Massachusetts’ Highest Court Rejects Targeted Tenders

Only three states have adopted the aEURoetargeted tenderaEUR? rule. Massachusetts recently had the chance to join those ranks, but it firmly declined. The concept of aEURoetargeted tenderaEUR? or aEURoeselective tenderaEUR? allows a policyholder to single out one insurer among co-insurers and trigger only that insureraEUR(TM)s policy, leaving the insurer without entitlement to contribution from co-insurers. In Insurance Company of the State of Pennsylvania v. Great Northern Insurance Company, an employee reported his injury to the insured employer, which then notified only one of two workersaEUR(TM) compensation insurers. After making several payments, the paying insurer became aware of the co-insurer and demanded contribution. The co-insurer refused, relying on case law from selective tender states. After the district court adopted the selective tender rule in favor of the co-insurer, the First Circuit Court of Appeals certified the question to the Supreme Judicial Court of Massachusetts. For three primary reasons, the Supreme Judicial Court rejected selective tender. First, the court noted that workersaEUR(TM) compensation policies are governed by statute, which creates an independent and automatic duty on the part of all insurers on the risk, regardless of notice by the policyholder. Moreover, the court held, adopting the selective tender rule would contravene Massachusetts jurisprudence on the late notice defense, which requires proof of prejudice. The court also insisted that such adoption would flout MassachusettsaEUR(TM) public policy of encouraging insurers to promptly pay claims for which it is reasonably clear they are liable and reward an insurer that disclaims coverage at the expense of the insurer who aEURoeconscientiouslyaEUR? endeavors to pay the claim first. Although the court pointed out the effect of workersaEUR(TM) compensation law upon its decision, the courtaEUR(TM)s outline of several other reasons to reject the rule indicates its decision would extend to non-workersaEUR(TM) compensation cases.

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