Insurer-Assignee May Invoke “Late Tender Rule”

Mutual of Enumclaw v. USF Insurance Company (February 26, 2007)

A condominium homeowners’ association brought construction defect claims against developer Dally Homes. Dally tendered the claims to two of its insurers, Mutual of Enumclaw (MOE) and Commercial Underwriters (CU), which settled with the homeowners’ association. As part of the settlement, Dally assigned its rights to MOE and CU. MOE and CU then tendered the claim to USF, a third insurer to which Dally had not tendered the claim.

Under the “late tender rule,” when an insured makes a late tender, the insurer must demonstrate actual prejudice before it will be relieved of its duties to the insured. The trial court held that MOE and CU were not entitled to the benefit of that rule because Dally chose not to tender the claim to USF. However, the court of appeals reversed because Dally assigned its rights to MOE and CU, which stepped into Dally’s shoes without limitation.