On July 30, 2015, the Tenth Circuit affirmed that an insurer that issued a commercial general liability policy with an auto exclusion for bodily injury arising out of the loading and unloading of an auto did not have a duty to defend. In Landmark Am. Ins. Co. v. VO Remarketing Corp., No. 14-1270 (10th Cir. July 30, 2015), the court held that the insured’s operation of unloading a piece of exercise equipment from an auto was not complete at the time the accident occurred, notwithstanding the underlying complaint’s asserted legal conclusions that the delivery had taken place.


Landmark American Insurance Company (Landmark), the insurer, brought a declaratory judgment action seeking a determination that it did not have a duty to defend or indemnify its insured, VO Remarketing Corp. (VO) against a lawsuit brought in Colorado state court. The claimant purchased an exercise machine from VO, and arranged for VO to deliver it to her home. Two VO employees lost control of the machine when they were maneuvering it up the stairs to the claimant’s loft, causing it to tumble down the stairs. The claimant, who was standing at a lower point along the stairway, was crushed by the machine and sustained serious injuries. The claimant filed the underlying action against VO, seeking damages for the personal injury and property damage she sustained.                         

In the ensuing coverage action, the federal district court granted Landmark’s motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), in which Landmark argued that the auto exclusion barred coverage for the claims asserted in the underlying action. The district court applied the policy exclusion and Colorado’s “complete operation” doctrine, and agreed with Landmark that the machine had not reached its place of final delivery and therefore  the process of unloading was not complete when the accident occurred.

Tenth Circuit Decision

On appeal, VO challenged the district court’s conclusion on a number of grounds, including VO’s primary argument that the district court failed to faithfully apply the complaint rule. VO contended that the district court improperly looked outside of the complaint’s four corners to determine that an auto was used and that the factual allegations in the underlying complaint did not establish that delivery was still in progress at the time of the accident.

The Tenth Circuit discussed at length its decision in Pompa, et al. v. American Family Mutual, No. 07-1138 (10th Cir. March 31, 2008), which recognized a narrow exception to the complaint rule. The Pompa decision permits consideration of a fact extrinsic to the underlying complaint in determining the duty to defend when such fact is undisputable, is not an element of a claim or a defense, and does not defeat the insured’s legitimate expectation of a defense.

VO contended that the district court improperly considered information extrinsic to the underlying complaint when it relied on Landmark’s declaratory judgment allegations that an auto was used to deliver the machine and on VO’s answer, which admitted same, in determining that Landmark did not have a duty to defend. The Tenth Circuit affirmed the district court’s conclusion, reasoning that whether an auto was used was not an element of a claim or defense in the underlying action and, therefore, that consideration of this allegedly extrinsic information was appropriate under the Pompa exception.

VO argued that Landmark could not establish delivery was still in progress because the complaint rule required the court to accept as true the underlying assertions that the delivery had occurred. The Tenth Circuit rejected this argument, concluding that the facts alleged in the underlying complaint, not the legal characterization of those facts, controlled the coverage determination. Thus, under the plain language of the policy and the “complete operation” doctrine, the underlying complaint’s allegations that the VO employees lost control of the machine during the ongoing delivery process supported application of the auto exclusion because VO had not yet completed delivery, notwithstanding the repeated legal conclusions that the machine had already been “delivered” at the time of the accident.

Practice Pointer

In Landmark, the Tenth Circuit reaffirmed its decision in Pompa and reinforced the concept that a court is not bound by the underlying complaint’s legal characterization of facts, but instead should consider the facts as a whole in determining whether there is a duty to defend. Furthermore, Landmark opens the door slightly wider with respect to consideration of extrinsic evidence not necessarily reflected in the underlying complaint, and plainly takes the case outside of policy coverage and supports the position that there is no duty to defend.