Court Opinion

ID: 9726315
Source: CourtListenerOpinion
Date Created: 2023-08-26 12:43:48.512843+00
Date Added: 2024-06-11T18:25:25.994558
License: Public Domain

JUSTICE QUINN, specially concurring. I concur with the holdings in this opinion. The uncontroverted fact that National received notice of the Gonzalez suit more than three years after the suit was filed relieved National of any duty to defend Camosy. I write separately to again express my concern with the “targeted tender rule” as promulgated by our supreme court in John Burns Construction Co. v. Indiana Insurance Co., 189 Ill. 2d 570, 727 N.E.2d 211 (2000). There, the court held that insureds have the right to select which concurrent primary insurers must respond to a particular suit or claim by making a targeted tender to those insurers. The targeted insurers have no right to seek contribution from the unselected insurers, even if those insurers have notice of the claim and even if the targeted insurers’ policies with the insured contain “other insurance” clauses. In the 3Va years since Burns was decided, it has only been cited twice by Illinois courts: Richard Marker Associates v. Pekin Insurance Co., 318 Ill. App. 3d 1137, 1141 (2001), and Chicago Hospital Risk Pooling Program v. Illinois State Medical Inter-Insurance Exchange, 325 Ill. App. 3d 970, 976, 758 N.E.2d 353 (2001). Consequently, the parameters of the targeted tender rule have not been spelled out. However, certain issues have been raised by legal commentators. In Chicago Hospital Risk Pooling, I wrote a concurrence in which I suggested: “[T]he amount and nature of the coverage provided should be determined by the language of the policy issued by the insurer to whom tender has been made. If that policy provides for equitable contribution from other insurers covering the same risk, that policy’s provision should control.” Chicago Hospital Risk Pooling, 325 Ill. App. 3d at 986 (Quinn, J., specially concurring). The targeted tender rule gives policyholders rights not afforded to them in the terms and conditions of the policy. These rights include the ability to target one policy over another to defend a claim or pay a loss. Insurers are unable to enforce the “other insurance” clause or to enforce provisions in the policy permitting them to seek equitable contribution from other insurers. In Constitutional Concerns Over the Exclusive Tender Rule in Illinois, 18 DuPage County Bar Association BRIEF (March 2003), author Richard Hodyl, Jr., posited that the targeted tender rule is violative of article I, section 10, of the United States Constitution, which provides that no state shall pass any bill or law that impairs the obligations of parties to contracts. He also argues that the rule similarly violates article I, section 16, of the Illinois Constitution: “§ 16. Ex Post Facto Laws and Impairing Contracts No ex post facto law, or law impairing the obligation of contracts or making an irrevocable grant of special privileges or immunities, shall be passed.” Ill. Const. 1970, art. I, § 16. Hodyl points out that our supreme court has long held that our state constitution provides a right to enter into private contracts without state interference: “[Any unilateral alteration of a private contract by an Illinois court] would deny to the parties to the contract the equal protection of the laws and abridge their privileges as citizens of the United States, and deprive them, without due process of law, of the liberty of making contracts outside the State in regard to their property.” Walker v. Lovitt, 250 Ill. 543, 549, 95 N.E.2d 631 (1911). In Excess-Primary Insurer Obligations and the Rights of the Insured, 69 Defense Counsel Journal, 315 (2002), Thomas M. Hamilton and Troy A. Stark, the authors, consider, among other issues, the potential impact the targeted tender rule may have on the relationship between primary and excess insurers. The authors first explain the concepts of horizontal and vertical exhaustion. Horizontal exhaustion “typically involves an insured who has multiple primary and excess policies covering the same risk. If a covered claim occurs, the theory of horizontal exhaustion holds that the insured must exhaust all available primary policy limits before invoking excess coverage. In contrast, vertical exhaustion allows an insured to seek coverage from an excess insurer as long as the insurance policies immediately beneath that excess policy, as identified in the excess policy’s declaration page, have been exhausted, regardless of whether other primary insurance may apply.” 69 Def. Couns. J. at 320. In United States Gypsum Co. v. Admiral Insurance Co., 268 Ill. App. 3d 598, 643 N.E.2d 1226, 1261 (1994), the court rejected the argument that “vertical exhaustion” applied to Gypsum’s request for its excess insurance carriers to cover asbestos claims. The court said “A plain reading of the ‘other insurance’ provision contained in the policies requires Gypsum to exhaust all triggered primary insurance before pursuing coverage under those excess policies.” Gypsum, 268 Ill. App. 3d at 654. The court explained that if Gypsum could pursue coverage from certain excess insurers at the exclusion of others, this would blur the distinction between primary and excess insurance. Hamilton and Stark write: “The question remains whether an insured’s use of target tenders can be used to circumvent the doctrine of horizontal exhaustion by requiring excess carriers to pay when certain ‘deselected’ primary insurers have still not paid. On that note, if John Burns is taken to its logical conclusion, it seems possible for an insured to deselect all of its primary insurers and tender only to its excess insurers. The decision could be extended in this manner based on language in Alcan and John Burns that suggests the insured has a ‘paramount right’ to select which insurers should participate in the defense and indemnity of a claim or suit. Doing so, however, seems to upset the distinction between primary and excess insurers, which the Gypsum court sought to preserve.” 69 Def. Couns. J. at 324. Hamilton and Stark propound two suggestions as to how courts could analyze the targeted tender rule in a manner that would be consistent with both the theory of horizontal exhaustion and the established relationship between primary and excess insurers: “The tension between horizontal exhaustion and targeted tender can be addressed by limiting the right of the insured to engage in targeted tenders to only those situations where the insured is named as an additional insured under a concurrent primary policy. This would confine the doctrine to situations where the facts are similar to those in John Burns. Thus, in cases where consecutive, rather than concurrent, policies and excess policies are all triggered by the same loss, the insured will have no right to engage in a targeted tender, and there will be no duties between primary and excess carriers, except those arising through contract or equitable subrogation. These solutions essentially will result in a harmonization of horizontal exhaustion and targeted tender by creating an either/or relationship between the rights guaranteed by each theory. An insured will have two options: it can either (1) exhaust all primary policies in order to have access to its excess insurance, or (2) engage in a targeted tender and deselect certain insurers, thereby foregoing its excess insurance coverage. This limitation will preserve the two theories by preventing current underwriting practices — that premiums charged reflect the risk assumed — from being undermined. In short, the theory of targeted tender must be limited in these ways so as not to ‘blur the distinction between primary and excess insurance.’ ” 69 Def. Couns. J. at 325. I believe that if Illinois retains the targeted tender rule, it should be limited to instances involving parties which are additional insureds under concurrent primary policies. This situation is most commonly seen in the context of the construction trade. When a general contractor hires an independent contractor, the general contractor exposes itself to many risks of liability. One of the most common of these risks is that the independent contractor may injure a third party or his or her own employee. When this happens, the general contractor may be found liable based on any of three theories of liability: (1) the general contractor’s own fault, usually for failing to properly supervise the independent contractor; (2) vicarious liability for the independent contractor’s negligence; or (3) strict liability under a workplace safety statute. See J. Mathias & T. Burns General Contractors and Subcontractors’ Insurers: The Additional Insured Provision, 89 Ill. B. J. 526 (2001). In order to avoid depleting its own insurance in protecting against these risks, general contractors require their subcontractors to list the general contractor as an additional insured on the subcontractor’s insurance policy. The insurers who insure subcontractors are now certainly well aware that they are facing the likelihood of shouldering the entire risk faced by the additional insured and they may charge the appropriate premium. Thus, the targeted tender rule will not blindside the insurer. I also agree with Hamilton and Stark’s suggested solution to harmonize the theory of horizontal exhaustion with the targeted tender rule. By following their recommendation, the important distinction between primary and excess insurers will be maintained.