2. “In the vast area of legal jurisprudence, there are undoubtedly many instances where being the first, or only, jurisdiction to grant rights to persons or entities may rightly be a source of pride. While it is still very early, the doctrine of ‘selective tender’ does not appear… to be one of those instances.”

4. “Our courts have chosen to protect the insured’s right to choose coverage for a claim with one insurer and knowingly forgo the coverage of another insurer… …despite the fact that ‘prejudice inescapably results’ from such a choice.”

5. Activating a Tender

6. London Underwriters – 1992 An insurance company’s knowledge of a claim does not constitute a “tender,” where the insured instructs the insurer not to participate in the lawsuit.

7. Cincinnati Companies – 1998  An insurer’s duty to defend is automatically triggered by actual knowledge of a claim.  If the claim has not been tendered by the insured, the insurer should then contact the insured to find out whether the insured wishes to have it assume the defense.  The insured may then accept the defense, or reject it (deactivate the tender).  If the insured rejects a defense by the insurer, the insurer is then relieved of its obligation to insured with regard to that claim.

8. Additional Insureds  If an insurance company has actual knowledge of a claim that has not been tendered by an additional insured, the insurance company should contact the additional insured to find out whether it wishes to have the insurer assume or participate in its defense.  If the additional insured instructs the insurer not to become involved in the lawsuit on its behalf, or if the insured is unresponsive or uncooperative, the is then relieved of its duty to defend with regard to that claim.

9. Actual Notice  Actual notice of a claim against an additional insured was provided when the insurance company’s own insured tendered its defense in a lawsuit in which the additional insured was also named…  …even though the additional insured did not tender its own defense to the insurance company

10. Bituminous Casualty – 1998  A general contractor is entitled to request exclusive coverage as an insured under its subcontractor’s insurance policy, and to knowingly forgo assistance from its own CGL carrier.  The general contractor’s CGL carrier was not obligated to contribute under its “other insurance clause,” since its policy was not triggered.

11. Who May Tender Defense  Coverage cannot be triggered by a tender from another insurance company.  Only the insured, or someone acting at the specific request of the insured, can properly tender and trigger a defense.

12. The John Burns Construction Case

13. The Targeted Tender Rule  The “targeted tender rule” (also referred to as the “selective tender rule”), allows an insured that is covered by multiple concurrent policies of insurance the right to select which insurer or insurers will defend and indemnify it regarding a specific claim.  John Burns Construction Co. v. Indiana Insurance Co. (2000)

14. Deactivating a Tender

15. Insured May Deactivate Targeted Tender…  An insured may “deactivate” coverage with an insurance company it had previously selected, and invoke exclusive coverage with another insurance carrier.

16. …Even After a Settlement…  In Richard Marker Associates, the insured itself settled the underlying lawsuit after both insurers denied its tender of defense.  After the declaratory judgment was resolved in the insured’s favor against one of the insurers, the insured withdrew its tender to the other insurer.

17. …and Notice May Be Given in the Settlement Agreement.  An insured’s statement in settlement agreement of its intention to deactivate coverage with a particular insurer may be sufficient even if manifested only in a settlement agreement.

18. Limits on Targeted Tenders

19. “Other Insurance” Provisions  Absent a policy provision limiting an insured’s right to select which insurer would be required to defend it, an “other insurance” provision does not in itself limit the insured’s right to tender its defense to one insurer alone.  That insurer is then foreclosed from seeking equitable contribution.

20. Horizontal Exhaustion of Coverage An insured must exhaust all available primary coverage before any excess insurance may be invoked.

21. Targeted Tender Rule Does Not Preempt Horizontal Exhaustion  Targeted tender may be applied to circumstances where concurrent primary coverage exists for additional insureds.  If defense and indemnity costs exceed the primary limits of the targeted insurer, the primary policies of deselected insurers must be exhausted before the insured may seek coverage under an excess policy.

22. Additional Insured Endorsements

23. Additional Insured Endorsement CG 2010 (1985 – 1993) “WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only respect to liability arising out of “your work” for that insured by or for you.”

24. Limit on Coverage  Only limit on coverage is “arising out of,” which requires only “but for” causation.  There is coverage if, but for the primary insured’s work, the additional insured would not be facing potential liability.  “Your work” defined in policy, can include occurrences both while work is ongoing and completed operations.

25. General Contractor’s Liability Where employee of subcontractor/named insured is injured during project, even though only going to or from job site, general contractor’s liability arises out of subcontractor’s work, even though subcontractor was not negligent.

26. “Arising Out of Your Work”  No requirement of negligence on the part of named insured.  Named insured’s work only needs to be a cause leading to occurrence.  Therefore, even a summary judgment in favor of the named insured does not necessarily preclude coverage for the additional insured.

27. Negligence of Additional Insured Under the “arising out of” language, additional insured may be covered even though sole cause of occurrence was additional insured’s own negligence.

28. No Coverage Where No Allegation of Vicarious Liability  Additional insured endorsement may exclude coverage for additional insured’s own negligence.  Where complaint contains no allegations of vicarious liability based on general contractor’s retained control over operative details of subcontractor’s work, no coverage for general contractor.

29. Additional Insured Endorsement CG 2010 (1993 – 2004) “Who Is An Insured is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of “your work” your ongoing operations performed for that named insured….”

30. Limits on Coverage  Nearly as broad as previous form because still uses “arising out of” language.  Use of term “your ongoing operations” apparently eliminates coverage for completed operations.

31. Limits on Coverage  Additional insured’s conduct may be contributing or concurrent cause, but there must be direct causal link to named insured’s “acts or omissions” to establish coverage for additional insured.  Does not require that alleged act or omission of named insured be negligent.  Even assigning employee to work in specific area could be enough to establish coverage.

32. General Contractor’s Negligence  Where complaint alleged direct negligence on part of general contractor, without reference to liability based on acts or omissions of plaintiff’s employer, there was no coverage for general contractor as additional insured under employer’s policy.  However, additional insured endorsement contained specific exclusion for liability resulting solely from acts or omissions of additional insured or its employees.

33. No Allegations of Vicarious Liability  Complaint contained no allegations of vicarious liability based on retained control over operative details of subcontractor’s work.  Additional insured endorsement excluded coverage for additional insured’s own negligence.  Therefore, there was no potential coverage for the general contractor.

34. Coverage of Additional Insured Limited  Under insurance policy at issue, coverage for additional insured was limited solely to liability of the additional insured resulting from conduct of the named insured.

35. Subcontractor Negligence Not Alleged  Subcontractor’s employee brought lawsuit against general contractor.  No coverage for general contractor as additional insured under subcontractor’s policy because negligence on part of subcontractor not alleged.

36. Additional Insured Endorsement CG 2010 (2004) “Section II – Who Is An Insured is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that named insured for “bodily injury”, “property damage” or “personal and advertising injury” caused in whole or in part by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of you ongoing operations for the additional insured(s) at the location(s) designated above.

37. Limits on Coverage  Clarifies that no coverage for occurrence caused solely by negligence of additional insured.  Additional insured covered if established, or complaint alleges, that occurrence caused wholly or partly by acts or omissions of named insured or those acting on its behalf.

39. 1.The insured may select a single concurrent insurance carrier to provide exclusive coverage for a loss.

40. 2.An insured may elect to decline an insurer’s participation in a claim.

41. 3.An insured may deactivate coverage with an insurer to whom a targeted tender was previously made, for the purpose of invoking exclusive coverage with another insurer.

42. 4.All primary coverage must be exhausted before an insured may seek coverage under an excess policy. However, the insured may then make a selective tender of its indemnity to concurrent excess insurance carriers

43. 5.Insurers may seek equitable contribution if an insured tenders its defense to multiple insurers that provide concurrent coverage for a loss.

44. 6.An insurer to whom an insured has made a targeted tender has the duty to defend and indemnify with respect to the loss, and it may not seek equitable contribution.

45. 7.An insurer that has been instructed by an insured not to involve itself in litigation is relieved of its obligations to the insured with respect to that loss.

46. 8.An insurer may discharge its duty to defend simply by contacting an insured to ask whether the insured desires its assistance with respect to a particular claim.

47. 9.An insured may deactivate a previous tender of its defense even after the underlying claim has been settled.

48. 10.An insured may tender its defense to a different insurer even after the underlying claim has been settled.

50. Step 1  Examine your policy:  Is there an initial grant of coverage under an additional insured endorsement?  Is there a written contract as required by any blanket additional insured endorsement?

51. Step 2  Examine the complaint:  Does the complaint allege liability on the part of the named insured (subcontractor)?  Does the complaint allege liability of the tendering party (i.e. general contractor) based on retained control?  Does the complaint allege negligence solely by the tendering party?

52. Step 3  Examine the policy exclusions:  Is coverage excluded for the sole negligence of the additional insured?  Does the policy exclude coverage for liability of the general contractor based on retained control?

53. Other Considerations  Briseno issues.  Kotecki waivers.  Is there an “insured contract?”

54. THE END