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Vol. 5, Iss. 10
October 12, 2016

Self-Described “Four Corners” State
Looks To Extrinsic Evidence To Find Duty To Defend


Somewhere around 33 states, give or take, expressly allow resort to extrinsic evidence to determine if an insurer is obligated to defend its insured. How that works can be easier said than done. In other words, the rules regarding what evidence an insurer can look out for this purpose, and its source, can be less than clear.

On the other hand, the states that limit consideration to the four corners of the complaint, to determine if an insurer is obligated to defend, should be more predictable. And, in general, that is true. But there can be outliers, which makes even “four corners” states difficult to predict. Put Liberty Ins. Corp. v. Korn, No. 15-332-LPS (D. Del. Sept. 27, 2016) is this category. The coverage issue arose out of the following unusual facts.

Richard and Madga Korn are ex-spouses. In an underlying complaint, it was alleged that “Ms. Korn took a portable hard drive from Mr. Korn’s home approximately one month after the divorce and provided it to the New Castle County Police Department, believing it contained child pornography. Thereafter, police obtained a search warrant and seized Mr. Korn’s personal computer, which contained in excess of 25 images of child pornography. Mr. Korn was arrested on January 14, 2013 and was charged with 25 felony counts of dealing in child pornography, carrying a potential prison sentence of 50 to 625 years. On July 14, 2014, following trial, he was acquitted.”

Mr. Korn sued his ex-wife alleging malicious prosecution, defamation, abuse of process, intentional infliction of emotional distress and negligent infliction of emotional distress. He claimed loss of reputation, lost wages and earning capacity, severe mental anguish and emotional distress, loss of relationships with his minor daughters, expenses (medical, psychiatric and psychological), shame, embarrassment, and personal humiliation.

Liberty, Ms. Korn’s homeowner’s insurer, filed an action seeking a declaration that it owed no duty to defend or indemnity Ms. Korn against her husband’s complaint.

The court concluded that the complaint alleged both intentional and negligent conduct. Thus, the “occurrence” requirement was satisfied for purposes of duty to defend. However, Liberty argued that, nonetheless, no defense was owed because the complaint did not allege that Mr. Korn sustained requisite “bodily injury,” defined as “bodily harm, sickness or disease, including required care.”

On one hand, it was a non-issue. Mr. Korn claimed he suffered heart palpitations and chest pain. Ms. Korn and the court both concluded that that was “bodily harm.” However, here’s the rub. These allegations about Mr. Korn’s bodily harm were not included in the complaint. They were contained in medical records. Liberty argued “for the four comers limitation and call[ed] Ms. Korn’s reference to the record [in the case] ‘a brazen attempt to circumvent the appropriate scope of review.’”

The court observed that the Delaware Supreme Court has adopted the four corners rule for purposes of determining an insurer’s duty to defend. However, the court added that “while the four-comers guideline encourages definition of the parties’ roles and responsibilities as early and efficiently as possible, it does not restrict a court from referring to the record when doing so would be useful to its analysis.” (emphasis added). The medical records, the court concluded, were useful to the analysis.

Thus, Delaware’s duty to defend standard is “four corners,” with resort to the record when it would be “useful to the analysis.” So much for “four corners” states offering predictability. This is just like the less than clear tests that exist in some “extrinsic evidence” states. Given the potentially harsh insurer consequences for breaching the duty to defend, it seems like insurers deserve a more predictable test.


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