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(Article from Insurance Law Alert, February 2020)

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The Tenth Circuit ruled that extrinsic facts could not be used to trigger an insurer’s duty to defend where the complaint failed to allege facts giving rise to the possibility of coverage.  Chavez v. Arizona Auto. Ins. Co., 947 F.3d 642 (10th Cir. 2020).

The coverage dispute arose out of a car accident in which Marlena Whicker rear-ended a taxi, injuring its passenger.  At the time of the accident, Whicker was living with the owner of the vehicle, but was not listed as an insured on the automobile policy.  However, the policy covered drivers who were using the vehicle with a named insured’s permission.  The injured passenger, as assignee of Whicker, sued the automobile insurer, seeking payment for a $700,000 default judgment that had been issued in the tort litigation.

The Tenth Circuit dismissed the complaint against the insurer, ruling that the underlying complaint did not trigger the insurer’s duty to defend.  More specifically, the court held that the complaint’s failure to plausibly allege (or raise an inference) that Whicker was a permissive insured under the policy was fatal to the request for a defense.  In so ruling, the court reiterated Colorado’s “four corners” complaint rule, under which the duty to defend arises only when the allegations in the complaint create the possibility of coverage under the relevant policy.  The court declined to consider extrinsic evidence bearing on Whicker’s potential status as a permissive driver, noting that the Tenth Circuit has recognized only two narrow exceptions to the “four corners” rule (permitting consideration of “indisputable [extrinsic] facts” and facts known from “parallel judicial proceedings”), neither of which applied here.