Connecticut Liberalizes "Four Corners" Rule
August 2005
The July 11, 2005, Supreme Court of Connecticut
case Hartford Cas. Ins. Co. v. Litchfield Mut. Fire
Ins. Co. involved a child being bitten by a dog. A suit seeking damages
was filed in connection with the incident. Various counts were directed against
Wylie as the owner and keeper of the dog, while various others were directed
against Strictly Dirt as the owner and keeper of the dog on its business premises.
by Kevin
Merriman
Goldberg
Segalla LLP
Litchfield Mutual issued two insurance policies, a commercial premises only
policy to Wylie as owner of certain property, and an identical policy to Strictly
Dirt, Inc., as lessee of the property. Wylie was president and sole stockholder
of Strictly Dirt, and was insured separately by Hartford Casualty under a homeowners
policy.
Litchfield Mutual defended Strictly Dirt but refused to defend Wylie. Hartford
Casualty defended Wylie and ultimately settled all claims against him. Hartford
Casualty and Wylie then filed a declaratory judgment action seeking a judgment
that Litchfield Mutual had a duty to defend Wylie in the dog bite suit under
its policies.
Hartford Casualty and Wylie argued that the complaint against Wylie alleged
that the child was an invitee at Wylie's place of business, so there was at
least the possibility that the injury occurred as a result of Wylie's business
conduct. These allegations, they argued, were sufficient to trigger Litchfield
Mutual's duty to defend.
Litchfield Mutual responded that Wylie and Strictly Dirt requested only "owners,
landlords, and tenants" liability coverage, not general liability coverage.
Absent an allegation suggesting some connection between the dog and the premises
of Strictly Dirt, Litchfield Mutual argued it had no duty to defend Wylie. Litchfield
Mutual also argued that the complaint against Wylie did not allege that Wylie
was an employee of Strictly Dirt or that he kept the dog for business purposes.
Since the underlying action was based solely on Wylie's personal ownership of
the dog, it did not come within the coverage provided by the policies.
Finally, Litchfield Mutual argued that the complaint did not relate to Wylie's
ownership of the dog, to his ownership or maintenance of the insured premises,
or any operations that were necessary or incidental to the insured premises,
and that the policy issued by the Litchfield Mutual covered only liability that
arose from the use or condition of the insured building, not any and all liability
incurred by Wylie.
The court held that Litchfield Mutual had a duty to defend Wylie in the action.
Initially, the court observed that an insurer's obligation to defend does not
depend on the merits of a cause of action but on whether the complaint states
facts that bring the injury potentially within coverage. Thus, the insurer's
duty to defend must be measured by the allegations of the complaint, and it
is irrelevant that the insurer may get information from other sources that demonstrate
the injury is not in fact covered. In this case, the court viewed the relevant
question was whether the party claiming coverage was an insured party in the
capacity in which he was sued.
The court reviewed the language of the policies at issue, concluding that
one policy provided Wylie with premises liability coverage, while the other
provided Strictly Dirt with business liability coverage. The court found that
Litchfield Mutual could be obligated to defend Wylie under either policy; however,
the court examined only the policy issued to Strictly Dirt.
Comparing the language of the insuring agreement against the allegations
of the complaint, the court concluded that it was clear the injury was alleged
to have taken place on Strictly Dirt's premises, where the child was an invitee,
and where Wylie and his dog were located. The complaint thus created at least
the possibility that the underlying action against Wylie fell within the broad
"use of the premises" coverage in the Strictly Dirt policy. Applying "a widely
recognized definition of [use], [under which] an insured uses property … where
he puts [the property] to his own service or to the purpose for which it was
ordinarily intended," the court held that the dog bite incident "was sufficiently
related to Wylie's use of the Strictly Dirt premises simply because at the time
of the incident Wylie was conducting his ordinary business as covered by the
policy."
To trigger the duty to defend, however, Wylie must have qualified as an "insured"
under the policy; that is, he must have been acting as an employee at the time
of the incident, and there were no allegations of this in the complaint. The
court observed, however, that an:
- insurer may be obligated to provide a defense not only based on the
face of the complaint but also if any facts known to the insurer suggest
that the claim falls within the scope of coverage…. Where the insurer has
sufficient knowledge to show that a claim falls within coverage even though
not properly pleaded to [invoke] coverage, the carrier cannot make the face
of the complaint argument…
Relying on a New York Court of Appeals decision, the court held that "we
should not employ a ‘wooden application of the ‘four corners of the complaint'
rule [that] would render the duty to defend narrower than the duty to indemnify'"
and that "'the sounder approach is to require the insurer to provide a defense
when it has actual knowledge of facts establishing a reasonable possibility
of coverage.'" See Fitzpatrick v. American Honda Motor
Co., 78 N.Y.2d 61, 67, (1991). The court concluded that in this case,
Litchfield Mutual had information from multiple sources that Wylie was an employee
of Strictly Dirt, and that he therefore fell within the definition of "insured."
The information was derived from applications for insurance, depositions testimony,
and affidavits submitted by the insured in the underlying action.
Finally, the court rejected Litchfield Mutual's argument that the policy
was an "owner, landlord, tenant" policy, which did not provide general liability
coverage, since the policy language did not reflect this limitation on coverage.
There was no requirement that the complaint allege a relationship between the
dog and the insured premises. The court concluded, therefore, that Litchfield
Mutual was obligated to defend and indemnify Wylie in the underlying action.
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