4th Circuit: Extrinsic evidence triggers duty to defend

Where an insurance carrier requested information from its insured about the timing of the exposure alleged by a plaintiff in an underlying suit, the carrier was required to consider that extrinsic evidence when assessing its duty to defend.

Background

In 2014, Phillip H. Riley and his wife sued Koppers Performance Chemicals Inc., a corporation that manufactures wood preservation chemicals, and other lumber industry entities in South Carolina state court, claiming that Riley “worked in the fence-making industry using treated lumber manufactured and/or provided by” Koppers and the other entities. Riley alleged that he developed cancer from exposure to chromated copper arsenate, or CCA, a chemical with which the lumber was treated.

Almost two years later, Koppers tendered a copy of the original complaint to Argonaut-Midwest Insurance Co., asserting that Argonaut had a duty to defend it in the Riley lawsuit under four commercial general liability policies. The policy periods spanned from 1979 to 1982, corresponding to the time Riley was an infant until he was almost 4 years old. Perhaps it was for that reason that Argonaut requested information from Koppers about the timing of the exposure alleged by Riley. In response, Koppers provided Argonaut with Riley’s deposition testimony in which Riley claimed exposure since birth.

Explaining that the original complaint did not bring claims against any entity insured under the policies, Argonaut stated that the policies did not provide coverage to Koppers in the Riley lawsuit. Riley subsequently filed an amended complaint against Koppers, this time alleging exposure to CCA-treated wood stored on the property on which he grew up and used in his later fence-building work. Koppers did not, however, tender the amended complaint to Argonaut as required for coverage under the policies. Koppers later settled Riley’s case.

A few years later, Koppers sued Argonaut, seeking a declaratory judgment that Argonaut owed duties to defend and indemnify it in the Riley lawsuit. Both parties filed motions for summary judgment. Interpreting the policies under Hawaii law, the district court granted Argonaut’s motion and denied Koppers’ motion.

Geographic scope

Argonaut does not dispute that cancer caused by exposure to Koppers’ wood-treating chemicals during the policy periods qualifies as a “bodily injury” caused by an “occurrence.” Rather, Argonaut argues that the policies’ coverage is limited to Koppers’ Hawaii operations, such that they only cover claims alleging a connection to those operations. Argonaut maintains that the district court correctly reached this conclusion since the policies only mention Hawaii locations and list Hawaiian DBA entities in the named insured designation.

However, the policies provide that “this insurance applies only to bodily injury … which occurs within the policy territory.” The policies define “policy territory,” in relevant part, as “(1) the United States of America, its territories or possessions, or Canada.” Nowhere do the policies expressly limit commercial general liability coverage to bodily injury arising out of the Hawaii locations listed in the policies. And while the policies’ named insured designation includes DBA entities, the policies fail to clarify the relationships between each of the entities listed in that designation.

Because the policies’ scope of coverage is subject to multiple reasonable interpretations as to its geographic limits and the covered entities, it is ambiguous. Under Hawaii law, that ambiguity is resolved in Koppers’ favor as the insured.

Defense obligation

The original complaint does not allege any bodily injury occurring during the policy periods. However, in assessing whether it had a duty to defend Koppers, Argonaut requested information concerning the dates of Riley’s alleged exposure. In response, Koppers provided Argonaut with Riley’s deposition testimony alleging exposure since birth.

The question, therefore, is whether in assessing its duty to defend, Argonaut could ignore extrinsic information that it requested after receiving a complaint that unambiguously failed to raise a possibility of coverage. Hawaii law does not clearly answer this question.

Under this court’s interpretation of Hawaii law, it believes that the Hawaii Supreme Court would hold that Argonaut was required to consider the extrinsic evidence it specifically requested from Koppers when assessing its duty to defend. The district court’s order granting Argonaut’s summary judgment motion and denying Koppers’ partial summary judgment motion on the issue of Argonaut’s duty to defend is therefore vacated.

Reversed and remanded.

Koppers Performance Chemicals Inc. v. Argonaut-Midwest Insurance Company, Case No. 23-1732, June 27, 2024. 4th Cir. (Quattlebaum), from DSC at Charleston (Gergel). Laura Figueroa Locklair for Appellant. Brandon Robert Gottschall for Appellee. 22 pp.