Targeted Tender Doctrine should be Narrowly Applied to Type of Factual Situations for which Originally Intended
In Amco Ins. Co. v. Cincinnati Ins. Co., Kevin Smith (“Smith”) filed a complaint (“Smith lawsuit”) in the Circuit Court of Cook County against Hartz Construction Company (“Hartz”), Cimarron Construction Company Inc. (“Cimarron”), and Van Der Laan Brothers, Inc. (“Van Der Laan”). Smith sought damages for injuries he suffered while working on a construction site at Manchester Cove Subdivision in Mokena, Illinois. Smith was employed by Edward Allen Construction (“Edward Allen”), a subcontractor working on the project at the construction site. Hartz was the general contractor, Cimarron was the carpentry subcontractor, and Van Der Laan was the concrete subcontractor.
As a result of Smith’s injuries, multiple insurance policies were triggered. Cincinnati issued a general liability policy to Hartz (“Cincinnati policy”); Erie issued a general liability policy to Van Der Laan (“Erie policy”); and AMCO issued both a primary general liability policy (“AMCO policy”) and an umbrella policy (“AMCO umbrella policy”) to Cimarron. On May 7, 2008, Hartz, as an additional insured under the AMCO policy, tendered its defense of the Smith lawsuit to Cimarron. Hartz, as an additional insured under the AMCO policy, tendered its defense of the Smith lawsuit to Cimarron. AMCO accepted Hartz’s defense tender, subject to a reservation of rights. Hartz also tendered its defense of the Smith lawsuit to Erie, as an additional insured under the Erie policy. Erie also accepted Hartz’s defense tender, subject to a reservation of rights.
AMCO argued that even if Hartz’s target tender was upheld, AMCO should be allowed to pursue claims against Cincinnati. In support of its argument, AMCO points out that its settlement payment of $1,450,000 exceeded its policy limit of $1 million.
Cincinnati argued that the right to target an insurer should end with the resolution of the underlying claim. Cincinnati contends that AMCO’s position requires that an insured’s right to select and deselect insurers continued past the point where the claim is completely resolved and had been paid by the targeted insurer.
The court reviewed whether the targeted tender doctrine allows insurers to deselect themselves as targeted insurers following the settlement of the insured’s underlying lawsuit.
Under Illinois law, the targeted tender doctrine allows an insured covered by multiple insurance policies to select or target which insurer will defend and indemnify it with regard to a specific claim. Illinois courts have consistently held that an insured has a paramount right to choose or knowingly forego an insurer’s participation in a claim. When an insured designates one of the insurers to defend, the duty to defend falls solely on the selected insurer. That insurer may not, in turn, seek equitable contribution from the other insurers who were not designated by the insured. This rule is intended to protect the insured’s right to knowingly forego an insurer’s involvement.
The court found that the targeted tender doctrine cannot be interpreted in such a way. Illinois courts have made it clear that the targeted tender doctrine should be narrowly applied to the type of factual situations for which it was originally intended.
Amco Ins. Co. v. Cincinnati Ins. Co., 2014 IL App (1st) 122856.
