Appellate court awards substantial indemnity costs in case arising from hockey puck injury

Plaintiff suffered broken jaw while at community centre

Appellate court awards substantial indemnity costs in case arising from hockey puck injury

The Ontario Court of Appeal has awarded AIG Insurance Company of Canada (AIG) costs on a substantial indemnity basis, fixed at $13,000 and inclusive of disbursements and taxes, in a duty-to-defend dispute arising from a personal injury case.

 In Markham (City) v. AIG Insurance Company of Canada, 2021 ONCA 546, which was a costs endorsement released on July 27, the appeal court noted that the motion filed by Lloyd’s Underwriters and by the City of Markham seeking reconsideration of the court’s decision to allow the appeal had no merit, would have likely failed and had led AIG to spend unnecessary expense to respond to the motion.

Last December, in Corporation of the City of Markham, et al. v. AIG Insurance Company of Canada, 2020 CanLII 94500 (SCC), the Supreme Court of Canada also dismissed the City’s and Lloyd’s application for leave to appeal from the Ontario Court of Appeal’s decision.

The case arose from an incident wherein the plaintiff sustained a broken jaw when a hockey puck flew onto his face while he was watching a hockey game at the community centre. The plaintiff sought $150,000 in damages from the City, which owns and maintains the hockey rink, and from Hockey Canada. A third-party claim brought certain groups renting the rink into the proceedings. The duty-to-defend issue arose because the City was insured both by Lloyd’s, under a commercial general liability policy, and by AIG, as an additional insured to Hockey Canada’s insurance policy.

In Markham (City) v. AIG Insurance Company of Canada, 2019 ONSC 4977, the Ontario Superior Court of Justice ruled that AIG should defend the action and should pay the defence costs, subject to later indemnification from Lloyd’s, but should not participate in the defence through retaining or instructing counsel.

In Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239, the Court of Appeal for Ontario allowed AIG’s appeal, ruling that both AIG and Lloyd’s had a duty to defend the action, should contribute to the ongoing defence costs and should equally share the defence costs, subject to a possible re-apportionment of the costs after the case has finally been resolved.

The appeal court found that AIG, like Lloyd’s, had a right to participate in the defence, including by retaining and instructing counsel, as long as certain steps were taken to ensure the protection of all the parties’ interests. The parties may, however, ask the Superior Court for directions if they disagree on the conduct of the defence. The appeal court then set aside the lower court’s costs order and awarded appeal costs of $15,000 to AIG.

While AIG was the primary insurer for claims resulting in bodily injury or property damage up to the $5 million policy limit, Lloyd’s also has a duty to defend the City against claims beyond the scope of AIG’s policy and within the scope of its own policy, the appeal court held.

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