Illinois law provides a business with a powerful tool to keep its insurance premiums down and decrease its loss history. But, it is extremely important to have capable counsel while navigating through the insurance coverage issues and targeting another company’s insurance policy.
1
Development of the Targeted Tender Rule
In 1992, the Appellate court of Illinois reached a decision that resulted in confusion, litigation and unexpected results ever since. An Insured that is potentially insured under two or more policies of insurance can select one insurer to respond to a claim and foreclose the selected insurer from seeking any recovery from other insurers. This arises most often in construction related settings where there is a general contractor with one or more subcontractors. The owner and general typically require the subcontractors to name the owner and general as additional insureds under the subcontractor’s general liability policy. The owner and general typically have their own liability policies. As a result, when a claim or suit arises, the owner and general are insured under their own policy as well as all other policies down the line. In Illinois, an insured can pick one or more policies to defend and indemnify it and foreclose any recovery by the selected insurer.
2
The Creation of a Right Not to Trigger an Insurance Policy.
The Court in Institute of London Underwriters v. Hartford Fire Ins. Co. held that where two policies of insurance potentially apply to a loss, an insured may elect which of the insurers is to defend and indemnify the claim by tendering its defense to one insurer and not the other. In Institute of London, a contractor hired an engineering company and was insured under the engineering company’s insurance with Institute of London Underwriters. The Contractor’s vice president elected to have the engineering firm and its insurer, Institute of London, pay for the indemnification and defense costs for that litigation.
3
Why A Targeted Tender is Permitted
The court in Institute of London found that the insured’s actions could not be called arbitrary, whimsical or vindictive. It further found as follows:
The contractor bargained with an engineering firm to be an additional insured under the engineering firm’s liability policy;
The contractor did not tender its defense to its own insurance carrier;
The contractor may well have feared that if the loss were attributed to its policy with its own carrier, the result may be a rise in premiums or cancellation of the policy;
It was the contractor’s intent that the engineering firm and/or its carrier should bear the loss.
4
How to Make A Targeted Tender
Based upon the Institute of London decision, an insured which is covered by more then one policy of insurance has the right to forego the assistance of one or more of the insurers. In order to tender to only one insurer, the insured must expressly state their intentions to the non-selected insurer and tender the matter to the selected insurer. The choice by the insured to tender to only one insurer will be upheld by the courts on the basis that there is no coverage under a policy which is not triggered.
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