Suppose a municipality (“the City”) rents a hockey rink at a community center to a local hockey club and minor hockey association for a minor league game. During this game, a young boy is injured by a stray hockey puck while watching from the stands. The young boy’s guardian then sues both the City and the national hockey association for the child’s broken jaw and associated pain and suffering.
Now imagine that the City is a named insured under a commercial general liability policy issued by ABC Underwriters. The City is also an additional insured under the national hockey association’s insurance policy with XYZ Insurance Company – but only for liability in respect of the national hockey association’s operations.
A dispute arises over whether both insurers have a duty to defend the claim brought against the City and whether XYZ Insurance Company has the right to participate in the defense by retaining or instructing counsel.
This story is based on a decision released last year by the Ontario Court of Appeal (1) and shows that an insurer is not absolved from the duty to defend simply because its policy is excess.
In this case, the ABC Underwriters policy contained an “other insurance” clause that provided it was excess if there was “any other insurance which would have attached if this insurance had not been effected”. The XYZ Insurance Company policy’s other insurance clause indicated it was primary.
The Ontario Court of Appeal found that ABC Underwriters had a concurrent duty to defend despite the policies’ other insurance provisions. This was because the City was an additional insured under XYZ Insurance Company’s policy only for liability in respect of the national hockey association’s operations. The court found allegations of liability against the City that were not in respect of the national hockey association’s operations (such as the failure to put a net around the rink). In other words, there was the possibility of a finding of liability not covered by XYZ Insurance Company’s policy but covered by ABC Underwriters’ policy. Therefore, both ABC Underwriters and XYZ Insurance Company had a duty to defend.
The Key Takeaway
Brokers should try and determine whether their clients are additional insureds under any other potentially responsive policies when a claim comes in and give notice to those other potentially liable insurers, even where the other policies are “excess.” When issuing certificates of insurance, brokers should make sure that the language on the certificate is consistent with the coverage provided to the additional insured under the policy.
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Special thanks to Joyce Tam of Thomas Gold Pettingill LLP for contributing to this article.