Massachusetts High Court Rejects Insured’s “Selective Tender”

April 14, 2016 | Insurance Coverage

The Supreme Judicial Court of Massachusetts has ruled, in response to a certified question from the U.S. Court of Appeals for the First Circuit, that, where two workers’ compensation insurance policies provided coverage for the same loss, an insured could not elect which of its insurers was to defend and indemnify the claim by intentionally tendering its defense to one insurer and not the other.  The insured could not foreclose the tendered insurer’s right to seek contribution from the other insurer.

The Case

An employee of Progression, Inc., was injured in an automobile accident while traveling abroad on a business trip. Progression had purchased two workers’ compensation policies from two different insurers.  One was purchased from the Insurance Company of the State of Pennsylvania (“ISOP”) and provided compulsory workers’ compensation coverage.  A second was purchased from Great Northern Insurance Company and provided workers’ compensation coverage for employees traveling outside the United States and Canada.

Both policies provided primary coverage; neither was an excess policy.

The employee gave timely notice of his injury to Progression and pursued a workers’ compensation claim before the Massachusetts Department of Industrial Accidents.

Progression gave notice of the claim only to ISOP; it did not notify Great Northern. ISOP immediately began making payments pursuant to the policy and defended the claim before the department.

ISOP later learned that Progression also had workers’ compensation coverage under its Great Northern policy and it sent a letter to Great Northern giving notice of the claim and requesting contribution.

Great Northern declined the “attempted tender,” informing ISOP that it had learned from Progression that Progression had intended to tender the claim only to ISOP and had not authorized ISOP to report or tender the claim to Great Northern.

ISOP filed a complaint against Great Northern in the U.S. District Court for the District of Massachusetts, seeking a judgment declaring that the doctrine of equitable contribution required Great Northern to pay one-half of the past and future defense costs and indemnity payments related to Progression’s claim.

The district court granted Great Northern’s motion for summary judgment and ISOP appealed to the First Circuit. The circuit court certified the equitable contribution question to Massachusetts’ top court.

The Massachusetts Court’s Decision

The Supreme Judicial Court of Massachusetts ruled that Progression, as the employer of the injured employee, could not prevent ISOP – which had paid the loss – from exercising its right of equitable contribution by intentionally giving notice of the injury only to ISOP and not to Great Northern.

The court refused Great Northern’s invitation to recognize a “selective tender” exception to the doctrine of equitable contribution that would provide that, if the insured chose not to tender a claim to an insurer, that insurer had no obligation to defend or indemnify that claim and, therefore, had no obligation to contribute towards the defense or indemnification. Such an exception, the court declared, was “incorrect with respect to workers’ compensation insurance under Massachusetts law.”

Instead, the court ruled, Great Northern’s obligation to defend and indemnify the claim had been triggered by the notice given to Progression by its injured employee, regardless of whether Progression had given notice of the injury to Great Northern. Therefore, the court held, as applied to workers’ compensation benefits, the language in Great Northern’s policy providing that its duty of coverage was contingent on Progression providing notice of the injury was “contrary to Massachusetts law, and null and void with respect to a Massachusetts employee.”

It should be noted that the court also stated that the “selective tender exception” did not accord with Massachusetts law “governing general liability insurance.”  Because the premise of the selective tender doctrine was that an insurer was not liable on a claim where the insured failed to give timely notice, the court concluded that adoption of the selective tender exception “would be in conflict with our statutory and case law governing liability insurance.”

The case is Insurance Co. of State of Pennsylvania v. Great Northern Ins. Co., 45 N.E.3d 1283 (Mass. 2016).

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  • Robert Tugander





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