Opinion ID: 200147
Heading Depth: 1
Heading Rank: 2

Heading: Interpreting the Policies

Text: Like most other jurisdictions, Massachusetts imposes a broad duty to defend on insurers: [i]t is axiomatic that an insurance company's duty to defend is broader than its duty to indemnify. Boston Symphony Orchestra v. Commercial Union Ins. Co., 545 N.E.2d 1156, 1158 (Mass. 1989). The Supreme Judicial Court (SJC) has observed that the duty to defend is based on the facts alleged in the complaint and those facts which are known by the -6- insurer. Boston Symphony, 545 N.E.2d at 1158. Thus, the insurer must accept tender of a defense if the complaints state or adumbrate4 a covered claim when read in light of extrinsic facts5 bearing some relevance to the allegations that the plaintiff did not specifically include in the complaint, but were nonetheless known or readily knowable by the insurer when the defense was tendered: [T]he question of the initial duty of a liability insurer to defend third-party actions against the insured is decided by matching the third-party complaint with the policy provisions: if the allegations of the complaint are reasonably susceptible of an interpretation that they state or adumbrate a claim covered by the policy terms, the insurer must undertake the defense. . . . Otherwise stated, the process is one of envisaging what kinds of losses may be proved as lying within the range of allegations of the complaint, and then seeing whether any such loss fits the expectation of protective insurance reasonably generated by the terms of the policy. Continental Cas. Co. v. Gilbane Bldg. Co., 461 N.E.2d 209, 212 (Mass. 1984) (quoting Sterilite Corp. v. Continental Cas. Co., 458 N.E.2d 338, 340-41 (Mass. 1984) (citations and footnote omitted)). 4 We follow the district court in defining to adumbrate to mean 'to give a sketchy representation of; outline broadly, omitting details (there was only time to adumbrate the plan)' or 'to suggest, indicate, or disclose partially and with a purposeful avoidance of precision (the meaning of the poem is adumbrated in its title).' OSF, 2001 WL at  n.1 (quoting 1 Webster's Third New International Dictionary 30 (1981)); see also Random House Webster's College Dictionary 19 (1992) (defining adumbrate to mean to give a faint image or indication of; outline or sketch). 5 When the parties refer to extrinsic facts, which they often do, we understand them to mean facts not referenced within the complaint. -7- Determining whether complaints adumbrate a claim can be a difficult interpretive exercise. OSF and USF&G advance widely varying accounts of how the court, applying Massachusetts law, is to analyze the complaints and facts extrinsic to them when envisaging what kinds of losses may be proved as lying within the range of allegations of the complaint. Continental Cas. Co., 458 N.E.2d at 212. USF&G argues that even if facts exist extrinsic to the complaint which, if they were pleaded, would trigger coverage . . . [t]here is no duty to defend if the allegations of the complaint are unambiguously outside the scope of policy coverage. OSF rejects this characterization of Massachusetts law and largely rests its case on the proposition that USF&G had a duty to defend OSF because Addamax could have sued for a covered personal or advertising injury on the basis of facts outside the complaints that were known or readily knowable by the insurer. State Mutual Life Assurance Co. v. Lumbermen's Mutual Casualty Co., 874 F. Supp. 451, 456 (D. Mass. 1995). Massachusetts courts generally use extrinsic facts (such as those set forth in demand letters to the insurer) to aid interpretation of the complaint, and not as independent factual predicates for a duty to defend. In attempting to envisag[e] what kinds of losses may be proved as lying within the range of allegations of the complaint, the insurer must examine the plaintiff's allegations in conjunction with facts that it knows or readily should know in order to determine whether coverage exists under the policy. Boston Symphony, 545 N.E.2d at 1158, 1160. -8- However, the insured cannot, in the absence of a complaint that requires coverage, force its insurer to defend the insured by simply telling the insurer facts that would create coverage. Id. at 1160; see also Kilgore v. Resumix, 1998 Mass.Super. LEXIS 170 (finding no duty to defend where defamatory utterance was neither alleged nor implied, and amendment of the complaint to state a defamation claim was a mere possibility). The language of Boston Symphony undercuts OSF's position that facts extrinsic to the plaintiff's allegations in the complaints, uncovered at any stage of the underlying action, can independently trigger a duty to defend that does not arise from the allegations of the complaints, however sketchily stated. Indeed, the SJC envisioned a limited role for extrinsic facts in liability insurance cases: We hold only that an insurer must give consideration to facts outside the complaint when it considers the allegations in the complaint to determine if coverage exists. Boston Symphony, 874 F. Supp. at 456. This holding is consistent with prior Massachusetts decisions emphasizing that there is no duty to defend if, at the time the claims were advanced, the insurer could reasonably have concluded that no aspect of the claims . . . fell within the scope of coverage. Millipore Corp. v. Travelers Indem. Co., 115 F.3d 21, 35 (1st Cir. 1997) (citing Polaroid Corp. v. Travelers Indem. Co., 610 N.E.2d 912, 916 (Mass. 1993)) (emphasis added). Thus, while the insurer can generally determine its duty to defend after the plaintiff submits the initial version of his complaint, the duty to defend may -9- occasionally arise during a later phase in the underlying action if the plaintiff obtains leave to amend and adds allegations that trigger coverage. Consequently, until there is an unalterable determination as to the nature of the underlying claim, any declaration of rights concerning the insurer's duty to defend cannot be conclusive. Lumbermen's Mut. Cas. Co. v. Belleville Indus., Inc., 555 N.E.2d 568, 575 (Mass. 1990). We therefore treat the extrinsic facts known or readily knowable to USF&G as an aid to interpreting the Addamax complaints. We do not consider them as independent grounds for a duty to defend. Functioning in this limited role, extrinsic facts work in tandem with the adumbrate standard to add substance and meaning to skeletal claims only adumbrated in the complaint. These facts, brought to the insurer's attention in a timely fashion by the insured, aid the insurer's informed review of the tender of defense by painting a fuller picture of the underlying action. However, extrinsic facts can also be misused by insureds seeking to transform a skeletal claim in the underlying complaint into an allegation arguably covered by the liability policy but unrelated to an actual claim in the complaint. Employed in this way, extrinsic facts could stretch the terms of the liability policy to encompass lawsuits beyond the contemplation of the parties when they contracted for the insurance. Hence, we must be mindful of the SJC's admonition in Boston Symphony that the insured cannot, in the absence of a complaint that requires coverage, force its insurers to defend the insured by simply telling the -10- insurer facts that would create coverage. Boston Symphony, 545 N.E.2d at 1160. We now discuss each of the two contested clauses of the policies in turn.