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30 Apr 2014

City Can Have its Cake and Eat it, Too

by Admin
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Zhou v. Markham et al., 2014 ONSC 435

After a long, icy winter which has no doubt obliterated most municipal snow removal budgets, cities are overdue for some good news when it comes to slippery sidewalks. This decision may be that good news.

In March 2011, Mr. Jun Zhou allegedly slipped, fell and injured himself while walking on a sidewalk owned by the City of Markham (the "City"). The sidewalk cleaning was contracted out by the City to VTA Construction ("VTA"). The contract between the City and VTA required VTA to obtain a public liability and property damage insurance policy with no less than $5 million in coverage, which policy was to extend coverage to the City in the event of VTA's negligence. Both the City and VTA were eventually sued by Mr Zhou. VTA's insurer, Intact, refused to defend the City, arguing that it may have been the City's own negligence that gave rise to the claim. The City was required to call VTA out to clean whenever conditions required this work be done.

Following Intact's refusal, the City hired its own lawyer, filed a defence (also cross-claiming against VTA) and filed a Motion directing Intact to defend the City. The Motion Judge found that as Mr. Zhou's allegations against the City were identical to those against VTA (failing to take reasonable care to ensure the safety of the sidewalk), there was no doubt that as Intact was defending VTA it also had a duty under the policy to defend the City against Mr. Zhou's claim.

The Motions Judge further found that because of the insurer's delay in accepting its duty to defend the City, the parties were now in conflict (per the cross claim) and a single lawyer could not represent them both. The Motions Judge ordered Intact to pay the City's legal bills to date, and to cover the costs of the City's independent counsel on a go-forward basis. 

This case essentially entitles municipalities to a defence from its subcontractor's insurer when the municipality has outsourced snow and ice removal and is a named insured under the subcontractor's policy.  

Read the whole of Zhou v. Markham et al., 2014 ONSC 435 here.