787 F.3d 632
1st Cir.2015Background
- Progression purchased two workers' compensation policies covering the same workplace injury: ISOP and Great Northern. Progression tendered the claim only to ISOP; Great Northern was not notified. ISOP paid over $2.5M and defended the DIA claim.
- ISOP later notified Great Northern and sought contribution for past and future payments; Great Northern refused, citing lack of notice and no obligation to cover.
- ISOP sued Great Northern in federal court (diversity jurisdiction) seeking equitable contribution; both parties filed cross-motions for summary judgment.
- The district court granted summary judgment to Great Northern, applying a "selective tender" rule (insurer to whom no notice was given need not cover or contribute).
- The First Circuit recognized unsettled Massachusetts law on whether an insured may intentionally tender only to one of multiple insurers and thereby bar contribution by the untendered insurer, and certified the question to the Massachusetts Supreme Judicial Court.
Issues
| Issue | ISOP's Argument | Great Northern's Argument | Held |
|---|---|---|---|
| Whether an insurer that paid may obtain equitable contribution from a co-insurer that was not given notice by the insured | Equitable contribution should apply; Massachusetts law (notice-prejudice rule) prevents denying coverage absent prejudice, so belated notice from another source would have triggered coverage and contribution | Because the insured intentionally failed to notify Great Northern, Great Northern never became obligated and thus cannot be forced to contribute | The First Circuit certified the question to the SJC instead of deciding; it did not resolve the issue on the merits |
| Whether Massachusetts follows a "selective tender" rule allowing an insured to choose which insurer pays by withholding notice from others | Selective tender conflicts with equitable contribution and the notice-prejudice policy protecting insureds | Selective tender is functionally correct: an insurer receiving no notice has no obligation and cannot be compelled to contribute | The court declined to adopt or reject selective tender and certified the question to the SJC |
Key Cases Cited
- Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (Mass. 2009) (discussed scope of successive insurers’ obligations for continuing losses)
- Johnson Controls, Inc. v. Bowes, 381 Mass. 278 (Mass. 1980) (expanded notice-prejudice rule to liability policies)
- Darcy v. Hartford Ins. Co., 407 Mass. 481 (Mass. 1990) (applied notice-prejudice principle to cooperation defenses)
- Lexington Ins. Co. v. Gen. Accident Ins. Co. of Am., 338 F.3d 42 (1st Cir. 2003) (recognized willingness to entertain equitable contribution actions in Massachusetts)
- Truck Ins. Exch. v. Unigard Ins. Co., 79 Cal. App. 4th 966 (Cal. Ct. App. 2000) (illustrative of equitable contribution between insurers)
- Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash. 2d 411 (Wash. 2008) (adopted selective/targeted tender rule)