SIXTH DIVISION December 8, 2006
No. 1-05-0606
THE NORTH RIVER INSURANCE COMPANY, ) Appeal from the UNITED STATES FIRE INSURANCE ) Circuit Court COMPANY and SHELCO STEEL WORKS, ) of Cook County. INC., ) ) Plaintiffs-Appellees ) ) (United States Fire Insurance ) Company, ) ) Plaintiff-Appellee and Cross- ) Appellant ) ) v. ) No. 00 CH 18557 ) GRINNELL MUTUAL REINSURANCE ) COMPANY, THE TOKIO MARINE AND FIRE ) INSURANCE COMPANY, LIMITED, ) AMERICAN MISCELLANEOUS STEEL, ) INC., KAJIMA CONSTRUCTION ) SERVICES, INC., and BEVERLY ) KNAUER, d/b/a, KNAUER INSURANCE ) SPECIALISTS, f/k/a POTTER & KNAUER ) INSURANCE AGENCY, ) ) Defendants-Appellees ) ) Tokio Marine ane Fire Insurance ) Honorable Company, Limited, and Kajima ) Richard J. Billik, Construction Services, Inc., ) Judge Presiding. ) Defendants-Appellants and ) Cross-Appellees). )
JUSTICE O'MALLEY delivered the opinion of the court:
Plaintiff-appellee and cross-appellant United States Fire 1-05-0606
Insurance Company (US Fire) brought a declaratory judgment action
against defendant-appellant and cross-appellee Tokio Marine and
Fire Insurance Company (Tokio) seeking reimbursement of funds
from Tokio's primary insurance policy which were paid from US
Fire's excess policy to fund a settlement in an underlying
personal injury lawsuit.1 US Fire also sought equitable
contribution from Tokio's excess policy for funds paid by US
Fire's excess policy toward the settlement for which Tokio was
allegedly responsible. The parties filed motions and cross-
motions for summary judgment. The circuit court granted summary
judgment in favor of US Fire and against Tokio on US Fire's
reimbursement claim and granted summary judgment in favor of
Tokio and against US Fire on its claim for equitable contribution
from Tokio's excess policy.
For the reasons that follow, we affirm the judgment of the
circuit court.
BACKGROUND
In 1996, general contractor Kajima Construction Services,
1 Grinnell, AMS and Knauer Insurance Specialists were
dismissed from this case prior to this appeal. We subsequently
granted Tokio's motion to voluntarily dismiss North River, Shelco
and Kajima from this appeal. The only parties remaining in this
appeal are US Fire and Tokio.
2 1-05-0606
Inc. (Kajima), commenced a building project in Bolingbrook,
Illinois. Kajima entered into a subcontract with Shelco Steel
Works, Inc. (Shelco), to perform certain construction work on the
project. Shelco, in turn, subcontracted its obligation with
Kajima to American Miscellaneous Steel, Inc. (AMS). During
construction of the Bolingbrook project, Michael Farkas, an
employee of AMS, sustained serious and permanent injury when an
iron bar joist fell on him while he was performing his duties.
In 1997, Farkas filed suit against Kajima, Shelco and others
alleging negligence on their part which resulted in his injury.
On the date of Farkas's injury, Kajima was insured under a
primary commercial general liability (CGL) insurance policy and
an excess umbrella policy, both of which were issued by Tokio.
Shelco was covered by a primary CGL insurance policy issued by
the North River Insurance Company (North River) and an excess
umbrella policy issued by US Fire. AMS was covered by a CGL
primary policy and an umbrella policy, both of which were issued
by Grinnell Mutual Reinsurance Company (Grinnell). Kajima,
Shelco and AMS had primary limits of $1 million on their
respective primary CGL policies and limits in excess of $2
million in coverage for each umbrella policy.
On July 1, 1997, after receiving notice of the Farkas
lawsuit, Kajima immediately tendered its defense and indemnity to
3 1-05-0606
North River and Grinnell, the primary insurers for Shelco and
AMS, respectively. The tender also indicated that Kajima was
seeking an exclusive defense and indemnity from Shelco's and
AMS's insurers without the benefit of Tokio's assistance. Kajima
also notified Tokio of the lawsuit and its selective tender to
Shelco and AMS's insurers by sending a copy of the July 1, 1997,
letter to Tokio for reference purposes. Both North River and
Grinnell ultimately accepted Kajima's tender and shared the costs
of Kajima's defense. Attorney David Nani was assigned to Kajima
as defense counsel and paid by North River to undertake Kajima's
defense.
As the Farkas case proceeded through the various stages of
trial, North River and Grinnell attempted to negotiate a
settlement. In October 2000, it became apparent that a
settlement within the limits of North River's and Grinnell's
primary insurance policies was not possible. North River
informed Tokio that Kajima's liability in the lawsuit could
exceed North River and Grinnell's combined primary limits and
suggested that Tokio contribute $500,000 toward a settlement
package. Tokio refused to contribute. On November 13, 2000,
North River and Grinnell advised Tokio that each insurer was
tendering its full primary policy limits in an attempt to settle
the Farkas lawsuit and that Tokio should do the same. Tokio
4 1-05-0606
again refused to contribute any amount on Kajima's behalf to the
settle the case.
The Farkas lawsuit was settled for $4 million after the jury
began deliberating, but before a verdict was reached. The
settlement was funded as follows: North River and Grinnell each
contributed $1 million and US Fire contributed $2 million from
Shelco's umbrella policy. Tokio did not contribute to the Farkas
settlement. US Fire, Shelco and North River subsequently sought
declaratory relief in the circuit court against Grinnell and
Tokio, among others.2 In its fifth amended complaint, US Fire
alleged that Tokio was obligated to exhaust its primary insurance
policy to indemnify Kajima before the US Fire umbrella policy
would be obligated to contribute on Kajima's behalf.
Motions and cross-motions for summary judgment were filed by
the parties. Tokio argued that it was not obligated to
contribute to Kajima's defense and indemnity because its policy
was not an available policy since Kajima had selectively tendered
its defense and indemnity to Shelco and AMS and their respective
insurers. As a result, the Tokio primary policy was not an
2 Although Shelco, North River and US Fire sought various
relief against several defendants, we will only address the
allegations against the parties germane to issues presented for
review by this court.
5 1-05-0606
available policy for Kajima's defense and indemnity. US Fire
responded that the selective tender rule does not apply to the
excess layer of insurance and despite the rule's applicability to
concurrent primary insurance policies, US Fire was not obligated
to indemnify Kajima until all primary insurance policies were
exhausted. In addition, US Fire asserted that Kajima's and AMS's
excess insurers were obligated to equally contribute to the loss
at the excess level due to the policies' mutually repugnant
"other insurance" clauses. In other words, the selective tender
rule should not apply to the excess policies issued by Grinnell,
Tokio and US Fire because each policy purported to be excess to
any other insurance. Grinnell subsequently settled with US Fire
by paying $500,000 from its excess policy in reimbursement to US
Fire.
The circuit court granted summary judgment in favor of US
Fire and against Tokio relative to US Fire's claim that the
horizontal exhaustion doctrine preempts the selective tender
rule. On the issue of whether the selective tender rule applies
to multiple excess policies, the circuit court ruled that the
selective tender rule applies to multiple excess policies and
because Kajima selectively tendered its defense and indemnity to
its subcontractor's insurers, Tokio's excess policy was not
available for indemnity until the targeted insurers had exhausted
6 1-05-0606
their policy limits. Tokio appealed and US Fire cross-appealed
the judgment of the circuit court.
ANALYSIS
I. STANDARD OF REVIEW
Summary judgment is appropriate where "the pleadings,
depositions, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law." 735 ILCS 5/2-1005(c) (West 2004); General
Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284 (2002).
We review an order granting summary judgment de novo. General
Casualty Insurance Co., 199 Ill. 2d at 284; Travelers Indemnity
Co. v. American Casualty Co. of Reading, 337 Ill. App. 3d 435,
439 (2003).
II. VERTICAL EXHAUSTION AND THE SELECTIVE TENDER RULE
On appeal, Tokio contends that vertical exhaustion of
Shelco's primary and excess policies was proper because Tokio's
policy was not "triggered" pursuant to the selective tender rule.
Tokio's bases for application of vertical exhaustion are: (1)
Kajima notified Shelco's insurers that it would not seek
indemnification from Tokio; (2) the contract between Kajima and
Shelco required vertical exhaustion by Shelco's insurers; (3) US
Fire waived any policy defenses with regard to vertical
7 1-05-0606
exhaustion; and (4) Tokio received late notice that it would be
required to indemnify Kajima. We disagree.
This court has recently ruled that the selective tender rule
does not entitle an insured to vertically exhaust consecutive
insurance policies and deselected primary insurers must answer
for a loss before an excess insurance policy will be activated.
Kajima Construction Services, Inc. v. St Paul Fire & Marine
Insurance Co., No. 1-05-1248, slip op. at 14 (September 15,
2006). In Kajima, we held that the selective tender rule, which
allows an insured covered by multiple concurrent policies the
right to choose which insurer will defend and indemnify it with
respect to a specific claim, applies to concurrent insurance
coverage. Kajima, slip op. at 5. See also John Burns
Construction Co. v. Indiana Insurance Co., 189 Ill. 2d 570, 574
(2000); Cincinnati Cos. v. West American Insurance Co., 183 Ill.
2d 317, 326 (1998); Institute of London Underwriters v. Hartford
Fire Insurance Co., 234 Ill. App. 3d 70, 78-79 (1992).
We also explained the distinction between the horizontal and
vertical exhaustion doctrines. Kajima, slip op. at 6-7.
Horizontal exhaustion requires an insured who has multiple
primary and excess policies covering a common risk to exhaust all
primary policy coverage before invoking excess coverage. See
Illinois Emcasco Insurance Co. v. Continental Casualty Co., 139
8 1-05-0606
Ill. App. 3d 130, 134 (1985); United States Gypsum Co. v. Admiral
Insurance Co., 268 Ill. App. 3d 598, 652-53 (1994). In contrast
to horizontal exhaustion, vertical exhaustion allows an insured
to seek coverage from an excess insurer as long as the insurance
policies immediately beneath that excess policy, as identified in
the excess policy's declaration page, have been exhausted,
regardless of whether other primary insurance may apply. United
States Gypsum Co., 268 Ill. App. 3d at 653; see also T. Hamilton,
T. Stark, Excess-Primary Insurer Obligations and the Rights of
the Insured, 69 Def. Couns. J. 315, 320-21 (July 2002).
We directly rejected the contention that perfecting a
selective tender entitles an insured to vertically exhaust
consecutive insurance coverage in Kajima, slip op. at 14.
Notwithstanding Kajima's selective tender to Shelco's and AMS's
insurers in this case, none of the arguments advanced by Tokio
constitute an exception to our holding in Kajima. We will,
however, briefly address the arguments that are not based on the
selective tender rule which Tokio claims entitle it to vertical
exhaustion.
A. Subcontractor's Agreement
Contrary to Tokio's assertions, the underlying construction
contract between Kajima and Shelco did not require Shelco to
vertically exhaust its consecutive insurance coverage. The
9 1-05-0606
agreement required that Shelco maintain primary and umbrella
commercial liability insurance. The primary insurance policy was
to have a $1 million per-occurrence limit and have Kajima named
as an additional insured. The contract also required Shelco to
obtain a $5 million umbrella liability policy. Tokio argues that
vertical exhaustion is required pursuant to the construction
contract because Kajima required Shelco to "maintain an umbrella
liability policy providing the same coverage and with the same
additional insureds as the basic policy." We agree with US Fire
that it is difficult to make sense of Tokio's argument that
vertical exhaustion is required based on the language cited here.
The contract makes no reference to vertical exhaustion. After
reviewing the record, we find nothing in the subcontractor
agreement that can be construed as requiring Shelco's insurers to
vertically exhaust consecutive insurance coverage. Consequently,
Kajima was not entitled to vertically exhaust consecutive
insurance coverage based on the underlying construction contract.
B. Waiver and Estoppel
Next, Tokio argues that US Fire has waived its right to seek
reimbursement or should be estopped from asserting the same
because it did not issue a reservation of rights letter.
Specifically, Tokio asserts that the insurance broker, Crum &
Forster, accepted Kajima's selective tender on behalf of North
10 1-05-0606
River and US Fire and failed to notify Tokio in a timely manner
that US Fire would not agree to vertical exhaustion. We reject
this argument.
First, we are of the view that Tokio's claims regarding
waiver and estoppel are misplaced. Waiver and estoppel apply
only where an insurer has breached its duty to defend. Thus, a
court inquires whether the insurer had a duty to defend and
whether it breached that duty. Montgomery Ward & Co. v. Home
Insurance Co., 324 Ill. App. 3d 441, 450 (2001), citing Employers
Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127,
151 (1999). "It is the duty to defend that gives rise to the
duty to reserve rights when defense of a claim is undertaken, and
without such a duty an insurer has no obligation to issue a
reservation of rights letter." Montgomery Ward & Co., 324 Ill.
App. 3d at 450, citing International Insurance Co. v. Sargent &
Lundy, 242 Ill. App. 3d 614, 633 (1993). An excess insurer that
has no duty to investigate coverage issues or to defend its
insured will not be estopped from later asserting coverage
defenses by a failure to issue a reservation of rights letter.
Sargent & Lundy, 242 Ill. App. 3d at 632.
Here, it is undisputed that US Fire is an excess insurer and
that North River and Grinnell provided Kajima with a defense for
the Farkas litigation. As a result, US Fire was not required to
11 1-05-0606
defend Kajima, although it was required to and did indemnify
Kajima. Under these circumstances, the principles of waiver and
estoppel are inapplicable to US Fire.
Second, the basis of Tokio's argument is that Kajima's
tender was communicated on Crum & Forster letterhead and did not
specifically exclude US Fire from the acceptance of the tender
even though Crum & Forster represented both insurance carriers.
Due to Crum & Forster's communication on behalf of North River,
Tokio claims that it was under the impression that both insurers
would exhaust their coverage for Kajima's defense and indemnity.
Tokio urges this court to simply ignore the distinction between
North River as a primary insurer and US Fire as an excess insurer
because Crum & Forester did not mention that US Fire was an
excess insurer and would not activate its policy until all
primary insurance had been exhausted.
There is no legal authority cited by Tokio to support the
theory that a letter from an insurance broker accepting a tender
of defense and indemnity on behalf of a primary insurer must also
expressly exclude any excess insurers. The record is replete
with evidence that Kajima and Tokio were well aware that North
River was the primary insurer and undertook Kajima's defense and
US Fire was an excess insurer that did not participate in
Kajima's defense. In fact, Tokio acknowledges in its brief that
12 1-05-0606
the August 18, 1997, acceptance letter stated, "The North River
Insurance Company is in receipt of *** [Kajima's tender of
defense in the underlying case]. Please accept this as our
acknowledgment and agreement to the same." The suggestion that
Tokio and Kajima were somehow tricked into believing that North
River and US Fire were one in the same based on an insurance
broker's letterhead, when viewed in light of the record, is
simply not believable.
Relative to Tokio's claim that it was notified late that US
Fire would not activate its policy until Tokio's primary policy
was exhausted is similarly without merit. Tokio and Kajima took
the position, from the time it was notified of the litigation in
1997, that it would be entitled to vertically exhaust its
subcontractors' consecutive insurance policies based on the
selective tender rule. Illinois law does not allow an insured to
vertically exhaust consecutive insurance coverage (Kajima, slip
op. at 14) and Kajima's contract with Shelco did not require
vertical exhaustion. Thus, it was unnecessary for US Fire to
notify Tokio that it would have to exhaust its primary policy
before the excess insurance would become available.
C. Conflict of Interest
Finally, Tokio makes a fleeting reference to a conflict of
interest relative to its assigned counsel in its brief on appeal.
13 1-05-0606
Tokio implies that "a potential for conflict" existed because
Shelco moved for summary judgment in the Farkas lawsuit, which,
if successful, would have relieved Shelco and its primary
insurer, North River, from all liability. The conflict existed
because North River funded Kajima's defense and paid for attorney
Nani's services. After reviewing the record, we find these
allegations to be meritless and without evidence to support them.
The record clearly establishes that attorney Nani provided Kajima
with a vigorous, competent and effective defense at all stages of
the Farkas litigation. There is not a shred of evidence in the
record that supports Tokio's allegation that attorney Nani
labored under a conflict of interest or that attorney Nani, North
River or Shelco was involved in any plan to provide substandard
representation to Kajima.
We, therefore, hold that the circuit court correctly ruled
that the selective tender rule did not preempt the horizontal
doctrine and that vertical exhaustion was not appropriate based
on Tokio's other arguments. The circuit court's judgment that
Tokio should contribute its primary policy to the Farkas
settlement before the excess policies would be activated was
correct.
III. WAIVER OF ARGUMENTS ON APPEAL
Tokio next argues that the circuit court erred when it
14 1-05-0606
ordered it to reimburse US Fire its entire $1 million policy
limits. Specifically, Tokio contends that the circuit court made
a de facto finding of fact with regard to Tokio's allocation of
fault by requiring it to pay the full amount without first
conducting a hearing on Tokio's proportionate liability.
However, Tokio raised this argument in the circuit court for the
first time in a motion for reconsideration.
US Fire argues that Tokio has waived any such argument,
since it did not raise the issue of liability apportionment until
its motion to reconsider. US Fire correctly contends it is not
proper to raise a new legal theory or factual argument in a
motion for rehearing and, thus, waiver applies to the parties
with respect to this legal issue. Coles-Moultrie Elec.
Cooperative v. City of Sullivan, 304 Ill. App. 3d 153, 166
(1999). "The decision to grant or deny a motion for
reconsideration lies within the discretion of the circuit court
and will not be reversed absent an abuse of that discretion.
[Citation.] The intended purpose of a motion to reconsider is to
bring to the court's attention newly discovered evidence, changes
in the law, or errors in the court's previous application of
existing law. [Citation.]
'Newly discovered' evidence is evidence that was not
available prior to the hearing on the motion for summary
15 1-05-0606
judgment. [Citation.] 'Trial courts should not allow litigants
to stand mute, lose a motion, and then frantically gather
evidentiary material to show that the court erred in its ruling.'
[Citation.]" Landeros v. Equity Property & Development, 321 Ill.
App. 3d 57, 65 (2001). Tokio did not bring any newly discovered
evidence to the circuit court's attention. It had been aware of
the Farkas lawsuit since July 1997, and also knew that Kajima was
named as a defendant and could potentially be found liable for
Farkas' injuries. Further, Tokio did not cite to any changes in
the law or errors in the court's previous application of the law
in its motion for reconsideration. Thus, Tokio's claim that the
circuit court erred in "allocating fault" on appeal is waived.
Even if waiver were inapplicable, we would affirm the
circuit court's denial of Tokio's motion to reconsider. First,
we note that North River notified Tokio during the Farkas trial
that a settlement would exceed both North River's and Grinnell's
primary limits. Tokio did not request an allocation of fault;
instead, it demanded that North River and Grinnell settle the
lawsuit without any contribution from Tokio. To the extent that
an allocation of fault was necessary as Tokio claims, it should
have been sought prior to or during settlement negotiations.
Tokio instead rested on its belief that it was entitled to
vertical exhaustion based on its selective tender and that it
16 1-05-0606
would not be required to defend or indemnify Kajima in the Farkas
litigation. It was not, in our view, proper for Tokio to sit
idle throughout the Farkas settlement negotiations only to raise
its objections in a motion for reconsideration. This is
especially true because North River and Grinnell indicated that a
settlement would not be possible within the limits of the primary
insurers' policies prior to settling the case.
Second, Tokio does not put forth any evidence to suggest
that its insured was less culpable than any other named
defendant. The possibility exists that Kajima could have been
found mostly or entirely at fault in the underlying lawsuit,
perhaps explaining why Tokio did not seek an allocation of fault
at the appropriate time. Thus, we agree with the circuit court
that Tokio's allocation argument was untimely, highly speculative
and self-serving and find that the circuit court properly denied
Tokio's motion to reconsider.
IV. THE SELECTIVE TENDER RULE AND EXCESS COVERAGE
US Fire cross-appeals the circuit court's decision to apply
the selective tender rule to the excess insurers of a common
insured. In its declaratory judgment action against Grinnell and
Tokio, US Fire sought equitable contribution from Tokio and
Grinnell's umbrella policies. Grinnell settled with US Fire for
$500,000 which was paid from its excess policy. The circuit
17 1-05-0606
court later ruled that the insurers selected by Kajima to defend
and indemnify it, including the excess insurers, must do so up to
their coverage limits before Kajima's excess policy will be
activated.
US Fire points out that there is no published authority in
Illinois that specifically addresses how or whether a common
insured may selectively tender its indemnity to an excess insurer
after exhausting concurrent primary insurance coverage. All
published cases related to the selective tender rule have
involved fact scenarios where the loss was less than or equal to
the available primary concurrent coverage. We additionally note
that US Fire supplemented the authority upon which it relies to
include this court's recent decision in Kajima. However, in that
case, the issue of whether the selective tender rule could be
applied to excess insurers was not before us and we did not
decide whether the selective tender rule could be applied to the
excess layer of coverage. Because the issue is now properly
before this court, we hold that once an insured has exhausted its
concurrent primary insurance coverage, it may selectively tender
its indemnity to concurrent excess insurers.
The selective tender rule, as recognized by Illinois courts,
gives an insured covered by multiple concurrent policies the
right to choose which insurer will defend and indemnify it with
18 1-05-0606
respect to a specific claim. John Burns Construction Co. v.
Indiana Insurance Co., 189 Ill. 2d 570, 574 (2000); Cincinnati
Cos. v. West American Insurance Co., 183 Ill. 2d 317, 326 (1998);
Kajima, slip op. at 2; Institute of London Underwriters v.
Hartford Fire Insurance Co., 234 Ill. App. 3d 70, 78-79 (1992).
In Institute of London, this court held that when two insurance
policies potentially apply to a loss, an insured may designate
one insurer to undertake its defense and indemnity and thereby
foreclose the settling insurer from obtaining contribution from
the nonsettling insurer. Institute of London, 234 Ill. App. 3d
at 78-79. Our supreme court has clearly established an insured's
right to select exclusive coverage from among multiple concurrent
insurance policies. John Burns, 189 Ill. 2d at 574; Cincinnati,
183 Ill. 2d at 326. This court and our supreme court have also
held that once an insured instructs an insurer not to involve
itself in the defense or indemnification of a claim, that insurer
" 'would then be relieved of its obligation to the insured with
regard to that claim.' " Bituminous Casualty Corp. v. Royal
Insurance Co. of America, 301 Ill. App. 3d 720, 724 (1998),
quoting Cincinnati, 183 Ill. 2d at 326. The insured may choose
to forego an insurer's assistance for various reasons, including
the insured's fear that premiums would increase or that the
policy would be canceled in the future. Cincinnati, 183 Ill. 2d
19 1-05-0606
at 326 (1998).
An insured has the right to selectively tender its defense
and indemnification to one of several common insurers. Kajima,
slip op. at 3. The "right" to selectively tender, despite its
criticism, has been characterized as "paramount." Legion
Insurance Co. v. Empire Fire & Marine Insurance Co., 354 Ill.
App. 3d 699, 703 (2004) (explaining that an insured has the
paramount right to choose or knowingly forego an insurer's
participation in a claim); Alcan United, Inc. v. West Bend Mutual
Insurance Co., 303 Ill. App. 3d 72, 79 (1999), quoting Institute
of London, 234 Ill. App. 3d at 79 (recognizing the paramount
right of the insured " 'to seek or not to seek an insurer's
participation in a claim as the insured chooses' "). See also
Chicago Hospital Risk Pooling Program v. Illinois State Medical
Inter-Insurance Exchange, 325 Ill. App. 3d 970, 987 (2001)
(Quinn, J., specially concurring) (stating "[i]n the vast area of
legal jurisprudence, there are undoubtedly many instances where
being the first, or only, jurisdiction to grant rights to persons
or entities may rightly be a source of pride. While it is still
very early, the doctrine of 'selective tender' does not appear
*** to be one of those instances"); American National Fire
Insurance Co. v. National Union Fire Insurance Co. of Pittsburgh,
343 Ill. App. 3d 93, 109 (2003) (Quinn, J., specially concurring)
20 1-05-0606
(suggesting that the selective tender rule be tailored in a
manner that "will not blindside the insurer" and maintain "the
important distinction between primary and excess insurers").
Whether we agree or disagree with the wisdom behind the
selective tender rule, our supreme court has clearly indicated
that an insured has the right to choose from among its concurrent
insurers. We can articulate no reason why this rule cannot or
should not be applied to concurrent excess insurance coverage.
Neither the John Burns case, nor any other published authority,
prohibits an insured's right to select or deselect a particular
policy when it has concurrent coverage. In addition, because the
selective tender rule is applied only concurrently at either the
primary or excess level and not consecutively, the concerns about
blurring the line between primary and excess insurance policies
is not applicable. Hence, our ruling here maintains the critical
distinction between primary and excess insurance policies which
we sought to preserve in Kajima slip op. at 5. Moreover,
contrary to US Fire's contention, the fact that an excess policy
contains an "other insurance" clause does not preempt the
selective tender rule. It is not relevant that Tokio or US
Fire's policy contains an "other insurance" clause. This was
made clear in John Burns. The purpose of an "other insurance"
clause is to provide a method of apportioning coverage among
21 1-05-0606
triggered concurrent policies. John Burns, 189 Ill. 2d at 576,
citing Institute of London, 234 Ill. App. 3d at 77 ("if the
policy is never triggered, the issue of liability under the
'other insurance' clause does not arise").
After reviewing the record and considering the authority, we
agree with the circuit court that Kajima perfected its selective
tender to US Fire. Thus, the circuit court correctly ruled that
the selective tender rule applies to the excess layer of
insurance coverage and that US Fire could not seek contribution
from Tokio in this case.
IV. CONCLUSION
For the foregoing reasons, we hold that Kajima was not
entitled to vertically exhaust consecutive primary and excess
policies notwithstanding its proper selective tender to other
concurrent insurers; the circuit court properly denied Tokio's
motion for reconsideration; and the selective tender rule was
applicable to concurrent excess insurance coverage. Accordingly,
the judgment of the circuit court is affirmed.
Affirmed.
FITZGERALD-SMITH, PJ., and JOSEPH GORDON, J., concur.