At this morning’s muffin meeting, Micah Pirk-O’Connell discussed an interesting decision on whether an additional insured is entitled to appoint counsel of its own choosing at the insurer’s expense.
In Markham (City) v. AIG Insurance Company of Canada, 2019 ONSC 4977, the plaintiff was struck by a hockey puck while watching a hockey game. The plaintiff sued the City of Markham and Hockey Canada.
The City entered into an ice rental contract with the Markham Waxers Hockey Club.
AIG issued an insurance policy covering the operations of Hockey Canada and other entities, including the Markham Waxers. The City was added to the policy as an additional insured.
Initially, AIG denied that it had a duty to defend the City, but it ultimately agreed. The City argued that it should be entitled to appoint its own counsel at AIG’s expense. Justice Casullo accepted the City’s position.
Although AIG stated that it would follow a “split file” protocol, AIG acknowledged that there was no way to monitor whether other claims handlers could access and review confidential documents. Moreover, there was no written policy regarding managing conflicts through the “split file” protocol.
In addition, the City and Hockey Canada had crossclaimed against each other.
Justice Casullo stated, “Ultimately, I am persuaded by the City’s argument that counsel’s mandate from AIG in respect of defending the Waxers can reasonably be seen to conflict with AIG’s mandate to defend the City.”.
Justice Casullo held that there was an irremediable conflict of interest. As a result, the City is entitled to appoint its own counsel at AIG’s expense. The City’s counsel is not required to report to or take instructions from AIG in the litigation.
Ankita Abraham addressed the case of Coseco v. Liberty, 2019 ONSC 4918, which involved an appeal of an arbitrator’s decision regarding a priority dispute between insurance companies.
The claimant resided in the State of New York. He was insured in New York by GMAC Insurance Company.
There was an automobile accident in Toronto. The claimant was a passenger in a vehicle insured by an Ontario insurer, Coseco. Liberty insured the spouse of the claimant in New York.
The claimant applied to Coseco for benefits. Coseco paid benefits and disputed priority. The arbitrator held that the American insurer, GMAC, was the priority insurer. This was upheld on appeal.
GMAC argued that the Ontario priority dispute scheme does not apply because it does not accord with the territorial limits on provincial jurisdiction.
Justice Nakatsuru rejected this argument, indicating that a prior Court of Appeal decision is binding.
GMAC had agreed to the terms of the Power of Attorney and Undertaking in regards to accidents in Ontario. An insurer who signs this undertaking is subject to the Ontario priority dispute scheme.