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Addressing Conflicts in Defending Additional Insureds

In HMQ v. AIG Insurance, the Province of Ontario was sued in two actions arising from highway construction work.

AIG insured a construction company, Aecon. Ontario was an additional insured on the AIG policy.

AIG agreed to defend Ontario and to have Ontario’s own counsel represent Ontario. However, AIG insisted that counsel for Ontario report to and share privileged reports with AIG. 

Ontario argued that it should not have to report to or take instructions from AIG. Otherwise, there would be a conflict of interest on the basis of AIG having an interest in arguing that the plaintiff’s damages were caused by Ontario’s own independent act of negligence rather than by Aecon’s operations.

AIG stated that it had a “split file” protocol to address potential conflicts. Ontario’s information was kept separate and confidential from information received in defending Aecon.

Based on the systems set up by AIG, Justice Ferguson held that there was no conflict of interest. Therefore, Ontario’s counsel was required to report to and take instructions from AIG.

Justice Ferguson also rejected Ontario’s request to be reimbursed for pre-tender defence costs.