Tageted Insurance Tender Lost Due To Delay
Illinois court holds that an Insured loses the right to elect a targeted tender after a delay of three years.
Camosy, Inc. was the general contractor on a construction project in American National Fire Ins. Co. v. National Union Fire Ins. Co. Of Pittsburgh, PA, 343 Ill.App.3d 93, 796 N.E.2d 1133, 277 Ill. Dec. 767 (2003). Camosy entered into a contract with a subcontractor which required the subcontractor to procure and maintain insurance coverage listing Camosy as an additional insured. The subcontractor obtained the insurance from National Union Fire Ins. Co. of Pittsburgh, PA (“National Union”). The subcontractor in turn sub-contracted part of the project to Area Erectors, Inc. who was insured with American National Fire Ins. Co. (“American National”). Camosy and the subcontractor qualified as additional insureds under the American National policy. During the construction project, an employee of Area Erectors, Inc. was injured on the job site. The employee filed suit against the general contractor alleging that he was injured as a result of Camosy’s violation of the structural work act, 740 ILCS 150/1 and Camosy’s negligence.
Various tenders were made pursuant to the decision in Institute of London v. Hartford Fire Ins. Co., 234 Ill.App.3d 70, 175 Ill.Dec. 297, 599 N.E.2d 1311 (1992) (allowing an insured to target one of several potential insurers for its defense and indemnification). Specifically, the general contractor, Camosy, tendered to the sub-subcontractor’s insurer, American National but did not tender directly to the subcontractor’s insurer, National Union.
Camosy filed a declaratory judgment action against the subcontractor and its insurer, National Union, seeking a determination that National Union owed a duty to defend and indemnify it with respect to the suit. Thereafter, the sub-subcontractor’s insurer, American National, settled the underlying litigation and filed an amended complaint on its behalf as well as the subrogee of Camosy alleging that National Union owed a duty to defend and indemnify Camosy or alternatively that it had a right to recover based on equitable contribution. Summary judgment motions were filed and the trial court found that Camosy tendered its defense and indemnification to the subcontractor’s insurer, American National but, at no time did Camosy make a direct tender to National Union prior to the filing of the declaratory judgment action. Although Camosy communicated several times with the subcontractor requesting status updates on its tender, Camosy failed to tender directly to the subcontractor’s insurer, National Union.
On appeal, the trial court held that pursuant to Institute of London and its progeny, Camosy and the subcontractor both held the right to select which insurer was to defend and indemnify the insured. Both held the right to tender the defense to either their primary insurer or the insurer under which they were an additional insured. Since Camosy was an additional insured under National Union’s policy and American National’s policy, it had the right to select either its own insurer, National Union or American National to defend and indemnify it in the underlying suit. The subcontractor, did not have the right to interfere with the selection. In addition, the subcontractor was not National Union’s agent and consequently it was Camosy’s responsibility to tender its defense directly to the insurer it wished to target. In the present case, the undisputed facts established that National Union did not receive any notice of the suit until Camosy filed a declaratory judgment action. At that point, due to the late notice, Camosy was precluded from electing a targeted tender to National Union for its defense.
The National Union policy contained a notice provision requiring that any insured must “immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or ‘suit.'” Camosy’s failure to immediately send copies of the demands or legal papers it received in connection with the underlying suit was a violation of the notice provision within the policy. Pursuant to Northern Ins. Co. of New York v. City of Chicago, 325 Ill.App.3d 1086, 259 Ill.Dec. 664, 759 N.E.2d 144 (2001) Camosy’s delay in providing notice of the suit relieved National Union of its obligation to provide a defense or indemnification for the underlying suit.
The decision in Institute of London has come under criticism from Justice Quinn in recent opinions including the present opinion. Justice Quinn offered a specially concurring opinion significantly criticizing the insured’s right to use a targeted tender. The present decision may signal the beginning of restrictions on the targeted tender rule. The court held that the targeted tender rule continues to exist but, has required the additional insured to satisfy a policy condition in order to obtain coverage.
