In the last issue of Coverage Opinions, I addressed a Florida federal court’s opinion in Southern Owners Ins. Co. v. Midnight Tires, Inc. where the court held that an insurer did not owe a defense, under an automobile policy, because the defendant was not an insured.  The issue was tied to who owned a certain automobile. 

On one hand, looking solely at the complaint on the ownership issue, the defendant could have been an insured.  At least it could not be ruled out.  So, based the “eight corners” rule, a defense would be owed.  However, in fact, and nobody disputed this, the answer to the ownership question precluded insured-status for the defendant.     

But the court cited to a “limited” exception, adopted by the Eleventh Circuit, “in which a court may consider extrinsic facts if those facts are undisputed, and, had they been pled in the complaint, they clearly would have placed the claims outside the scope of coverage. . . . The exception is limited to exceptional cases in which courts have crafted an equitable remedy when it is manifestly obvious to all involved that the actual facts placed the claims outside the scope of coverage.”

In adopting this exception, the court stated that “at some point in legal pleadings, common sense should prevail, which is in essence the basis for the limited exception to the four corners rule.”

Ironically, Southern Owners Ins. Co. v. Midnight Tires was addressed in the November 14th issue of CO.  Well, in the crazy coincidence category, on November 13th, an Alabama federal court issued a decision in which it had the same scenario before it.

In Mass. Bay Ins. Co. v. Robinson, No. 22-CV1236 (N.D. Ala. Nov. 13, 2023) the court addressed whether a defendant was an insured under an automobile policy.  Just as in Midnight Tires, the issue was tied to who owned a certain automobile.  The complaint was silent as to who owned the automobile.  So it could not be ruled out that the defendant owned it.

However, in fact, the defendant was driving her own automobile, and, thus, she was not an insured.  And nobody disputed this – not even the defendant herself.

But, alas, the court explained that it was bound by Tennessee Supreme Court (the governing law) decisions holding that the duty to defend is based solely by the allegations in the complaint.  Acknowledging that its decision was counterintuitive – so clearly not adopting the Midnight Tires rationale that “at some point in legal pleadings, common sense should prevail” -- the court reached the entirely predicable conclusion:

“In light of the Tennessee Supreme Court’s clear, repeated, and longstanding instruction that an insurer’s duty to defend arises ‘solely’ from ‘the allegations contained in the underlying complaint,’ this court finds that it cannot consider the evidence the Insurers have presented about Ms. Robinson’s ownership of the car involved in the accident. And because the allegations in the state court complaint are unclear about ownership of the car, the court is required to construe them in favor of coverage. The court must, therefore, DENY Massachusetts Bay’s motion for summary judgment as to its duty to defend under the commercial lines policy.” (citations omitted).