A recent decision from a New York appellate court reminds us that, under New York law, the duty to defend may be triggered not only by the allegations of a complaint, but also by extrinsic evidence, i.e., actual knowledge of facts outside the four corners of the complaint establishing a reasonable possibility of coverage.
The issue in City of New York v. Wausau Underwriters Insurance Company was whether the City, a putative additional insured under policies issued to its electrical contractor, was entitled to a defense in five underlying personal injury actions. Per the additional insured endorsements attached to the contractor’s policies, the City was an additional insured for “liability caused, in whole or in part, by the negligent acts or omissions of [the electrical contractor]….” The complaints in two of the actions did not mention the City’s contractor; thus, the court found that the duty to defend was not triggered by the facial allegations of the complaints. Notwithstanding, in both cases the insurer had been notified by the City’s law department of facts establishing a reasonable possibility that the injury arose from work performed by the contractor under contract with the City. Thus, in those actions, the court found the duty to defend was triggered by extrinsic evidence.
The complaints in two other actions contained allegations against both the City and its contractor, and the City notified the insurers of facts establishing a reasonable possibility that the injury arose from work performed by the contractor were made known to the insurer. Thus, in both cases, the duty to defend was found to have been triggered both by the facial allegations of the complaints and by extrinsic evidence.
The court found that a fifth action did not trigger a duty to defend because, while there were allegations and extrinsic evidence that the injuries arose from work performed by the contactor, the accident occurred after the contractor’s work was completed, and therefore was excluded by the policy’s products-completed operation hazard exclusion.