Illinois' Targeted Tender Rule – A Powerful Strategy for Insureds To Maximize Insurance Coverage

Under Illinois’ targeted tender rule, an insured covered by multiple concurrent liability policies has the right to choose which of those policies will defend and indemnify. The Illinois Supreme Court first adopted the targeted tender rule in a case concerning concurrent primary policies. John Burns Construction Company v. Indiana Insurance Company, 189 Ill.2d 570, 727 N.E.2d 211 (2000).

The Burns case involved a general contractor who was covered by two concurrent primary liability policies that applied to the claim of an injured worker. The general contractor had its own general liability policy, and it was also an additional insured on a subcontractor’s general liability policy. The general contractor directed its own insurer not to respond to the claim and demanded that the subcontractor’s insurer provide full defense and indemnity. On appeal, the Illinois Supreme Court ruled in favor of the general contractor, ruling that the general contractor had an absolute right to select which of the two concurrent primary liability policies should perform.

When an insurer is deselected by a selected tender made to another insurer, the deselected insurer is relieved of any further obligation to the insured and to other insurers as well. The Court in Burns contended that this application of the selective tender rule does not violate the “other insurance” clause of the targeted policy, because there is no “other insurance” when only one policy has been triggered by a targeted tender. Thus, once an insured has made a targeted tender, the insurer selected to perform is prohibited from seeking any contribution from other potentially applicable concurrent policies. The Burns decision dealt solely with concurrent primary policies, and to this day the most common use of the target tender rule is to selectively tender the defense of claims.

Commercial contracts of all kinds, such as construction contracts, contracts for the sale of goods, or manufacturing contracts, frequently require the good or service provider to have insurance, and to name the buyer as an additional insured on the provider’s insurance policy. Being named as an additional insured does not cost the party being added anything, and it is an attractive benefit because if the additional insured tenders a claim under that insurance, the claim will not be held against the additional insured for purposes of its own loss history. This means it will not face increased insurance premiums as a result of the contractual counterparty’s insurer paying the claim. Accordingly, the ability to “target” a policy that the insured did not have to pay premiums for carries a potentially significant advantage.

Obtaining proper advice when an insurance claim arises is important so that policyholder rights are preserved and maximized. The Insurance Recovery Team at Burke Warren is ready to assist you with any insurance issues that may arise.