Court’s decision is the ongoing proceedings between the parties in Japan, item d) on the list, which was largely ignored by the Trial Judge. First, an action has been launched by the appellant in Japan for a declaration of non-liability which includes as parties Mazda Canada, as well as Mazda U.S.A. That this action was started after the Canadian one, in my view, is not of any importance. Second, there is a civil action being pursued by Mazda U.S.A. in Japan for its losses, which has now been consolidated with the declaration proceeding.
The action in Canada was stayed. This is the second time the Federal Court of Appeal has bowed to proceedings being commenced in another court in foreign jurisdiction. If the first decision (OT Africa) was the opening wedge, this Mitsui decision is the big foot in the door. Leave to appeal to the Supreme Court of Canada is being sought.
Rui Fernandes3. Waiver of Subrogation Enforced
Federal Court Enforces “Waiver of Subrogation”: Timberwest Forest Corp. v. Pacific Link Ocean Services Corporation and others (2008 F.C. 801)
Timberwest Forest Corp. (“Timberwest”) sells logs to various customers from a British Columbia origin point. Timberwest entered into a contract with a California based customer, Harwood, for the supply of a shipment of logs, which was to travel loaded onto the deck of a barge pulled by a tug along the coast. By the terms of sale, Harwood was responsible for arranging and paying for the transportation. However, Timberwest retained title of the goods and risk over the same until they were delivered and paid for by Harwood. Thus, while the obligations concerning the appointment of a carrier made this look like an “FOB” contract, in substance, this was a “Delivered ex Ship” contract. This set up an interesting series of issues in this lawsuit.
As it had risk over the course of the voyage, Timberwest arranged for insurance over the logs. Largely as an incident of history, Timberwest obtained an insurance policy which contained a “waiver of subrogation” clause whereby its cargo insurer agreed that it would not commence subrogation against the carrier should misfortune fall on the shipment while enroute, for which the carrier might be liable.
In accordance with the above, Harwood contracted Pacific Link Ocean Services Corporation (“Pacific Link”) who had a tug and barge under charter to carry the logs. Pacific Link entered into a contract of carriage with Harwood, unaware of the fact that Timberwest had arranged insurance coverage over the cargo for the voyage featuring the above referred to “waiver of subrogation”.
While enroute, the logs, which were carried on deck (a necessity given that this was a barge movement), were swept off of the barge and were lost.
Litigation ensued, giving rise to a host of marine insurance issues. Pacific Link was named as a defendant, as the “contracting carrier”, as well as the owners of the tug and barge, the master of the tug and employees who were involved in the loading of the logs onto the barge. The litigation was commenced by St. Paul Insurance, in subrogation, that insurer having indemnified Timberwest for the loss. The major issues arising were as follows:
1. Could the waiver of subrogation apply in favour of Pacific Link, as the “carrier”, despite the fact that, as the plaintiff asserted, this being international carriage, that the Hague-Visby Rules governed? (It may be recalled that the Hague-Visby Rules provide, at Article III(8) that “any clause (in a contract of carriage) relieving or lessening the liability of the carrier or ship, other than provided by these Rules, is null and void and of no effect”. In essence, was the waiver of subrogation a “benefit of insurance clause” that should be treated as null and void?
2. How about the other defendants, in the owners of the tug and barge and the master and crewmembers who were involved? To the extent that Pacific Link, as carrier, could rely on the protection of the waiver of subrogation clause and be considered as “additional insured”, were these other entities likewise entitled to this protection as “third party beneficiaries” or additional insureds?
The subrogating insurer, suing in the name of the plaintiff Timberwest, wanted a recovery from the carrier or failing that (in the event that the waiver of subrogation clause applied) from the other named defendants. To this end, the plaintiff accepted that it was bound by the terms of the contract of carriage between Harwood and Pacific Link. (Case law has long had it that an “FOB Seller” who retains risk over goods during the course of the transportation is an undisclosed principal vis-à-vis the shipper/receiver of the goods who booked the carrier. In other words, it stands to reason that Harwood, acting as shipper, was acting as the agent for Timberwest as concerns the transportation of the product). Notwithstanding that Pacific Link had no knowledge of Timberwest’s involvement or interest in this shipment (let alone the existence of the insurance policy) Pacific Link was able to hold Timberwest to the terms of the contract of carriage and Timberwest conceded this.
However, Timberwest argued that the contract of carriage, being international in scope from a Canadian port, was governed by the Hague-Visby Rules and as a result of the aforementioned Article III(8), the waiver of subrogation clause was null and void and did not apply to the benefit of Pacific Link as carrier. There was a factual wrinkle: a bill of lading was not issued for the voyage; however, it was conceded by all parties that the voyage was to be “covered” by a bill of lading as it was contemplated that one would be issued. The carrier argued, in favour of the application of the waiver of subrogation, that the Hague-Visby Rules and Article III(8) were not “offended” because in fact the Rules did not apply to this shipment. (It should be recalled that the Hague-Visby Rules apply, as a compulsory matter of law, to shipments from Canadian ports, if covered by a bill of lading, unless the goods in question are live animals or the goods are cargo which is to be carried on deck with the fact of the “on-deck carriage” stated on the face of the bill of lading or contract of carriage). Thus, the interesting debate as to what the bill of lading, if issued, would have disclosed. If the bill of lading would not have disclosed the on-deck carriage then the Hague-Visby Rules would have applied potentially giving rise to the plaintiff’s argument that Article III(8), was “offended” or contravened by the waiver of subrogation clause.
In addition to arguing that the Hague-Visby Rules did not apply, the defendant asserted that a waiver of subrogation and insurance policy is different than a benefit of insurance provision incorporated into the contract of carriage. That is, there was nothing in the contract of carriage offending Article III(8) – the insurance policy being a separate document negotiated between Timberwest and its insurer. The defendant also asserted that the other named defendants, being either employees of Pacific Link or its subcontractors, were to get the benefit as being additional unnamed insureds under the subject cargo insurance policy on the basis that they were intended “third party beneficiaries” to same: Pacific Link, merely being a corporate entity, necessarily required the involvement of the other defendants to perform its contractual mandate which involvement (1) was foreseen and known to Timberwest and Harwood and (2) the functions performed by the defendants in fact fell squarely within their contemplated involvement in carrying out the contract of carriage. Thus, on the basis of established Canadian jurisprudence (London Drugs Ltd. v. Kuehne & Nagel International Ltd.  3 S.C.R. 299) the carrier argued that the remaining defendants were “third party beneficiaries” to take the benefit of the waiver of subrogation contained in the insurance policy.
The court held that the Hague-Visby Rules did not apply to the shipment, finding that the bill of lading, if issued, would have stated that the entire shipment was being carried on deck. Thus, the application of the Rules would have been exempted and there was therefore no concern that Article III(8) of the Hague-Visby Rules were offended. There was no reason not to enforce the waiver of subrogation clause in the insurance policy as it was clearly intended for the benefit of Pacific Link acting as carrier.
The court also ruled that the other remaining defendants were also unnamed third party beneficiaries or additional unnamed insureds on the basis of London Drugs and the later case law following same on the rationale that the actual performance of Pacific Links’ carriage mandate fell to these other defendants to be performed. Therefore, as the “carrier” was to be so protected, so too would be the carrier’s employees or subcontractors actually performing the carriage.
Accordingly, the court ruled that the waiver of subrogation clause applied in favour of all of the defendants as a result of which St. Paul Insurance could not subrogate for which it had indemnified Timberwest.
Gordon Hearn4. Limitation on “Reasonable Foreseeability”
The case of Donoghue v. Stevenson is often cited as one of the most important cases regarding the law of negligence as it created the neighbour principle and, thereby, extended the duty of care to apply to those parties who may not have had a direct relationship with the person who suffered harm. The case arose because a consumer found a snail in the bottom of a bottle of ginger beer, which the consumer had just consumed, and suffered harm as a result of the incident. The question the court had to determine was whether the manufacturer could be liable for any harm that befell the consumer as a result of consuming this contaminated ginger beer. The court found that one must not injure his/her neighbour and went on to define neighbour as being
…persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.
In the end, the court concluded that the manufacturer of a consumable good owes a duty of care to the ultimate consumer of that good.
It is only fitting that now when the court is looking to expand the reach of negligence once again that the case they are examining is based on remarkably similar facts.
Mustapha v. Culligan of Canada Ltd. arose after Mr. Mustapha and his wife discovered two dead and partially dismembered flies in a bottle of water. They had intended to place the water bottle on the dispenser to replace the empty one, but before they were able to do so, while cleaning the bottle off, they noticed the flies inside the bottle. It should be noted that Mr. Mustapha and his wife maintained a spotless home and had a phobia of germs. As a result of this incident, Mr. Mustapha alleged that Culligan’s negligence in failing to ensure that the water was not contaminated led him to suffer psychiatric harm.
The Supreme Court examined what a plaintiff is required to show to have a successful action in negligence. It stated that the plaintiff must demonstrate “(1) that the defendant owed him a duty of care; (2) that the defendant’s behaviour breached the standard of care; (3) that the plaintiff sustained damages; and (4) that the damages were caused, in fact and in law, by the defendant’s breach”.
The Supreme Court disposed of the first two steps rather swiftly. As stated above, Donoghue v. Stevenson clearly shows that a manufacturer owes a duty of care to a consumer. The court then stated that Culligan breached the standard of care because a manufacturer of a consumable product has an obligation to take reasonable care to ensure that the consumable product is not contaminated by foreign elements.
The third step was a question of fact and the trial judge at the spent three quarters of his lengthy judgment summarizing the testimonies of different expert witnesses to determine whether Mr. Mustapha indeed suffered psychiatric harm. The Court, accepting the testimony of the plaintiff’s experts, stated that the impact of the incident on Mr. Mustapha included, but was not limited to, an inability to shower, drink water and nightmares about the incident. The Supreme Court had no issue with the findings of the trial judge and stated:
On the findings of the trial judge, supported by medical evidence, Mr. Mustapha developed a major depressive disorder with associated phobia and anxiety. The psychiatric illness was debilitating and had significant impact on his life; it qualifies as a personal injury at law. It follows that Mr. Mustapha has established that he sustained damage.
The final question the Supreme Court examined was whether the plaintiff’s damages were caused by the defendant’s breach. Quite clearly, the trial judge found that the defendant’s breach of its duty of care caused the plaintiff’s psychiatric harm; however, the remaining question was whether the plaintiff suffered damages in law or whether the damages were too remote from the defendant’s breach to warrant recovery.
In reaching its conclusion, the Supreme Court provided the ordinary fortitude doctrine and stated that the plaintiff “must show that it was foreseeable that a person of ordinary fortitude would suffer serious injury from seeing the flies in the bottle of water he was about to install.” In this case, the Court concluded that Mr. Mustapha only showed what his own reactions were and he did not show how a person with ordinary fortitude would have reacted to the flies similarly. Therefore, it was not reasonably foreseeable for Culligan to know that its negligence would cause harm to the plaintiff because a person of an ordinary fortitude would not likely have suffered this harm (or at least the plaintiff did not show that a person of ordinary fortitude would suffer this harm).
In conclusion, the Supreme Court in Mustapha v. Culligan of Canada Ltd. put a limit on negligence by not limiting the scope of who is considered a neighbour, but by conceding that the harm suffered by the plaintiff must be reasonable in so far as that a person of an ordinary fortitude could be susceptible to the breach. This limitation allows the alleged wrongdoer a reasonable opportunity, prior to an incident, to know that its actions/inactions could cause harm to another person and to take measures to protect this person from harm. That said, the question remains, would Mr. Mustapha been awarded damages had he drank the water?
5. Insurer’s Duty to Defend and Choice of Counsel Revisited and Case Comment on Appin Realty Corp. Ltd v. Economical Mutual Insurance Co. 89 O.R. (3d) 654 (Ontario Court of Appeal February 12, 2008)
There are always attempts by parties and their counsel to push and extend the law, but the case needs the right facts and policy wordings. The Appin case reviewed below failed in both of its attempts.
DUTY TO DEFEND OVERVIEW
It has long been held that the “Pleadings Rule” principle applies when examining whether or not an insurer has a duty to defend claims against its insured. Traditionally (and tritely) the duty to defend is broader than the duty to indemnify and the two are examined independently. Nichols v. American Home Assurance Co. (1990) 1 S.C.R. 801 provided that a duty to defend was much broader than a duty to indemnify and that “the mere possibility that a claim within the policy might succeed suffices”.
The insurer’s duty to defend under any policy arises where the statement of claim “alleges” acts or omissions that are covered by that policy. However, the duty to indemnify only arises where such allegations are proven to fall within that coverage.
The basic rule is simply that if the claims that are alleged in the statement of claim would, if proven, fall within coverage then there is a duty to defend and the insurer must supply counsel. It may of course be determined that there none of those claim are actually proven and therefore there will be no indemnity.
This area though has received some clarification. The Ontario Court of Appeal in 1993 held in Jon Picken Ltd. v. Guardian Insurance Co. of Canada,  I.L.R. 1-2973, that the insurer cannot go outside the four corners of the pleadings to consider “underlying facts” when deciding whether it has a duty to defend even if such acts would have been excluded by the policy.
In 2000, the Supreme Court of Canada in Non-Marine Underwriters, Lloyds of London v. Scalera (2000), 185 D.L.R. (4th) 1, reviewed the Pleadings Rule.
The SCC determined that the court (and the insurer) can, in fact, look beyond the particular words used in the pleadings to determine the true meaning of the claim and held that the nature of the pleadings may be tested to consider whether the claims were properly pleaded. (In Scalera, the court held that there was no duty to defend a claim for negligent sexual battery as sexual battery could not be pleaded in negligence and such intentional acts were excluded under the policy.) An attempt by plaintiff’s counsel to be creative in a bald attempt to attach a deep pocket failed since a bare allegation may not be enough. The label put on the claim could be examined for its true nature and the examination of all allegations was granted legitimacy by the court to look behind the words to locate the substance of the allegations.
The SCC in Monenco Ltd. v. Commonwealth Insurance Co. 2001 SCC 49 allowed review of extrinsic evidence referred to in pleadings such as the joint venture agreement referred to in that set of pleadings. In Monenco, the insurer declined to provide a duty to defend where its insured provided architectural/engineering services to the claimant. The claim alleged that Monenco had done so that Monenco denied doing and referred to the joint venture agreement.
The SCC confirmed that a review of the “true nature” of the pleadings was permitted including the factual allegations cited in the pleading and whether such allegations could support such a claim or claims. Therefore, if exclusion applies on its face based on the pleadings, then there will be no duty to defend. In Monenco, the pleadings alleged that the services had been provided and the terms of the joint venture arrangement also attracted the exclusion.
And so the Scalera/ Monenco approach has continued to today.
It was recently reviewed again by Allen J. in Russell Metals Inc. v. Ball Construction Inc.  O.J. No. 4673(See case comment in our January 2008 newsletter).
Regarding the duty to defend, Justice Allen applied the test from Nichols v. American Home Assurance Co., supra and then went on to hold that the case at bar was not one in which to review extrinsic evidence to determine whether there was a duty to defend as had been permitted in Monenco because examination of evidence referred to the in the pleadings (including any review of associated reports in that regard) would require factual findings and included contentious issues. As Justice Iacobucci had stated in Monenco, “… we cannot advocate an approach that will cause the duty to defend application to become a “trial within a trial.” In that connection a court considering such an application may not look to “premature” evidence, that is, evidence which, if considered would require findings to be made before trial that would affect the underlying action.”
But where are we now? Well, where we were before.
Appin Realty Corp. Ltd v. Economical Mutual Insurance Co. 89 O.R. (3d) 654 (Ontario Court of Appeal February 12, 2008)
The Appin case required a review of the pleadings and also the insurance policy and included an attempt to change a fundamental principle.
The Appin case reviewed the obligation of an insurer’s duty to defend recently in a Judgment by Kershman J. in the Ontario Superior Court in August of 2007. Justice Kershman found that the insurer was required to defend the action on behalf of its insured to a claim brought by the plaintiff involving damages for bodily injury caused by bacteria and mould. The insurer had denied on the basis that its policy exclusions stated that there was no coverage for actual, “alleged” or threatened exposure to mould. (emphasis added). While claims regarding bacteria were covered, the insurer took the position that the claim for mould fell within the exclusion clause and that there was no duty to defend any claim, which included such allegation pursuant to its concurrent exclusion clause that stated:
This exclusion applies regardless of the cause of the loss or damage, other causes of injury, damage, expense or costs or whether other causes acted concurrently or in any sequence to produce injury, damage, expenses or costs.
The insurer appealed.
Counsel for the insurer on appeal submitted that the use of the word “alleged” in the exclusion 7(a) was to absolve the insurer of the duty to defend in any case where the bodily injury from mould was alleged regardless of whether it was combined with covered claim such as those related to bacteria.
This position alone is unusual given that coverage was afforded for claims involving injury from bacteria. In fact, the insurer agreed in submissions to the Ontario Court of Appeal that indemnity would be provided where there was a successful claim for damages arising out of such a covered peril, but submitted that a defence was not owed.
The insurer’s position was that the duty to defend in this case was narrower than the duty to indemnify. Surprising to say the very least.
Needless to say the Ontario Court of Appeal did not agree stating that the insurer would have to use clear and unambiguous language to convey such a departure from the long held principles in Nichols, supra, and also, it is submitted here, from Scalera and Monenco as well. The court stated on page 657 at paragraph 5:
We disagree with the insurer’s position. The language in 7(a) is both unclear and ambiguous in its effect. A plain reading of the provision does not support the insurer’s position. Indeed the clause is worded in such a fashion that would leave most people guessing as to its meaning. For example, on another possible interpretation, the clause could be taken to mean that wherever injury from mould is alleged in a claim even it if it ultimately establishes that the injury arouse solely from a covered peril such as bacteria, the claim would exclude both the duty to defend and the duty to indemnify and this would effectively extend the exclusion to otherwise non-excluded perils. (and at paragraph 6)
The insurer’s position stands on its head the general proposition that the duty to defend is broader than the duty to indemnify…If as the insurer submits, the clause is was meant to convey that the insurer’s duty to defend is narrower than its duty to indemnify, clear and unambiguous language was required. The language used falls well short of the mark.
Frankly, while acknowledging that the insurer could provide such language in its policy to require a narrower duty to defend, it seems difficult to envisage such language that would attempt to extend exclusions to non-excluded perils being employed by insurers in their policies and also ultimate success before the courts in this regard.
CHOICE OF COUNSEL OVERVIEW
There are a few situations where the insured will be permitted to select its counsel (typically when the insured is self insured for a significant layer) although most insurance policies provide the insurer with the right to choose counsel. This is only reasonable given that indemnity ultimately comes from the insurer. The courts will, however, interfere if there is an apprehension of bias. Any doubts as to potential conflict should be resolved in favour of the insured. (See New Brunswick Court of Appeal reasons in Morrison v. Cooperators 2004 NBCA 62 at paragraph 24):
In my opinion, the conflict in this matter lies in the position of the parties and potential conflict at the trial of this matter. The Applicant and the (insurer’s) respective interests do not necessarily coincide on all material aspects and in particular on the issue of liability. I am of the view that this presents at least the potential for conflict and any doubts in this regard should be resolved in favour of the insured: Laurencine v. Jardine (1988), 64 O.R. (2d) 336 (H.C.J.).
There is no absolute right to control the defence of an action. In situations where there are coverage issues in the middle of litigation, the insured must consent to the continuation of representation of the insured by the insurer-appointed counsel. Otherwise, counsel acting on the defence, at that time, must step down and cannot act for either the insured or the insurer given the appearance of conflict and impropriety. (See Brockton (Municipality) v Frank Cowan Co.,  O.J. No. 20 (C.A.))
Appin Realty Corp. Ltd v. Economical Mutual Insurance Co. 89 O.R. (3d) 654 (Ontario Court of Appeal February 12, 2008)
In Appin Realty Corp. Ltd v. Economical Mutual Insurance Co., supra, the Court of Appeal also dealt with the issue of whether the insured was required to accept the insurer’s choice of counsel after the battle over the duty to defend as indicated above. The insured was concerned that there would be an attempt by insurer’s choice of counsel to steer the evidence to a mould or “non-covered” peril. The insurer was concerned that insured’s choice would do likewise toward a covered peril and preferred independent counsel. The Court of Appeal found that the insured’s choice of counsel would continue given that counsel’s record and that he was aware of the challenge of ensuring a fair approach.
Insurers will lose this battle almost every time if there is any indication of potential bias that goes both ways. In this case, even with the reasonable approach of suggesting “independent” counsel, the insurer did not prevail.
One wonders just how much this determination to allow the insured’s counsel to continue arose out of an attempt to capsize the long held principles discussed above without clear and unambiguous language in the policy to support such a discombobulating argument.
Kim E. Stoll
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