The United States Court of Appeals for the Eleventh Circuit released an unpublished opinion on March 20, 2014, in Composite Structures, Inc. d/b/a Marlow Marine Sales v. The Continental Ins. Co., — Fed. Appx —, 2014 WL 1069253 (11th Cir., Mar. 20, 2014), addressing whether a court may consider information outside the eight corners of the complaint and insurance contract when analyzing an insurance company’s duty to defend.  The case concerned a boat manufacturer that was insured under a series of commercial general liability insurance policies.  Two seamen sued the boat manufacturer claiming that they sustained injuries as the result of being exposed to excessive amount of carbon monoxide while working in a boat that was built, designed, completed, outfitted, manufactured and sold by the boat manufacturer.  After being served with the lawsuit, the boat manufacturer tendered the defense of the lawsuit to its insurance company under the commercial general liability insurance policies.  The insurance company denied both a defense and indemnity.  In support of the denial, the insurance company cited an exclusion that required that the continued exposure to a pollutant must be known by the insured boat manufacturer within 72 hours after its commencement.

The boat manufacturer settled the claims with the injured parties, then filed suit against the insurance company seeking a declaratory judgment that the insurance company had a duty to defend and indemnify it in the underlying suit.  The parties filed cross-motions for summary judgment.  The U.S. District Court for the Middle District of Florida granted the insurance company’s motion, denied the insured’s, and entered judgment.  In making its decision, the trial court considered extrinsic information.  Specifically, the district court considered evidence that established notice of pollution exposure was not provided within 72 hours.  The insured appealed the case to the Eleventh Circuit due to the trial court’s consideration of extrinsic evidence.

Under Florida law, which controlled the diversity action, an insurer’s duty to defend is generally determined solely from the allegations in the complaint against the insured—not the actual facts of the claims against the insured, the insured’s version of the facts, or the insured’s defenses.  Any ambiguity in the complaint is construed in favor of providing a defense.  Florida courts have recognized limited exceptions to the general rule, however, when there are extrinsic facts that typically would not be alleged in the underlying complaint against the insured.  See, e.g., Higgins v. State Farm Fire and Cas. Ins. Co., 894 So.2d 5, 10 n. 2 (Fla. 2005).  For example, Florida law permits a court to consider extrinsic information when considering application of a prior litigation exclusion.  The Eleventh Circuit determined that the Marlow Marine case presented a situation where extrinsic evidence should be considered.  In particular, the court noted that the exclusion relied upon by the insurance company required consideration of the timing of the notice provided to the insured.  Because that information would not typically be alleged in a complaint against an insured, the Court of Appeals determined the district court properly considered extrinsic evidence concerning notice.  The extrinsic evidence conclusively established—and it was undisputed—that the injured parties did not provide notice of the pollution exposure within 72 hours as required in the insurance contract.  The insurance company, therefore, did not have a duty to defend because there was no possibility that the injured parties’ claims could not fall within the coverage granted in the insurance contract.

The attorneys at MLR are experienced in analyzing issues concerning an insurance company’s duty to defend and indemnify an insured.  Please contact us with any questions about this case summary or any other matter addressed in the Insurance Coverage Blog.

UPDATE (Apr. 8, 2014): The Continental Insurance Company, appellant in the above case, has filed a motion with the Eleventh Circuit to publish the opinion in the case.  A copy of the motion can be viewed here.  We will update the post when further information comes available.

UPDATE (June 11, 2014): On June 5, 2014, the Eleventh Circuit denied The Continental Insurance Company’s motion to publish the opinion in the case.  The Order is available here.