Amco Insurance Company v. Cincinnati Insurance Company
10 N.E.3d 374
Ill. App. Ct.2014Background
- Injury suit: Employee Kevin Smith sued general contractor Hartz and subcontractors for construction-site injuries; multiple insurers were implicated (AMCO insured Cimarron, Cincinnati insured Hartz, Erie insured Van Der Laan).
- Hartz tendered defense to AMCO (and later to Erie), expressly selecting AMCO and Erie as targeted insurers; both accepted under reservation of rights; Hartz did not target its own carrier Cincinnati.
- AMCO defended and, after settlement negotiations, paid $1,450,000 to resolve the Smith lawsuit (allocating amounts among AMCO primary and umbrella policies), then received an assignment from Hartz and Cimarron of any rights to recover from other insurers.
- AMCO sued Cincinnati seeking equitable subrogation/contribution and declaration of other insurance obligations; Cincinnati moved to dismiss under section 2-615, arguing the targeted-tender doctrine bars AMCO’s claims and that AMCO’s assignment conveyed no recoverable rights post-settlement.
- Trial court dismissed AMCO’s claims with prejudice under Rule 304(a); AMCO appealed.
- Appellate court affirmed, holding that once a targeted insurer defends and pays to settle the underlying claim, it cannot thereafter deselect itself (or use an insured’s post-settlement assignment) to pursue deselected insurers for contribution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a targeted insurer that defended and paid a settlement may, via post-settlement assignment from the insured, pursue deselected insurers for contribution or subrogation | AMCO: Hartz assigned rights to AMCO, including the right to deactivate prior target tenders; assignment allows AMCO to seek contribution/subrogation from Cincinnati and to determine coverage priority | Cincinnati: Targeted-tender protection ends at resolution; assignment is meaningless post-settlement because Hartz had no remaining claims against Cincinnati; allowing this would nullify targeted-tender doctrine | Held for Cincinnati: targeted-tender doctrine does not permit a defending/payor insurer to deselect itself post-settlement via assignment and pursue deselected insurers; dismissal affirmed |
| Whether AMCO may proceed to determine priority between Cincinnati and Erie to cover amounts exceeding AMCO’s limits | AMCO: Because AMCO paid more than its primary limit and Cincinnati’s policy status was unclear, claims should proceed to determine priority between Cincinnati and Erie | Cincinnati: Hartz targeted Erie as well; Erie’s primary limits would apply before any excess coverage; Erie’s limits would cover AMCO’s excess payments, so Cincinnati not triggered | Held for Cincinnati: Erie (as targeted primary) would satisfy obligations before Cincinnati; no basis to proceed against Cincinnati |
Key Cases Cited
- Kajima Constr. Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 227 Ill. 2d 102 (supreme court) (explains targeted/ selective tender doctrine and limits on extending it to force excess coverage before primary policies)
- Cincinnati Cos. v. West American Ins. Co., 183 Ill. 2d 317 (supreme court) (targeted tender: selected insurer bears duty to defend and cannot seek equitable contribution from deselected insurers)
- Richard Marker Assocs. v. Pekin Ins. Co., 318 Ill. App. 3d 1137 (appellate court) (insured who paid settlement himself could thereafter deselect one insurer and target another; factually limited)
- Institute of London Underwriters v. Hartford Fire Ins. Co., 234 Ill. App. 3d 70 (appellate court) (discusses protection of insured’s right to select insurer and limits on contribution claims by selected insurer)