Florida courts generally adhere to the Eight Corners Rule when determining whether an insurer has a duty to defend its insured. Under this rule, the duty to defend determination is made by looking only at the terms within the four corners the insurance policy and the allegations within the four corners of the complaint. Extrinsic evidence may not be considered. Recently, however, in Composite Structures, Inc. v. Continental Insurance Co., 2014 WL 1069253 (11th Cir. March 20, 2014) (unpublished), the United States Court of Appeals for the Eleventh Circuit (applying Florida state law) recognized an important exception to the Eight Corners Rule – when an insurer’s coverage denial is based on factual issues that ordinarily would not be alleged in the complaint, the insurer may consider extrinsic evidence outside of the complaint.
The underlying lawsuit was brought by two seamen who sustained carbon monoxide poisoning while aboard a boat. The seamen sued the insured boat manufacturer for negligence and strict liability, and the insured tendered its defense to Continental Insurance Co. Continental disclaimed coverage for the underlying suit because the insured first discovered the occurrence more than 72 hours after its commencement. As a result, the insured had not satisfied the conditions of the pollution buyback endorsement that created exceptions to the pollution exclusion in the two general liability policies at issue.
In the declaratory judgment action brought by the insured, Continental successfully argued in the district court that the conditions in the pollution buyback endorsement were not satisfied because the insured did not first discover the occurrence within 72 hours after its commencement, and because the occurrence was not timely reported to Continental. On appeal from the district court’s summary judgment ruling, the insured argued that the district court erred in considering evidence outside of the underlying complaint in determining Continental’s coverage obligations.
The Eleventh Circuit affirmed the district court’s decision. The appellate court recognized that Florida courts generally follow the Eight Corners Rule. However, the court also noted that the Florida Supreme Court has recognized certain exceptions to this rule, including that insurers may look to facts outside of the underlying complaint when the basis for the insurer’s declination involves facts that normally would not be alleged in the complaint. Here, the court observed that the underlying complaint involved negligence and strict liability claims, neither of which required the plaintiffs to allege the date of when the insured notified its insurer of the occurrence. Thus, the Eleventh Circuit held that, “[u]nder Florida law, Continental was permitted to consider the uncontroverted date of written notice when determining its duty to defend because the date of written notice to the insurance company is not a fact that would normally be alleged in the complaint.”
On April 7, 2014, Continental filed a motion for publication with the Eleventh Circuit and urged the court to publish its decision. The insured has not opposed Continental’s motion at this time. Interested readers should stand by, as a published opinion would have a significant impact on lower courts in the Eleventh Circuit.
In January 2014, we looked at the Eight Corners Rule as it applies in Texas.