The number of cases that set out the circumstances under which a defense is owed are incalculable.  The number of cases that set out the circumstances under which a defense can be withdrawn?  Not so many. 

Sure, lots of cases state that a defense can be withdrawn when there are no more covered claims remaining in the complaint.  But that paradigm situation, where the only covered claims(s) are dismissed, is few and far between.  Usually the issue is more complex, such as where information developed as part of an investigation, or in discovery, reveals that, despite what the complaint says, there are no longer any potentially covered damages.

Both of these situations were at issue in Voyager Indem. Ins. Co. v. Gifford, No. 21-242 (W.D.N.C. Oct. 3, 2022).  On September 17, 2020, Amaziah Dondero filed suit against Dakota Gifford alleging that, on August 4, 2020, Gifford crashed his vehicle into Dondero as he was crossing a street in Asheville, North Carolina.  In the complaint, Dondero alleged that, at the time of the accident, Gifford was operating his vehicle “in the course of making a food delivery for Door Dash.”

Voyager Indemnity issued a commercial auto policy to Door Dash.  The policy extended coverage to contractors operating as delivery drivers, subject to the following time frame: after the driver accepts an order and begins to use his or her automobile for delivery, with coverage ending upon completion of the delivery.

Based on the allegations in the complaint, Voyager undertook Gifford’s defense.  However, when it did so, Voyager had possession, from Door Dash, of Gifford’s activity log on the night in question, showing that Gifford had completed his last delivery before the time of the accident and had not accepted a new delivery.  Therefore, despite the allegation in the complaint, that, at the time of the accident, Gifford was operating his vehicle “in the course of making a food delivery for Door Dash,” the truth was clearly otherwise.  [Plus, Gifford admitted the same thing during his deposition – that he was not in the course of making a delivery for Door Dash at the time of the accident.]

On November 2, 2020, Dondero filed an amended complaint.  It was identical to the original complaint, except it had removed the allegation that Gifford was making a Door Dash delivery at the time of the accident.

On September 10, 2021, Voyager filed a declaratory judgment action.   It filed an amended complaint in the coverage action on November 29, 2021.    

The court addressed Voyager’s duty to defend and if, and when, it ceased.  The fact that a defense was not owed at the time of the original complaint -- if you considered the Door Dash activity log -- could not have been clearer.  And the activity log had been authenticated. 

However, the court concluded that this was not a basis to deny a defense.  The allegations of the original complaint – at the time of the accident, Gifford was operating his vehicle “in the course of making a food delivery for Door Dash” – is what controlled.

It was only after the amended complaint – what the court called the “operative complaint” – “[did] not allege facts arguably covered by the Policy and no facts demonstrating coverage have been revealed through the Plaintiff's investigation, [that] the Plaintiff does not have a duty to defend Gifford.”

It is not surprising that Voyager was able to cease defending Gifford after the amended complaint had been filed.  This is tantamount to the paradigm situation of there no longer being any potentially covered claims remaining in the complaint -- albeit, here, an amended complaint. 

But the challenge for insurers, of being able to cease defending, was on display by the court’s reliance on the “comparison test” for purposes of determining the insurer’s duty to defend” – put the complaint and the policy side-by-side and ask if there’s coverage.  This left the insurer with no way to extricate itself from a duty to defend, despite crystal clear evidence that the claim was not even potentially covered.