Insurance law – Commercial general liability insurance – Duty to defend – Third parties
Markham (City) v. Intact Insurance Co.,  O.J. No. 2609, 2017 ONSC 3150, Ontario Superior Court of Justice, May 23, 2017, G.P. DiTomaso J.
Hasan Jalal allegedly slipped and fell on an icy and snowy sidewalk in the City of Markham on February 24, 2014. Mr. Jalal commenced an action against the City and VTA Construction Limited alleging the defendants failed to keep the sidewalk free of snow and ice.
At the material time, the City contracted out winter maintenance of its sidewalks to VTA Construction Limited. The contract required VTA Construction Limited to plow, sand and/or salt the sidewalks upon being requested to do so by the City within a specified timeframe. The City called out VTA Construction Limited to maintain the sidewalk every day from February 18 to 22, 2014. Mr. Jalal slipped and fell on the sidewalk on February 24, 2014.
VTA Construction Limited had a commercial general liability policy which included the City as an additional insured in respect of any liability arising out of the operations of the named insured.
The insurer denied the City’s request for a defence on the basis the City was not an additional insured for the purposes of Mr. Jalal’s action. The insurer took the position the City failed to ask VTA Construction Limited to maintain the sidewalk on the date of Mr. Jalal’s alleged fall. As no services were provided by VTA Construction Limited on that day, the insurer argued no claim could have arisen out of the insured’s operations on the day of the alleged fall.
The insurer’s argument was rejected by the Court. The City was an additional insured for the purposes of the claims made by Mr. Jalal. In addition, the insurer was required to defend the City because the injuries Mr. Jalal allegedly sustained as pleaded in the Statement of Claim arose as a direct result of the operations performed by VTA Construction Limited pursuant to its agreement with the City and Mr. Jalal’s allegations of negligence fell squarely within the coverage afforded by the policy.
The City sought an order entitling it to appoint and instruct counsel of its choice to defend the main action without reporting to the insurer, or taking instructions from the insurer, and at the insurer’s expense. The Court found there was a conflict of interest between the insurer’s defence of the allegations against VTA Construction Limited and the duty to defend owed to the City. The statement of defence filed on behalf of VTA Construction Limited attempted to shift liability to the City for not asking VTA Construction Limited to maintain the sidewalk on February 23 and 24, 2014. The Court found the conflict was best dealt with by the City continuing to retain independent counsel without having to report to the insurer or take instruction from the insurer. The insurer was also required to reimburse the City for costs incurred in defending itself prior to the insurer assuming its defence.
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