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What Is Duty to Defend?

When an insurance policy covers a policyholder, certain situations exist in which the insurer has a duty to defend an insured party. It is essential to understand the elements of the duty to defend when it comes to insurance coverage. A Phoenix insurance bad faith attorney can help an insured party understand his or her rights under the duty to defend and develop a legal response to any malfeasance on the part of an insurer.

Understanding Insurers’ Duty to Defend

The duty to defend applies to the allegations of a complaint against an insured party in relation to the terms of the insured’s policy. Generally, an insurer has a duty to defend an insured party if a complaint alleges an issue covered by the insured’s policy and the complaint does not include allegations of any exclusion to coverage.

Some jurisdictions rely solely upon the language of a complaint in comparison to the policy terms in question, and others require insurers to launch investigations to determine whether the facts of a complaint trigger a duty to defend. The frame of reference used in these determinations is the Four Corners Rule, sometimes referred to as the Eight Corners Rule, in regard to the four corners of a complaint, and the four corners of the insured’s policy terms. The corners refer to the exact contents of these documents.

What Is the Four Corners Rule?

In jurisdictions that follow the Four Corners Rule, the insurer has a duty to defend its insured party if the complaint potentially falls within the insured’s policy. In such jurisdictions, the court cannot propose hypothetical situations in which the insured would have a duty to defend, read facts into pleadings, or look outside the four corners of those pleadings.  The Four Corners Rule also applies to the insurer’s duty to indemnify and refers to the actual facts regarding the insured party’s liability in the related litigation.

Some jurisdictions may refer to this rule as the Eight Corners Rule in regard to the four corners of a policy plus the four corners of a complaint against an insured party. This is just a semantic distinction as the Four Corners Rule refers to the four corners of an insured party’s policy and a related complaint against the insured party. Ultimately, these rules prevent insurers from looking for unrelated or tangential facts and issues in an attempt to deny coverage as a safeguard for the rights of insured policyholders.

Complicating Factors Related to the Four Corners Rule

Different types of facts related to a Four Corners issue come into play and may influence an insurer’s obligation to defend an insured party. Those facts typically include unpled, but known facts that negate coverage, and unpled but known facts that trigger the insurer’s duty to defend. If the elements of a complaint conflict with the facts an insurer already possesses, or facts that would be easily ascertainable about the insured party, facts outside of the complaint could potentially come into play.

How an Attorney Can Help

Facts outside the four corners of a complaint cannot become justification for an insurer to deny the duty to defend. It is also vital for insured parties to fully understand when and how an insurer’s duty to defend against a complaint applies, and a Phoenix insurance bad faith attorney can be tremendously helpful in this capacity.

If an insurer refuses to defend an insured policyholder when the duty to defend clearly applies, or the insurer manipulates aspects of the related pleadings in an attempt to avoid upholding a duty to defend, that insurer commits insurance bad faith. A Phoenix insurance bad faith attorney can help address issues concerning duty to defend and encourage more fair and balanced interactions with insurers. Contact our firm to learn more.