In Ins. Co. of Penn. v. Great N. Ins. Co., __ F.3d __, 2015 WL 3440342 (1st Cir.), the First Circuit has certified to the Supreme Judicial Court of Massachusetts the question of whether, when an insured has two insurance policies that cover the same loss, the insured can opt to have one insurer cover the entire loss or if either insurer can insist that both share equitably in covering the loss.
In the underlying case, an employee of Progression, Inc. was injured while on a business trip. The employee pursued a worker's compensation claim. Progression had two insurance policies that covered work-related injuries, one with ISOP and one with Great Northern. It tendered its claim to ISOP only and did not notify Great Northern of the loss. ISOP defended and indemnified.
ISOP later learned of the Great Northern policy, notified it of the claim, and requested contribution. Great Northern informed ISOP that it had contacted Progression after receiving notice from ISOP and that Progression had purposefully tendered the claim only to ISOP. Great Northern asserted that ISOP was legally obligated to handle the claim and that there was no practical reason for Great Northern to assume its handling.
The First Circuit discussed the doctrine of equitable contribution, which allows a party to seek contribution from a co-obligor who shares the same liability as the party seeking contribution. The SJC has never addressed whether equitable contribution is available to seek a claim for contribution by one insurer against another.
The First Circuit noted that neither party disputes that the SJC would likely adopt equitable contribution in a case in which an insured looks to multiple, similarly-obligated insurers for payment. But the issue before the court was whether it should apply where the insured does not want one insurer to pay anything and has intentionally avoided giving the insurer notice of the claim.
It's important to note that the issue of selective tender comes up most frequently not, as in this case, with concurrent policies, but with consecutive policies in long tail losses. The doctrine of selective tender in long tail losses favors policy-holders, because it allows them to force a single insurer to pay the entire loss up to its limits regardless of whether there are periods during the loss when the insured had no coverage or insurers for those periods are no longer in business. In that context, selective tender would contradict the decision the SJC made five years ago in Boston Gas v. Century Indem. Co.
Thanks to Mike Tracy of The Law Office of Michael G. Tracy for bringing this case to my attention.