Judgment on the Pleadings – Successful Post-Settlement Target Tender of Excess Policy

Joe Postel and Peter Syregelas recently obtained judgment on the pleadings in a coverage dispute pending in federal court. RLI issued a personal umbrella policy to the owner of a business, while Acuity issued a commercial auto and commercial excess policy to the business.  The business owner was driving his company car, listed on the Acuity auto policy, when he collided with a bicyclist, causing the bicyclist’s demise.  A wrongful death claim was asserted against the business owner, and it was undisputed that he was entitled to coverage under all three policies.

The dispute was over the method of sharing between the excess policies after exhaustion of Acuity’s primary limit.  Neither excess policy specified a method of sharing.  RLI’s limits were $1,000,000, but Acuity’s excess limits were $8,000,000.  Accordingly, RLI contended that the correct method of sharing was by limits, leaving RLI paying with only 1/9th of the excess settlement amount, up to its limits.  Acuity contended that the correct method of sharing was by equal shares.  The insurers could not resolve their dispute before mediation, and RLI filed suit in federal court to resolve it.  The insurers did, however, agree to an interim funding formula, with the ultimate allocation to be decided in the federal case.

After the wrongful death claim settled at mediation, further settlement efforts between the carriers failed.  The business owner then sent an email to RLI, stating that he was making a target tender and he wanted RLI to exhaust its excess policy before Acuity’s policy paid anything.  The insurers filed cross-motions for judgment on the pleadings, and District Judge Jorge Alonso granted Acuity’s motion and denied RLI’s.  The judge did not need to decide the dispute on the method of sharing, because he found that the target tender was reasonable and timely, and therefore effective, even though it was made post-settlement.  As a result RLI’s policy must be exhausted before Acuity’s excess policy pays anything.

The decision was the subject of a front-page article in the Chicago Daily Law Bulletin. Read the article here.