Readers of the Insurance Commando Blog know we criticize Washington’s Supreme Court for proscribing insurers from looking outside the complaint to determine if they must defend. To provide some perspective, and useful information, this week we’ll summarize the extrinsic evidence rule in Washington and its neighbors. The table below encapsulates each state’s version of the rule:
|
State |
Can An Insurer Rely on Extrinsic Evidence? |
|
Alaska |
No. |
|
Idaho |
Unclear. |
|
Montana |
Yes. |
|
Oregon |
Only under narrow exceptions. |
|
Utah |
Used to depend on what the policy said. Now seems to forbid reliance on extrinsic evidence. See below for details. |
|
Washington |
Don’t even think about it. |
Below we’ll flesh out the above – and provide a few cites:
Alaska
Alaska appears not to have considered the extrinsic evidence rule much. Its Supreme Court has simply forbidden insurers from considering evidence outside the complaint in denying the duty to defend. State Dept. of Transportation v. State Farm.
Idaho
We couldn’t find an Idaho Supreme Court case (or any other state court case) in which the Court interpreted the rule. But an Idaho federal court held – annoyingly in an unpublished opinion – that an insurer could consider extrinsic evidence in denying the duty to defend. St. Paul Fire & Mar. Ins. Co. v. Aspen Realty, Inc., No. CV 05–355–S–MHW, 2007 WL 2682107, *1 (July 27, 2007 D. Idaho). Unless you are in front of Chief Magistrate Williams (the judge in St. Paul Fire & Mar. Ins. Co. v. Aspen Realty, Inc.), the prudent Idaho insurer probably ought to assume the “8 corners rule” applies.
Montana
Rejecting the majority rule, the Montana Supreme Court allows an insurer to deny the duty to defend even if the complaint alleges covered facts, but the insurer knows of facts negating its duty to defend. Landa v. Assurance Co. of America.
Oregon
Oregon generally forbids insurers from relying on facts outside the complaint to deny the duty to defend. Bresee Homes, Inc. v. Farmers Insurance Exchange. But Oregon state courts have allowed limited exceptions (1) when a civil action alleges accidental conduct, but the insured’s criminal conviction triggers the intentional act exclusion (Casey v. Northwestern Security Ins. Co.) or (2) to determine if the tendering party is an insured. Fred Shearer & Sons, Inc. v. Gemini Ins. Co. Also, Oregon federal courts have said extrinsic evidence may be considered to determine if insureds meet the more specific coverage requirements under claims made policies. Keizer Campus Operations, LLC v. Lexington Ins. Co. and Harris Thermal Transfer Products, Inc. v. James River Ins. Co.
Utah
Utah courts – at least for a time – had the most novel formulation of the rule. In 2001, the Utah Supreme Court held that policy language determines if insurers may rely on extrinsic evidence. Fire Ins. Exch. v. Estate of Therkelsen. Following the Court’s lead, the Tenth Circuit Court of Appeals held evidence outside what the complaint alleges is irrelevant if the policy defined “suit” as what is alleged. Employers Mut. Cas. Co. v. Bartile Roofs, Inc. The Utah Supreme Court, perhaps trying to allay head scratching, explained a bit further that if the policy has language such as “covered claim or suit,” a court may rely on extrinsic evidence. Fire Ins. Exch. v. Estate of Therkelsen. Not sure this clears up anything. Insurers need to know if they can look outside the complaint to determine if what is “alleged” is actually “covered.” It doesn’t seem – to this blogger anyway – that “covered” or “alleged” policy language provides much direction to the insurer. In a 2013 case, the Utah Supreme Court seemed to revert to a more conventional reliance on the “8 corners rule.” Basic Research, LLC v. Admiral Ins. Co. Good thing Utah is a small state.
Washington
As we’ve told you before, Washington refuses to allow an insurer to rely on any evidence outside the complaint in determining its duty to defend. Expedia, Inc. v. Steadfast Ins. Co.
Conclusion
Not surprisingly, each state puts its own stamp on the extrinsic evidence rule. Further, these states illustrate extreme interpretations of the rule (Montana’s apparent rejection and Washington’s refusal to recognize exceptions), plus positions in between (Oregon by recognizing narrow exceptions). And then there’s Utah.
*Thanks to fellow blogger Jeff Tindal for providing additional Oregon authorities.
