Case Summary: Reeb v. The Guarantee Company of North America
Defence + Indemnity
An insurer-appointed defence counsel will be in conflict of interest if the interests of the insurer and the insured are not in alignment, and in such cases the Court may appoint independent counsel (an amicus curae or Cumis counsel) to defend the insured at the insurer’s expense.
Reeb v. The Guarantee Company of North America, 2017 ONCA 771 per Sharpe, Lauwers and Roberts JJ.A. 
FACTS AND ISSUES
Two 14 year old boys (Reeb and Riley) were playing with pellet guns. Reeb shot Riley, who consequently lost an eye. The underlying action was against Reeb, his mother, and his father (who were separated at the time).
Reeb’s mother had homeowner’s insurance through Royal & Sunlife which had a third party liability limit of $1 million. Riley’s claim was for $1.5 million. The insurer appointed counsel to defend the claim under a reservation of rights while it investigated coverage.
Reeb’s counsel brought an application for a declaration that Reeb was insured under two additional policies of insurance issued by the respondents. The first was issued to his father, Tim Reeb, by The Guarantee Company of North America. The second was issued to Tim’s second wife, Theresa Curry-Reeb, by Co-operators General Insurance Company. The respondent insurers were represented by another law firm. The respondent insurers conceded that Ryan Reeb was insured under both policies but they asserted that the “intentional act” exclusion in both policies applied to exclude the injuries suffered by Riley.
The application judge dismissed the application based on the “intentional act” exclusion in both of the insurance policies issued by the respondent insurers, leading to the appeal. If the exclusion act applied Reeb would not have been entitled to coverage under the additional policies, and the exclusion clause would likely eliminate the primary coverage as well.
Before turning to the merits of the appeal, the Ontario Court of Appeal considered whether the insurer should have provided the boy with independent counsel due to the conflict of interest.
HELD: For the appellant; appeal allowed and new trial ordered.
1. Conflict of Interest:
a. The Court recognized that the insurer-appointed defence counsel had a conflict of interest in these circumstances because the interests of the insurer and those of the insured conflicted:
 When a lawyer is retained by an insurance company to represent its insured, a conflict of interest may arise where the interests of the insurance company and the insured are not in alignment. In her text, Understanding Lawyers’ Ethics in Canada, 2d ed. (Markham: LexisNexis Canada Inc., 2016), at para. 6.87, p. 272, Alice Woolley concisely frames the conflict of interest question in the context of the tension between the insurance company’s contractual rights and the insured’s interests to full and fair representation, as follows:
While courts have generally been deferential to the contractual rights of insurance companies in this respect, courts have also held that a lawyer “owes a duty to fully represent and protect the interest of the insured” and have required that the insured has obtained independent counsel where there is “a reasonable apprehension of conflict of interest on the part of counsel appointed by the insurer”.
2. Conflict of Interest Guidelines:
a. Referencing Hoang v. Vicentini 2015 ONCA 780 (CanLII), the court set out the following guidelines for considering whether the insurer needed to appoint independent counsel in these circumstances:
The balance is between the insured's right to a full and fair defence of the civil action against it and the insurer's right to control that defence because of its potential ultimate obligation to indemnify. In my view, that balance is appropriately struck by requiring that there be, in the circumstances of the particular case, a reasonable apprehension of conflict of interest on the part of counsel appointed by the insurer before the insured is entitled to independent counsel at the insurer's expense. The question is whether counsel's mandate from the insurer can reasonably be said to conflict with his mandate to defend the insured in the civil action. Until that point is reached, the insured's right to a defence and the insurer's right to control that defence can satisfactorily co-exist.
b. The Court stated that there was a “reasonable apprehension of a conflict” even if that did not exist. This prevented the Court from ruling on the merits of the appeal.
3. Amicus Curiae appointed.
a. The Court set aside the application judge’s decision and appointed an amicus curiae or independent counsel for Reeb to assist the Court in determining what should happen next:
Mr. Reeb ought to have had independent counsel who did not report to or take instructions from Royal & Sun Alliance to advise him on the advisability of bringing the underlying application in the face of a settlement offer, and representing him on this appeal. There is no way of knowing how things would have unfolded had Mr. Reeb been represented by independent counsel throughout, which impugns both the application and this appeal.
The Hoang case was briefed in the November 2015 edition of Defence + Indemnity. Often the independent counsel appointed by the Court for an insured is referred to as “Cumis counsel” after the leading American case in the area: San Diego Federal Credit Union v. Cumis, 208 Ca.Rptr 494 (Calif.C.A., 1984).