1. An insured has the right to selectively tender its defense to one or more concurrent insurers for a loss and decline an insurer's participation. 2. An insured may deactivate a previous tender to an insurer in order to invoke exclusive coverage with another insurer, even after a claim is settled. 3. All primary insurance must be exhausted before excess coverage applies, but the insured can then selectively tender the excess indemnity to concurrent excess insurers.

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.”

3. TARGETED TENDERS IN ILLINOIS

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. TARGETED TENDERS IN ILLINOIS
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 TARGETED TENDER RULE
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. TARGETED TENDERS IN ILLINOIS
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. TARGETED TENDERS
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. TARGETED TENDERS
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.

38. SUMMARY

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.

49. CLAIMS CONSIDERATIONS

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