consider extrinsic evidence that constitutes an indisputable fact that is not an
element of either the cause of action or
a defense in the underlying litigation.
Pompa is based on the expectation that
the Colorado Supreme Court would recognize an exception to the complaint rule
if a claimant’s complaint contained allegations made in bad faith and framed to
trigger an insurance policy.
Some jurisdictions allow the use of extrinsic evidence only in limited circumstances:
E In Connecticut, an insurer can look
outside the allegations made in an underlying complaint in order to establish
a duty to defend. However, extrinsic evidence may not be considered in determining that the duty to defend does not exist.
determination of whether a duty to defend exists. If the policy language bases
the duty to defend on whether there is an
actual covered claim or suit, then extrinsic evidence is admissible.
In a minority of states, the four corner rule is strictly
enforced; even if the insurer has extrinsic evidence
that would trigger coverage.
E In AIMCO v. Nutmeg Ins. Co. a second
exception was identified: considering extrinsic evidence in the form of an allegation contained in several separate—but
factually related—complaints. The AIMCO
court predicted that the Colorado Supreme
Court would recognize a narrow exception
to the four corners rule requiring an insurer
to consider facts of which it is aware in parallel complaints that tend to show a duty to
defend as this “would not undercut an insured’s legitimate expectation of a defense.” 3
To date, the Colorado Supreme Court
has not adopted these two exceptions.
E Illinois applies strict interpretation of
the four corner rule except in declaratory
judgment actions. A court in a declaratory
judgment proceeding where an insurer’s
duty to defend is at issue may look beyond
the allegations of the underlying complaint
to show that there is no duty to defend.
E In Utah, whether extrinsic evidence is
admissible to determine if an insurer has
a duty to defend an insured turns on the
parties’ contractual terms. If the policy
terms make the duty to defend dependent
on the allegations against the insured,
then extrinsic evidence is irrelevant to a
Courts in some jurisdictions are moving away from strict adherence to the four
corner rule. There is a trend for courts to
find coverage and impose a duty to defend
to protect the insured. Where the four corner rule does not apply, insurers should be
diligent in their factual investigation and
cautious in their denial to defend. To protect itself, an insurer can add clear policy
language as to whether extrinsic evidence
may be considered in the determination
of a duty to defend exists. An insurer
can also defend and initiate a declaratory
judgment action to determine its duties
under the policy, where appropriate.
Stephen Brown is a
partner in Wilson Elser’s
Connecticut office. He
represents and advises
clients in litigation matters
involving a wide array of
subject matter areas and substantive legal
issues, including: insurance coverage,
professional liability, employment issues,
general liability, medical malpractice,
transportation, construction, and
environmental and toxic tort matters. Carl Pernicone is a partner in Wilson Elser’s New York office and is co-chair of the firm’s Insurance- Reinsurance Coverage practice. He has extensive xperience handling a variety of coverage matters, including those involving toxic tort, environmental liability and property
insurance, as well as, those in emerging
areas, such climate change and hydraulic
fracturing in shale plays.
Samuel Reich is an associate in the firm’s Connecticut office. He focuses on insurance & reinsurance coverage, environmental, toxic tort and asbestos litigation. He was recently named to the list of “New Leaders in
Law” by the Connecticut Law Tribune.