FILED

United States Court of Appeals

Tenth Circuit

January 17, 2020

Christopher M. Wolpert

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

GEORGIANA CHAVEZ, as assignee

of Marlena Whicker,

Plaintiff - Appellant,

v. No. 18-1473

ARIZONA AUTOMOBILE

INSURANCE COMPANY,

Defendant - Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

(D.C. NO. 1:17-CV-02572-MEH)

Marc R. Levy (Matthew W. Hall, Levy Law PC, and DezaRae D. LaCrue and

Keith R. Scranton, Franklin D. Azar & Associates, P.C., Aurora, Colorado, with

him on the briefs), Levy Law PC, Englewood, Colorado, for Appellant.

Winslow R. Taylor, III (Kurt H. Henkel and Robert S. Hunger with him on the

brief), Tucker Holmes, P.C., Centennial, Colorado, for Appellee.

Before TYMKOVICH, Chief Judge, BALDOCK, and HOLMES, Circuit

Judges.

TYMKOVICH, Chief Judge.
While driving a car insured by Arizona Automobile Insurance Company,

Marlena Whicker rear-ended a taxi and injured its passenger, Georgiana Chavez.

Chavez sued Whicker in Colorado state court and won a default judgment when

neither Whicker nor Arizona entered a defense. Whicker, unable to satisfy the

judgment from the lawsuit, assigned her rights against Arizona to Chavez, who

then filed this diversity suit against Arizona in federal court for failure to defend

Whicker in the underlying state court action. Her theory was that Arizona had a

duty to defend Whicker under Colorado law because Arizona knew that she was a

driver covered under its policy.

The district court disagreed with Chavez and granted Arizona’s motion to

dismiss. Under Colorado law, Arizona was only required to defend Whicker if

Chavez’s complaint plausibly alleged Whicker was insured under the Arizona

policy. We therefore reach the same conclusion as the district court and,

exercising jurisdiction under 28 U.S.C. §§ 1291 and 1294(1), AFFIRM its

dismissal of Chavez’s case.

I. Background

Whicker was driving a car owned and insured by another person in Aurora,

Colorado, when she became distracted and rear-ended a taxi carrying Chavez. No

one disputes that Whicker was at fault for the incident.

-2-
At the time of the accident, Whicker was living with the vehicle’s owner

but was not related to him. The vehicle was insured by Arizona, and both the

vehicle and owner were named in the policy. The owner was one of three named

insureds, but Whicker was not. Because she was not a named insured, the

insurance policy did not automatically provide coverage for Whicker’s use of the

covered vehicle, but the policy did cover drivers of the vehicle who used it with a

named insured’s permission, making those users insured in their own right.

Prior to the state court proceedings, Arizona learned that Whicker lived

with the named insured. In processing the claim against the vehicle’s named

insured, Arizona unsuccessfully attempted to contact him to determine if the

claim fell within the insurance policy and whether Whicker was a permissive user

of his vehicle. It attempted to contact him a second time, but his phone was not

in service. Arizona then denied coverage because it could not verify that Whicker

was actually a covered driver.

With her insurance claim unsatisfied, Chavez demanded a settlement with

Arizona seeking the policy limits. Arizona again denied coverage. Chavez then

sued Whicker in state court seeking damages for the accident and sent notice to

Arizona of the suit. Neither Whicker nor Arizona defended the suit, and a default

judgment was entered against Whicker for over $700,000. Whicker was unable to

satisfy this judgment and assigned Chavez the right to pursue bad faith claims that

-3-
she had against Arizona in lieu of payment. Chavez then brought this suit as

assignee of Whicker against Arizona in order to recover the damages and alleged

that Arizona breached its duty to defend Whicker in the underlying suit.

Arizona moved to dismiss the suit against it, arguing the complaint did not

trigger any duty on its part. The district court granted the motion because the

complaint in the underlying suit never properly alleged that Whicker was insured

under the policy.

II. Analysis

Chavez contends that Arizona breached its duty of good faith by failing to

defend Whicker in the underlying state court proceeding. She argues Arizona had

a duty to defend Whicker because it knew she might have used the covered

vehicle with a named insured’s permission and therefore might have been covered

by the policy.

For the reasons discussed below, we disagree.

A. Standard of Review

We review the district court’s interpretation of Colorado law and the

relevant insurance policy de novo. United Fire & Cas. Co. v. Boulder Plaza

Residential, LLC, 633 F.3d 951, 956 (10th Cir. 2011). We interpret Colorado law

as its own Supreme Court has done. “Where the state’s highest court has not

addressed the issue presented, [we] must determine what decision the state court

-4-
would make if faced with the same facts and issue.” Rash v. J.V. Intermediate,

Ltd., 498 F.3d 1201, 1206 (10th Cir. 2007) (quoting Oliveros v. Mitchell, 449

F.3d 1091, 1093 (10th Cir. 2006)).

B. The Complaint Rule

Colorado law generally requires an insurer to defend its insured from any

suit arising out of an incident covered by the relevant insurance policy.

Automobile insurers like Arizona are therefore often required to defend insured

drivers when those drivers are sued for damages resulting from an accident. But

that general duty is triggered only if the policy is plausibly implicated.

Colorado has adopted the so-called “complaint rule” as a pleading

requirement in such cases to determine when the policy is implicated and, by

extension, when the duty to defend arises. In a case challenging the failure to

defend, we apply the complaint rule to determine whether the insurer’s duty to

defend was properly triggered in the underlying litigation and therefore breached

by the insurer’s failure to provide a defense. Pompa v. Am. Family Mut. Ins., 520

F.3d 1139, 1145 (10th Cir. 2008).

In the prototypical complaint rule case, a plaintiff sues a defendant named

in an insurance policy. When that defendant’s insurer fails to provide a defense,

the defendant then sues the insurer for the failure or assigns his or her rights to do

so to a victorious plaintiff. See, e.g., id. The question in the suit against the

-5-
insurer is usually, then, whether the plaintiff’s complaint alleged the sort of claim

that would be plausibly covered by the insurance policy. And under the Colorado

complaint rule, a complaint must allege facts that would plausibly yield insurance

coverage. In short, to establish coverage for a specific tort, such as negligently

causing injuries in an automobile accident, one must first plausibly allege that the

tortfeasor is covered by the relevant policy.

The complaint rule focuses its inquiry on the complaint itself, and “we base

the determination of an insurer’s duty to defend on the allegations contained in

the underlying complaint,” to the exclusion of allegations made elsewhere. Cotter

Corp. v. Am. Empire Surplus Lines Ins., 90 P.3d 814, 829 (Colo. 2004) (en banc).

That is, when deciding whether the complaint makes a claim covered by the

policy, we look only within the four corners of the complaint and the four corners

of the policy. Id. at 827 (“We have consistently held that an insurer’s duty to

defend arises solely from the complaint in the underlying action.”); Pompa, 520

F.3d at 1145 (“Under the complaint rule, the insurer’s duty to defend is

determined by examination of solely the policy and the complaint.”). Thus the

complaint rule is sometimes referred to as the four-corners rule and, less

commonly, the eight-corners rule.

If the complaint alleges a claim that would be covered by the relevant

insurance policy, the duty to defend is triggered. The inverse is also true: if the

-6-
complaint does not allege on its face a claim that would be covered by the policy,

then there is no duty to defend. The complaint rule can, therefore, be used

offensively, as Chavez tries to use it here, to trigger a duty to defend, but it can

also be used defensively to demonstrate that no duty was ever created. Even

though it can be used in both ways, the complaint rule is not meant to allow

insurers to escape a duty actually owed to an insured. Indeed, the Colorado

Supreme Court stated that the rule “operates to cast a broad net, such that when

the underlying complaint alleges any facts or claims that might fall within the

ambit of the policy, the insurer must tender a defense.” Cyprus Amax Minerals

Co. v. Lexington Ins., 74 P.3d 294, 301 (Colo. 2003). This court, too, has noted

that the rule’s purpose is not to limit insurer’s duties to their insureds. See Apt.

Inv. and Mgmt. Co. (AIMCO) v. Nutmeg Ins., 593 F.3d 1188, 1194 (10th Cir.

2010) (noting that the rule “was never meant to be used by insurers as a shield in

order to avoid a legitimate duty to defend”). Rather, the complaint rule is a

mechanism meant to further the Colorado legislature’s public policy rationale

underlying the duty to defend. See id.; Hecla Mining Co. v. N.H. Ins., 811 P.2d

1083, 1090 (Colo. 1991).

Still, some instances arise in which plaintiffs so thoroughly fail to properly

allege any facts or claims that they do not trigger any duty, and insurers have

successfully used the rule to avoid defending claims against insureds. The

-7-
Colorado Supreme Court has stated multiple times that an insurer can be forced to

consider only the allegations in a complaint when avoiding the duty to defend. Id.

at 1089 n.10, 1090; Cotter, 90 P.3d at 827. That court has also held that an

insured cannot rely on extrinsic evidence to show that a duty to defend exists.

Compass Ins. v. City of Littleton, 984 P.2d 606, 615–16 (Colo. 1999).

C. Chavez’s Complaint

With all of this in mind, we now turn to whether allegations in the

underlying complaint, and not extrinsic evidence, plausibly demonstrated

coverage for Chavez’s injuries. To establish that the complaint did, it must have

alleged (1) Whicker was covered in her capacity as a driver of the covered vehicle

when she caused the accident and (2) the damage itself is the sort of damage

covered by the insurance policy.

We can dispose of the second item quickly. The Arizona policy covers the

sort of automobile collision presented in this case.

We turn, then, to the first item: whether the complaint properly and

plausibly identified Whicker as an insured, i.e. as a person who could properly

claim coverage for the type of incident that occurred. The policy includes as

insureds, inter alia: (1) the named insureds or their family members and (2) “[a]ny

person using [the named insureds’] covered auto with the express or implied

permission of” the named insureds. App. at 52. It continues: “No person shall be

-8-
considered an insured if that person uses a vehicle without the permission of the

owner or uses the vehicle as a converter.” Id.

Because Whicker was not named in the relevant policy, simply mentioning

her name would not automatically satisfy the requirement that the insured be

identified as an insured. Still, Whicker could have been identified as an insured

by a statement that her permissive use of the covered vehicle made her an insured

for these intents and purposes. But Chavez’s complaint did not directly allege

that Whicker was an insured under the policy. In relevant part, the complaint

only stated: “Defendant Marlena Whicker . . . is an individual and resident of

Adams County, State of Colorado.” App. at 33. It did not identify her as a

covered driver. Nor did it state her address, which might have linked her to the

named insured. Nowhere in the complaint did Chavez identify the vehicle that

Whicker was driving such that she might have at least demonstrated the defendant

was driving a covered vehicle. The return of service provided to Arizona also

failed to identify the address at which both Whicker and the named insured

resided. See App. at 36, 82. By naming a named insured, listing his address, or

identifying a covered vehicle, Chavez might have raised the inference that

Whicker was a permissive, insured user—an inference upon which Chavez relies

heavily. At the very least, including the named insured’s address might have put

Arizona on notice as to which policy might be at issue.

-9-
Because of these deficiencies in the complaint, Chavez’s suit against

Whicker failed to create a duty for Arizona to defend her. Without extrinsic

evidence, it is impossible to conclude from the complaint and policy alone that

Whicker was an insured under the policy. And because an insured cannot rely on

extrinsic evidence to show that a duty to defend exists, Chavez’s complaint failed

to trigger any duty under Colorado’s complaint rule as the Supreme Court has

explained it. See Compass, 984 P.2d at 615–16.

Even if a complaint fails to trigger a duty to defend under the traditional

formulation of the Colorado complaint rule, we have on occasion considered

whether an exception to the rule exists. Although Colorado courts have yet to

make any exception to the complaint rule,

1 we applied a modified version of the

complaint rule in two cases.

The first case was Pompa v. American Family Mutual Insurance Co., 520

F.3d 1139 (10th Cir. 2008). In that case, the insured defendant, Pompa, had

pleaded guilty to murder and was being sued by his victim’s family for wrongful

death. He requested that his insurer defend him in that suit, but the insurer

refused, leaving Pompa without a defense. The court entered a default judgment

against him much like the state court did in the suit underlying this one. Unable

1 The Colorado Supreme Court did briefly weigh in on the possibility of an

exception in Hecla, but it made no exception in that case. See Hecla, 811 P.2d at

1089 n.10.

-10-
to satisfy the judgment, Pompa sued his insurer and assigned the unsatisfied

plaintiffs rights to the bulk of any proceeds from this second suit. Pompa argued

that the Colorado complaint rule precluded his insurer from considering his guilty

plea when deciding whether to defend him in the wrongful death suit because his

conviction was not stated within the four corners of the complaint.

We rejected Pompa’s argument and recognized that “an indisputable fact

that is not an element of either the cause of action or a defense in the underlying

litigation” can be used to deny the duty to defend. Pompa, 520 F.3d at 1147.

Chavez suggests that Pompa recognizes an actual knowledge exception to the

complaint rule by which an insurer with actual knowledge of any claim not stated

in a complaint must still provide a defense based on that extrinsic claim. But

Pompa does not recognize such a broad exception to the complaint rule, and we

doubt that the Colorado courts would do so. Nor does Chavez point to

indisputable evidence that shows Whicker was a covered driver.

Following Pompa, we also considered the complaint rule in AIMCO v.

Nutmeg Insurance Co., 593 F.3d 1188 (10th Cir. 2010). In that case, we

considered “whether an insurer, in determining its duty to defend, can disregard

its knowledge of facts outside an individual complaint but contained in related

complaints and known to the insurer.” AIMCO, 593 F.3d at 1193 (emphasis

added). AIMCO had been a defendant in multiple suits arising out of a Ponzi

-11-
scheme orchestrated by an independent contractor in its employ. “Several of

these suits alleged either AIMCO’s direct involvement with the scheme or

liability for the actions of AIMCO’s independent contractor.” Id. at 1192.

AIMCO requested that its insurer, Nutmeg, provide a defense, but Nutmeg

declined because, when read in isolation, the individual complaints did not trigger

coverage under the relevant policies. AIMCO then brought suit to enforce

Nutmeg’s duty to defend. We concluded the rule would allow an insurer to

consider facts it knows from parallel judicial proceeding in determining coverage.

That scenario does not apply here because Arizona’s actual knowledge of

Whicker’s status as a plausibly insured driver does not come from “parallel

judicial proceedings” but from the insurance claims process.

To the extent Chavez invites us to broaden the exceptions that we

recognized in Pompa and AIMCO, we reject the invitation. In United Fire &

Casualty Co. v. Boulder Plaza Residential, we concluded that courts should be

wary of making an exception when interpreting Colorado’s complaint rule

because “the responsibility of the federal courts, in matters of local law, is not to

formulate the legal mind of the state, but merely to ascertain and apply it.” 633

F.3d at 961 (quoting Hardy Salt Co. v. S. Pac. Transp. Co., 501 F.2d 1156, 1163

(10th Cir. 1974)). We stated that this court should hesitate to recognize broad

-12-
exceptions when Colorado courts have not even recognized or ratified narrow

ones:

Neither the Colorado Supreme Court nor Colorado’s lower courts has

thus far recognized any exceptions to this rule, nor has either ratified

the two exceptions recognized by the Court in Pompa and AIMCO.

We are therefore wary of embracing a third, much broader exception

to the plain language of Colorado’s complaint rule absent clear

authority from Colorado’s highest court.

Id.

As neither Pompa nor AIMCO required Arizona to consider the extrinsic

evidence, the complaint rule applies.

III. Conclusion

Chavez’s complaint failed to trigger a duty for Arizona to defend Whicker

in the underlying suit because it failed to state on its face any facts that could

have even plausibly given rise to a claim covered by the Arizona policy.

Moreover, the facts of this case do not avail Chavez of the exceptions to the

complaint rule granted the insurer in Pompa or the insured in AIMCO. And

because our precedent compels us to decline to recognize another exception to

Colorado’s rule in this case, we will not find one.

We therefore AFFIRM the district court’s order dismissing the case.

-13-