CAUGHT IN THE MIDDLE: WHEN LIABILITY INSURANCE DEFENCE COUNSEL ENCOUNTER COVERAGE PROBLEMS
AbstractThis paper explores the ethical and legal difficulties encountered by insurance defence counsel when confronted with a coverage problem on a liability insurance policy. Ordinarily, where a claim is made against an individual insured by a liability insurance policy, defence counsel is hired by the insurance company to protect the common interest of the insurance company and the insured: namely, to reduce or avoid any liability finding against the insured. Frequently, however, while serving this role, defence counsel may become aware of potential problems with the policy: problems which may entitle the insurer to deny coverage to the insured. In this situation, should defence counsel favour the interest of the insurer in denying coverage or the interest of the insured in avoiding liability under the protection of the insurance policy? While this problem is encountered daily by lawyers across the country, to date the Canadian courts have provided little guidance for defence counsel caught between its obligations to the insurer and the insured. This paper attempts to offer solutions to this problem by identifying the common situations where this issue arises and by identifying and critically analysing the relevant Canadian case law to date.
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