Jurisdictions differ in how they label the process of reading the insurance policy along with the allegations of the complaint.
The comparison test requires the pleadings in the underlying suit to be read side by side along with the policy to determine whether the alleged damage or injury is covered or excluded.
Compare the pleadings to the policy and its endorsements. If it is not clear look at the secondary facts called extrinsic facts.
Extrinsic facts are anything outside of the policy form and the pleadings which can be admissible in court. Newspaper articles and social media postings, etc are good examples.
The “eight corner rule” looks to the “four corners” of the petition and to the “four corners” of the policy, in that they determine the duty to defend. The insurance company must review the allegations in the complaint.
Some states refer to this as the “four corners” rule, which requires the review of the “four corners” of the complaint.
However, what happens if the complaint allegations do not clearly answer whether the duty to defense is imposed?
The issue becomes apparent whether there are other facts that can be used by the insurance company or the insured to answer the question. This is called extrinsic evidence.
There is no rule as to the use of this evidence. Either approach by either the insurer or the insured can be used if it benefits one or the other depending on the circumstances. There are some differences as to when, by whom and how the evidence is admissible.
Some courts impose a duty upon the insurance company to investigate the claims before refusing to deny a defense, depending upon the circumstances.
Other courts do not require an investigation by the insurer, but they require that an insurance company consider the facts supplied by the insured.
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jurisdictions limit the use of extrinsic evidence to the insured only. Others, however, allow the insurer to consider extrinsic evidence to deny a defense.
Courts often reason that an insurer cannot avoid a defense based on knowledge of facts suggesting a claim is without merit, but can do so if that knowledge of facts indicates a claim is not covered. Still, other states tend to adhere to the strict complaint allegation rule, rarely allowing this evidence.
Author: Partners of Claims Resources and Solutions LLC publishes this article as a public service. It is provided for general information and is not intended to replace legal advice for specific cases.