Larian hired an external dev because they wanted another Divinity game but knew they didn't have the manpower to make 2 games at the same time. A dev from Logic Artist said in last march that this is their game and Larian only helps with the story,
Polygon didn't understand that Larian never worked on this, the game was cancelled because Logic Artists couldn't work on Fallen Heroes any longer without upsetting their publisher for the new Expedition game. So Fallen Heroes cancellation only means that Larian loses some money though I doubt that this will affect the project that much.
