In Gagnon c. Sinotte,1 a decision handed down by the Quebec Court of Appeal on August 13, 2009, the Court recognized the right of a liability insurer whose insured is the subject of a countersuit to appoint an attorney to take up the defence other than the attorney already representing the insured in the principal action.

THE FACTS

Through her attorney, the Plaintiff, Ariane Gagnon, brought an action in defamation for $200,000 against the Defendants Louise Sinotte and Jacques Turenne. The Defendants, through their attorney, filed a defence along with a counterclaim in the amount of $1,670,000 for damage to their reputation.

The Plaintiff/Cross-Defendant, Ariane Gagnon, contacted her liability insurer to defend her in this counterclaim. Her insurer agreed and appointed a separate lawyer from the one representing her in the principal action, on the understanding that the second lawyer’s mandate would be limited to the counterclaim. Thus, from that point on, the Plaintiff/Cross-Defendant had two lawyers representing her, the lawyer she had retained herself to represent her in the principal action and the lawyer appointed by her liability insurer.

The attorney for the Defendants/Cross-Plaintiffs, Sinotte and Turenne, objected to this dual representation. Invoking the principle that a party to a lawsuit can be represented by just one attorney for purposes of that lawsuit, the attorney submitted that Ariane Gagnon was entitled to only one lawyer, who should handle both the principal action and the counterclaim.

THE TRIAL JUDGMENT

The trial judge accepted the arguments of the Defendants/Cross-Plaintiffs and rejected the appearance filed by Ariane Gagnon’s insurer’s lawyer. Relying on the decision of the Court of Appeal in Nobert c. Lavoie,2 the trial judge noted that a party to a lawsuit had the right to only one attorney ad litem. Consequently, the Defendants/Cross-Plaintiffs were right to object to having to face two different opposing attorneys, one handling the principal action and the other the defence to the counterclaim.

The Nobert c. Lavoie decision was handed down almost twenty years ago. Nobert had brought a suit in damages against Lavoie, and had also applied for an injunction against him, claiming that Lavoie was responsible for contaminating his land. Lavoie’s liability insurers had taken up his defence, but in a limited manner, the lawyer appointed by them having filed a defence to the action in damages. Lavoie thus hired a second attorney to defend him against the application for an injunction, which attorney filed a second defence accompanied by a counterclaim. Nobert moved to have that defence and counterclaim dismissed on the grounds that Lavoie was not entitled to be represented by more than one lawyer. The Court of Appeal agreed with Nobert, based on the one attorney ad litem rule, but was careful to point out that the rule did not prevent a party from “hiring as many specialists and counsel as it liked” to assist its attorney ad litem.

In Cormier c. Industries Cover,3 a short decision handed down in 1997, the Court of Appeal ruled that counsel could examine witnesses and plead in a case, just like the attorney ad litem, as long as there was no duplication.

In 1998, a similar problem was once again submitted to the Court of Appeal in Ville de Fermont c. Pelletier.4 The Plaintiffs had brought a suit in damages against the Defendant Ville de Fermont as well as its liability insurer Lombard Canada Ltd. Since the amount of the suit exceeded the policy limit, Ville de Fermont had appointed a separate attorney from the one its liability insurer had appointed to defend it. Since two different attorneys had appeared in the case, the Plaintiffs Pelletier applied to have the second appearance rejected. While acknowledging that a party could be defended by only one attorney ad litem, the Court of Appeal also found that since the amount of the suit exceeded the policy limit, Ville de Fermont’s interests differed in part from those of its insurer and, therefore, it had the right to appoint its own lawyer for the part of the claim that exceeded the amount of its policy. The Court of Appeal thus reconciled the rights of the parties by authorizing Ville de Fermont’s attorney to file an amended appearance so as to limit its scope to the interests exclusive to Ville de Fermont, but did not specify how that appearance should be formulated. This decision was interpreted to mean that, in situations like this, it was possible to get around the obstacle to dual legal representation not by appointing a second attorney ad litem but by appointing counsel to assist the first attorney. However, the Court of Appeal noted that, so far as possible, the trial judge should take steps to ensure that the two lawyers will not be doing the same work.

Despite the one party, one lawyer rule having been relaxed somewhat in the years following Nobert c. Lavoie, the trial judge in Gagnon c. Sinotte saw fit to apply the rule strictly, rejecting the appearance filed by the attorney appointed by Ariane Gagnon’s insurer. The insurer appealed.

THE DECISION OF THE COURT OF APPEAL

On August 13, 2009, the Court of Appeal overturned the lower court judgment, recognizing the right of Ariane Gagnon’s insurer to appoint a full-fledged lawyer ad litem, separate from the one already acting for her in the principal action, to represent her interests in the counterclaim. The Court of Appeal began by pointing out that insurance law had unquestionably evolved since Nobert c. Lavoie was handed down in 1989. Recalling its landmark rulings of the 1990s concerning the insurer’s duty to defend and, to that end, its right to appoint the attorney of its choice, the Court went so far as to say that it doubted very much that the outcome of Nobert would have been the same had it been heard after those rulings. In short, the Court of Appeal concluded that the procedural dynamic specific to the relationship between an insurer and its insured made for “an undeniable exception to the one party, one lawyer rule as soon as the complexity of the case was such as to raise some issues that related to interests confined to one or other of them.” As a question of fact, the Court of Appeal was of the view that the debate raised by the principal action was clearly separate from the one raised by the counterclaim, thereby entitling the insurer “to appoint its own lawyer to defend the counterclaim without being limited to the lawyer chosen by the Plaintiff for the principal action.”

CONCLUSION

This recent decision of the Quebec Court of Appeal recognizes the right of an insurer called upon to defend an insured in a countersuit to appoint an attorney ad litem different from the one already representing the insured in the principal action. Prior to this decision, the one party, one lawyer rule could be circumvented only by appointing counsel to assist the attorney ad litem. Otherwise, the insurer and the insured had to agree, so far as possible, that the attorney appointed by the insurer would also deal with the aspects of the case that were not covered by the insurance policy, even if it meant splitting the attorney’s fees. These problems will no longer exist where it can be shown that the interests of the insured and the insurer do not line up completely.

The difficulties associated with applying the one party, one lawyer rule will of course have to be resolved on a case by case basis. It will not always be easy to determine whether the interests of the insurer and the insured are identical. Therefore, the problem of dual representation will in all likelihood continue to be debated. However, Gagnon c. Sinotte encourages litigators to show some flexibility in applying this rule.