In its recent decision in Burlington Ins. Co. v. CHWC, Inc., 2014 U.S. App. LEXIS 3941 (9th Cir. Mar. 3, 2014), the United States Court of Appeals for the Ninth Circuit, applying California law, had occasion to consider an insurer’s obligation to consider extrinsic facts in determining a duty to defend.
The underlying incident in Burlington involved injuries allegedly suffered by the plaintiff when forcibly removed by bouncers from the insured nightclub, Crazy Horse. Claimant’s original lawsuit contained a cause of action for assault and battery for the alleged incident, as well as causes of action for negligent hiring and premises liability. Crazy Horse’s insurer, Burlington, was provided copies of the pleadings as well as police reports concerning the incident. The initial police reports were consistent with an assault and battery. A supplemental report, however, indicated that while claimant was being removed from the club, he became defiant and began to resist removal. One of the witnesses interviewed in the supplemental report stated that during this period of heightened tension, the claimant backed into a stool and fell down and that this is what may have caused his injuries.
Based on these facts, in particular the allegations in the complaint alleging that plaintiff’s injuries resulted solely from an assault and battery, Burlington denied coverage to Crazy Horse pursuant to its policy’s assault and battery exclusion. Burlington later received summary judgment in its favor from a California federal district court. The lower court held that due to the assault and battery exclusion, and the allegations in the underlying complaint, “there was never a possibility of coverage.”
On appeal, however, the Ninth Circuit held that the reference in the police report to the claimant falling on a stool raised the possibility that his injuries were not solely the result of an assault and battery. Citing to the seminal California decision in Gray v. Zurich Ins. Co., 419 P.2d 168, 176 (Cal. 1966) concerning an insurer’s duty to consider extrinsic facts in determining the duty to defend, the court noted that while some aspects of the police reports substantiated an assault and battery, “some of the witness statements provided to Burlington stated that [claimant] was injured when he tried to sit down on a stool, lost his footing, and hit his head on the wall.” This version of event, explained the court, if truly the cause of claimant’s injuries, would not fall within the assault and battery exclusion.
Thus, explained the court, notwithstanding the actual allegations in the pleadings, and notwithstanding the witness statements in the police reports suggesting that claimant was injured solely as a result of force applied by the Crazy Horse bouncers, the extrinsic facts at least raised the possibility of coverage, which was sufficient to trigger a duty to defend. As the court explained:
Although as originally pleaded [claimant’s] negligence claim was predicated on the theory that he had been assaulted, the extrinsic facts available to Burlington revealed the possibility that [claimant] could amend his negligence claim to allege theories of liability that would fall outside the assault-or-battery exclusion. Under well-settled California law, that possibility was enough to trigger Burlington's duty to defend.