In Mt. Hawley Ins. Co. v. Roebuck, the liability insurer for the owners of a Florida outdoor shopping mall sought to avoid coverage in connection with a stabbing that occurred at the mall based on the insureds’ failure to comply with conditions precedent to coverage. The Eleventh Circuit, however, in agreement with the district court, found that because the facts extrinsic to complaint that were necessary to establish the conditions’ application were in dispute, the insurer owed a duty to defend.
Mt. Hawley Insurance Company issued a commercial general liability policy to the owners of the mall, which included an endorsement that required the owners to, among other things, enter into written agreements with its tenants that required the tenants to procure additional insured coverage in the owners’ favor and maintain liability insurance with limits of $1 million. The endorsement provided that failure to comply with those requirements would nullify Mt. Hawley’s obligation to defend or indemnify the owners in connection with claims “arising directly or indirectly” from the tenant’s “occupation, use or maintenance” of the leased space.
In December 2014, an altercation occurred between patrons at a bar and grill that was a tenant at the mall. The altercation, which occurred in the bar’s parking lot, resulted in the stabbing of one of the patrons, who subsequently sued the owners of the mall and the bar, alleging they breached their duty of care in failing to keep the patron safe at the premises. Mt. Hawley tendered the defense and indemnification of the owners to the bar’s liability insurer, who denied coverage. The bar’s liability policy included a sublimit for assault and battery claims of only $50,000.
Mt. Hawley commenced a declaratory judgment action against the owners seeking a declaration of no coverage in connection with the underlying action on the basis that the owners failed to satisfy conditions precedent to coverage since:
1. The bar’s insurer denied coverage to the owners
2. The limits set forth in the bar’s policy were inadequate
3. The underlying claims arose directly or indirectly from the bar’s operation of its leased space.
Florida, however, follows the eight corners rule when determining a duty to defend, which means an insurer’s duty to defend is dictated exclusively by the facts and legal theories alleged in the pleadings when compared to the terms of the policy. Facts extrinsic to the complaint are typically not considered when determining an insurer’s defense obligation. There was no dispute that the facts necessary to determine the owners’ failure to satisfy the aforementioned conditions were not alleged in the complaint. However, Mt. Hawley argued that the court could consider facts extrinsic to the complaint to determine the owners’ failure to satisfy conditions precedent to coverage, since such facts were not the type that would be alleged in the underlying action (i.e., whether the tenant’s liability policy carried the proper limits or provided coverage to the owners’ on a primary and noncontributory basis).
On appeal, both the district court and Eleventh Circuit recognized an exception to the eight corners rule when the extrinsic facts are undisputed. However, both found that the facts necessary to establish the conditions’ application here were in dispute, and thus Mt. Hawley’s defense obligation survived. Though it was undisputed that certain conditions were not satisfied, since the bar’s insurer refused to defend or indemnify the owners, and since the bar’s liability policy had insufficient limits, the conditions’ application in the first instance were in question. Specifically, at issue was whether the underlying plaintiff’s injuries arose directly or indirectly from the bar’s occupation, use, or maintenance of the leased premises such that the owners’ obligation to comply with the conditions was triggered. Since the facts necessary for this determination were in dispute (and, frankly, would be at the heart of the bar’s liability defenses in the underlying action), the district court found, and the Eleventh Circuit affirmed, that Mt. Hawley owed a duty to defend the owners.
This case is only a further example of Florida’s hesitance to stray from the long-standing precedent requiring strict application of the eight corners rule governing an insurer’s duty to defend.