Who does the lawyer appointed by my insurer actually represent in Ontario?

Even though your insurer selects the lawyer, pays their fees, and often directs the overall defence strategy, the lawyer's professional duty of loyalty runs to you, the named defendant client - not to the insurer. That lawyer is required to act in your best interests in defending the lawsuit, keep your communications confidential from the insurer where appropriate, and exercise independent professional judgment on your behalf, regardless of who is footing the bill.

In the ordinary case, where the insurer has accepted the claim without reservation, this arrangement works smoothly because your interests and the insurer's are aligned - both want the claim defended successfully and the exposure minimized. Problems arise when the insurer is defending under a reservation of rights and the coverage dispute overlaps with the facts being litigated, since the lawyer can end up in a position where information relevant to one issue creates tension with the other. In that situation, you may be entitled to independent counsel, chosen by you rather than the insurer, precisely because the ordinary arrangement's built-in loyalty can no longer be relied on to serve you alone.