Can an OC be liable for medical costs etc? Or would the building insurance cover it?
Depends on the insurance, but if the block permitted activities that the insurance didn’t cover, then yes, the scheme would be liable.
Could this be viewed as discriminatory or fraud against the minority?
Not really (and certainly not fraud on the minority, which is related to the sale of common property). The owners corp is entitled to control the use of common property and ensure that it is used safely for the purpose for which it was intended. So many kids are killed or injured on the driveways of private homes every year that you’re unlikely to get a sympathetic hearing at a tribunal.
It may be that noise is bugging your neighbours more than the fear of financial responsibility, but that’s the kind of argument that gets owners’ attention when it comes to a vote. You need to find an area where the kids can play safely and be left to be kids.