Washington Supreme Court Tackles Tender and Prejudice Issues
Washington just got a little stranger. (No, not Washington, D.C.--the other one). In a lengthy and fascinating opinion that the Washington Supreme Court released on September 4, a unanimous court (unusual in any of itself) has ruled that defending insurers can pursue a claim for subrogation but not equitable contribution against a carrier who was not identified until after the underlying construction defective claims were resolved. As regards the claim for equitable contribution, the court ruled that the "selective tender" rule (insured chooses to tender to certain carriers but not others) trumped the "late tender" rule (delay in tender doesn't defeat coverage unless it causes prejudice).
Does the Enumclaw opinion mean that Illnois is now no longer the only state that allows "targeted tenders"? Frankly, it's not clear since it's not apparent that the insured in this case made a deliberate decision not to notify USF Insurance (or maybe they just confused USF with U.S. Fire!). Even so, the broad language in the opinion made lead future litigants to press "targeted tender" claims in Washington State.
The real question is what difference it makes, since the court ruled that the settling insurers, who had obtained an assignment of the insured's rights, could still pursue a claim for subrogation. Indeed, subrogation might be a preferred remedy since some courts have blocked claims for equitable contribution if the insurer asserting the claim was itself previously derelict in some respect such that it doesn't deserve to get equity.
The most interesting aspect of the claim is the court's treatment of the prejudice issue. In most states, prejudice will be presumed as a matter of law if the insured's isn't notified of a claim until it has already settled. In this case, however, the Supreme Court adopted a "flexible" or "nuanced" approach that will require USF to show exactly how its inability to participate in the insured's defense affected the outcome of the case or why its inability to conduct a timely investigation of the underlying claims impaired that investigation.
