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March 8, 2016

Legal Update
Jessica H. Park, Regina E. Roman

Insurance Law Alert: Massachusetts SJC rejects doctrine of selective tender

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In a March 7, 2016 decision, Ins. Co. of the State of Pennsylvania v. Great Northern Ins. Co., No. SJC-11897, the Massachusetts Supreme Judicial Court confirmed that the Commonwealth recognizes claims for “equitable contribution” between co-insurers, but, as a matter of first impression, declined to adopt a so-called “selective tender” defense to such claims.  The doctrine of equitable contribution in the insurance context permits an insurer that pays more than its share of a loss to seek recovery from another carrier that insures the same risk.  The “selective tender” exception to that doctrine, which has been adopted in several jurisdictions, provides that where an insured elects to notify and tender a claim to only one of the co-insurers, the insurer to whom no tender was made is excused from any obligation to contribute to the defense or payment of the claim.

While the decision specifically addressed the rights and obligations of workers’ compensation insurers, the Court announced more broadly that permitting a defense to claims for equitable contribution based on an insured’s decision to selectively notify or tender the claim to only one of its liability carriers would be inconsistent with Massachusetts law and public policy.  In particular, the Court stated that permitting a carrier to raise a selective tender defense based on the lack of notice by the insured would be inconsistent with the Massachusetts rule that late notice of a claim under an occurrence-based policy typically will not defeat an insurer’s coverage obligation absent a showing of prejudice.  Moreover, the Court found that allowing an insured to selectively give notice and tender a claim to only one carrier, and thereby bar that carrier from recovering from a co-insurer, would be contrary to Massachusetts’ public policy of encouraging carriers to “promptly accept their coverage obligations and begin defending claims.”  Instead, a selective tender defense would punish such “good” insurers by requiring them to pay the entirety of the claim on their own.  Id. at 14.

To read the SJC’s decision, please click here.

For questions regarding the information contained in this Alert, contact Regina E. Roman, Jessica H. Park, or your attorney.

This Alert was prepared for the clients and colleagues of Sugarman, Rogers, Barshak & Cohen, P.C. It is provided for educational and informational purposes only and is not a substitute for professional advice on your specific legal situation.