From the Desk of Kyle D. Riley: An insurer’s duty to defend an insured is triggered by the allegations made in a complaint. This case looks at when an exception to this general rule, allowing outside facts to be read into the complaint to determine a duty to defend, is appropriate.
Claims Pointer: An insurer does not have a duty to defend an insured if the alleged claims in a complaint are clearly outside of the policy’s coverage. Facts outside of the complaint may be considered in evaluating a duty to defend if the allegations in the complaint are in conflict with facts that the insurer has actual knowledge of. However, when it is clear from the face of the complaint that the allegations are not covered by the insurance policy, an insurer has no obligation to consider extrinsic evidence. Additionally, as shown in this case, additional facts obtained through discovery do not effectively become part of the complaint such that an insurer must consider them in evaluating its duty to defend.
Western National Assurance Company v. Maxcare of Washington, Inc., in the Court of Appeals of the State of Washington, Division I, No. 67952-0-I, — P3d —-, (December 24, 2012) (unpublished).
On February 23, 2009, Latisha Cueva left a pot of chicken broth cooking on the stove unattended while she ran errands. When she returned, her home was filled with smoke which resulted in smoke and odor damage. Ms. Cueva’s property insurer thereafter hired Maxcare of Washington, Inc. (“Maxcare”) to clean and repair her residence. Prior to its cleaning and remediation, Ms. Cueva told Maxcare that her daughter had chemical sensitivity and Maxcare agreed to not use any chemicals during the remediation process. After the cleaning was done, Ms. Cueva moved back home with her daughter and they began experiencing physical symptoms they associated with use of chemicals by Maxcare. Ms. Cueva’s insurer thereafter hired an industrial hygiene services provider to test and clean the home. After the home was further cleaned and tested within normal levels, Ms. Cueva and her daughter returned. However, they continued to exhibit physical symptoms that they attributed to Maxcare’s work. The Cuevas filed a lawsuit against Maxcare alleging that Maxcare contaminated the home with chemicals in violation of its promises to and instructions from the Cuevas and that severe and potentially permanent injury resulted. Maxcare then tendered the defense of this lawsuit to its insurer, Western National Assurance Company (“Western”). Based on a pollution exclusion in Maxcare’s policy, Western refused the defense. Maxcare brought a declaratory judgment action against Western to determine whether Western had a duty to defend. On cross motions for summary judgment, the trial court found for Western. Maxcare appealed.
In affirming the trial court’s ruling, the court of appeals observed that a lawsuit triggers an insurer’s duty to defend if the complaint against the insured alleges facts that, if proven, impose liability upon the insured within the policy’s coverage. However, the court of appeals found that the allegations in the Cuevas’ complaint fit squarely within the pollution exclusion of Western’s policy. Maxcare argued that a recognized exception to this general rule applied wherein facts outside the complaint could be considered if the allegations in the complaint were in conflict with facts the insurer had actual knowledge of. Maxcare argued that discovery conducted during the underlying litigation gave Western “actual knowledge” of potential theories of liability against Maxcare that were not present on the face of the Cuevas’ complaint and were not subject to the pollution exclusion of Maxcare’s policy. In essence, Maxcare was arguing that these additional facts received in discovery effectively became part of the Cuevas’ complaint and must be considered by Western in evaluating its duty to defend. The court of appeals disagreed, finding that Washington case law established that an insurer need not consider extrinsic facts if it was clear on the face of the complaint that the allegations were not covered by the policy. Further, the court found no case law which supported Maxcare’s broad application of the “actual knowledge” exception, and that without the Cuevas’ amending their complaint to conform to this evidence, the exception did not apply.
NOTE: This opinion has not been published. It is provided to demonstrate how the court approaches the issues involved in the case. It cannot be cited as authority to a court of law.
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