The case arises out of an incident in which the plaintiff fractured his jaw when a hockey puck flew in his face while watching a hockey game at the community center. The plaintiff claimed $ 150,000 in damages from the City, which owns and maintains the rink, and from Hockey Canada. A mis en cause involved certain tenant groups of the skating rink. The duty to defend issue arose because the Town was insured by both Lloyd’s, under a commercial liability insurance policy, and by AIG, as an additional insured to the policy. Hockey Canada insurance.
In Markham (City) v. AIG Insurance Company of Canada, 2019 ONSC 4977, the Ontario Superior Court of Justice ruled that AIG should defend itself against the action and should pay the defense costs, subject to subsequent indemnification from Lloyd’s, but should not participate in the defense by retaining or mandating a lawyer.
In Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239, Ontario Court of Appeal allowed AIG’s appeal, ruling that AIG and Lloyd’s had a duty to defend the action, should contribute to the costs of the pending defense and should share to equal parts of the defense costs, subject to a possible new distribution of costs once the case has been definitively resolved.
The appeals court ruled that AIG, like Lloyd’s, had the right to participate in the defense, including by retaining and employing counsel, provided certain steps were taken to protect the interests of all parties. The parties may, however, seek directions from the Superior Court if they disagree on the conduct of the defense. The appellate court then set aside the lower court’s costs order and awarded AIG $ 15,000 for appeal costs.
While AIG was the primary insurer for claims resulting in bodily injury or property damage up to the policy limit of $ 5 million, Lloyd’s also has a duty to defend the city against claims beyond the scope of the policy. AIG police and within the scope of its own police, the appeals court held.