First Circuit Asks Massachusetts Top Court to Decide “Selective Tender” Issue

The U.S. Court of Appeals for the First Circuit has certified a question of Massachusetts law to the Supreme Judicial Court of Massachusetts in a case involving an insured with two insurance policies covering the same loss but where the insured tendered a claim to only one of the insurers.

The Case

An employee of Progression, Inc. allegedly was injured while on a business trip. The employee pursued a workers’ compensation claim before the Massachusetts Department of Industrial Accidents (“DIA”).

Progression had two insurance policies that covered work-related injuries: one with Insurance Company of the State of Pennsylvania (“ISOP”) and one with Great Northern Insurance Company. Progression, however, tendered the claim to ISOP only and Progression did not notify Great Northern.

ISOP made payments pursuant to the policy and defended the claim before the DIA.

After ISOP learned of Progression’s policy with Great Northern, it wrote Great Northern, notifying it of the claim against Progression and requesting contribution. Great Northern responded that it had contacted Progression after receiving notice from ISOP and learned that Progression purposefully had tendered the claim to ISOP only. Great Northern observed that ISOP was “legally obligated to handle [Progression’s] claim,” and that there was “no practical reason whatsoever for Great Northern to assume” handling the claim.

ISOP sued Great Northern and moved for summary judgment declaring that the Massachusetts doctrine of equitable contribution required Great Northern to pay half of the past and future defense costs and indemnity payments related to the claim.

For its part, Great Northern argued that it had no coverage obligation because Progression had chosen not to comply with its duty under the policy to notify Great Northern of the claim.

ISOP responded that Progression’s failure to notify Great Northern only should excuse Great Northern from its coverage obligation if the lack of notice had caused prejudice, and that Great Northern had not demonstrated prejudice.

The district court granted summary judgment to Great Northern, holding that Progression’s decision to selectively tender the claim to only ISOP defeated ISOP’s later action for equitable contribution from Great Northern.

ISOP appealed to the First Circuit.

The First Circuit’s Decision

The circuit court explained that the case presented a question of law and policy about which the Supreme Judicial Court of Massachusetts had not spoken. The First Circuit then certified the following question to that court:

Where two workers’ compensation insurance policies provide coverage for the same loss, may an insured elect which of its insurers is to defend and indemnify the claim by intentionally tendering its defense to that insurer and not the other and thereby foreclose the insurer to which tender is made from obtaining contribution from the insurer to which no tender is made?

The case is Insurance Co. of State of Penn. v. Great Northern Ins. Co., No. 14-1991 (1st Cir. May 29, 2015).