Analyzing duty to defend questions is often harder than many people think, and I see a quite a few instances in which people get tripped up by jumping ahead in the analysis without satisfying the initial steps. Mid-America Pipeline Company, Inc. v. Mountain States Mutual Casualty Co., 2006 WL 1278748 (D. Utah May 8, 2006) provides a good example. The case concerns a huge gas pipeline explosion near Moab, Utah, in which the town would have been destroyed by a pipeline rupture had not the gas cloud burst into flames before it could spread further. The insurer for one of the pipeline contractors refused to provide a defense against claims the company caused delays in finishing the pipeline, on the grounds that no covered property damage was alleged in the complaint (Utah is one of the "eight-corner" states in which insurers must evaluate the duty to defend only in light of the policy and the allegations of the complaint). The insured objected, saying it was obvious a fireball had occurred and caused damage. However, as the court pointed out, the insurer’s knowledge that there was an actual fireball and property damage was irrelevant to the duty to defend under Utah law.
What is and what is not extrinsic evidence is often a tough question. Extrinsic facts are those that are extrinsic to the complaint and go to its merits. Facts that are related to the identity of the insured, however, or whether the policy is in effect at all, are not extrinsic in this sense. For example, many insurers today are faced with claims from entities that are related to but are not the named insured. Investigating which company is entitled to be considered as an insured at all is not making use of extrinsic facts as that term is understood.
However, here are two tougher questions for eight-corner jurisdictions. 1. If a complaint plainly alleges a covered act within the policy period, but personnel documents show the alleged tortfeasor couldn’t have committed the act because he had not yet begun working at the job, should the insurer accept the duty to defend, deny it, file a declaratory action or drop back 15 yards and punt? 2. If deposition testimony during a case shows the insured knew of a construction defect before the policy period began, can the insurer withdraw from the defense because it is a known loss?