OUTCOME: Successful appeal addressing Duty to Defend
On October 17, 2003, a fire broke out at the County Building at 69 West Washington in the Chicago Loop. As a result of the fire, 22 lawsuits were filed by the injured people and surviving family member...s on behalf of the six people that died in the blaze. All claims were settled in one of the largest civil settlements ever in Cook County history; over $100 million.
In a modern day twist to David and Goliath, a small security company refused to accept its insurance company’s refusal to defend the company in the Loop Fire litigation. On December 19, 2008, after battling the insurance company’s wrongful denial of insurance for over four years, the Illinois Appellate Court ruled in favor of the security company, requiring Clarendon America Insurance Company to defend B.G.K. Security Services, Inc. for the claims raised against it in the Loop Fire litigation.
OUTCOME: Court found an effective selective tender
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. As the law currently stan...ds, 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. Illinois is unique in that, since 1992, it has allowed the insured to pick one or more policies to defend and indemnify the insured and foreclose any recovery by the selected insurer.
The Creation of a Right Not to Trigger an Insurance Policy.
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. Institute of London Underwriters v. Hartford Fire Ins. Co., 234 Ill. App.3d 70, 599 N.E.2d 1311, 175 Ill. Dec. 297 (1st Dist. 1992). In Institute of London, a contractor hired an engineering company to perform repairs on a dockwall. The contract required that the engineering firm secure insurance and list the contractor as an additional insured, which it did with Institute of London Underwriters. In addition, the contractor had its own policy of insurance with Hartford. When a tort action was filed against the contractor, the contractor tendered the action to the engineering firm for its defense and indemnification. The contractor also notified its own insurance carrier, Hartford, of the action. Following the court approval of a $75,000 settlement, the vice president of the contracting company told the attorney representing the contractor, as well as the contractor’s insurance carrier, Hartford, that Hartford should not contribute to the settlement in any way. Ill. App.3d. at 73. Further, the vice president told an adjuster for Hartford that it did not want the Hartford policy to respond to the settlement, but rather, the contractor elected to have the engineering firm and its insurer, Institute of London, pay for the indemnification and defense costs for that litigation. Id. While reviewing this issue, the court in Institute of London framed the issue as follows:
[W]here two insurance policies potentially apply to a loss, may an insured elect which of its insurers is to defend and indemnify the claim by tendering its defense to one insurer and not the other and thereby foreclose the settling insurer from obtaining contribution from the non-settling insurer? Id.
The trial court answered this issue in the affirmative and the Appellate Court of Illinois, First District affirmed this holding. Id. The court in Institute of London found that the insured’s actions could not be called arbitrary, whimsical or vindictive.
