In its recent decision in Composite Structures, Inc. v. The Continental Ins. Co., 2014 U.S. App. LEXIS 5258 (11th Cir. Mar. 20, 2014), the United States Court of Appeals for the Eleventh Circuit, applying Florida law, had occasion to consider whether an insurer can rely on facts extrinsic to a complaint for the purpose of denying coverage based on the insured’s failure to comply with conditions precedent to coverage.

Continentals’ insured, Composite Structures, was named as a defendant in an underlying products liability suit concerning carbon monoxide exposure alleged by two individuals that worked aboard a watercraft that had been designed and built by Composite Structures.  The marine services general liability policy issued by Continental to Composite Structures contained a pollution buy-back endorsement, providing an exception to the policy’s pollution exclusion, but only to the extent that certain conditions are satisfied.  Among these conditions are that the pollution event can be identified as commencing at a specific time, the event is discovered within seventy-two hours of its commencement, and the event is reported to Continental within thirty days after the insured became aware of the incident. 

Continental disclaimed coverage to Composite Structures on the basis that Composite Structures did not learn of the incident within seventy-two hours of its commencement and that in any event, notice was not given to Continental within the requisite thirty days.  Composite Structures argued that Continental improperly looked beyond the allegations of the underlying complaint in order to determine that the these conditions precedent were not satisfied.

In considering the issue, the Eleventh Circuit noted that under Florida law, an insurer’s duty to defend typically is determined solely by the four corners of the complaint and that extrinsic facts are not to be considered.  The court further observed, however, that Florida’s Supreme Court has recognized exceptions to this rule “where an insurer’s claim that there is no duty to defend is based on factual issues that would not normally be alleged in the complaint.”  Ginnins v. State Farm Fire and Cas. Co., 894 So.2d 5 (Fla. 2005).  Such an exception existed with respect to the pollution buy-back, explained the court, since the underlying complaint was silent as to the dates upon which Composite Structures became aware of the incident and reported it to Continental. 

While Composite Structures argued that the complaint’s silence on these issues “did not completely foreclose the possibility of coverage,” the court disagreed, reasoning that “Continental was permitted to consider the uncontroverted date of written notice when determining its duty to defend because the date of written notice to the insurance company is not a fact that would normally be alleged in the complaint.”  Rather, a products liability claim focuses on theories of negligence and strict liability, neither of which, explained the court, “required plaintiffs to allege the date the defendant informed its insurer of the occurrence,” particularly since this information would not ordinarily be available to the plaintiffs.  As such, and having concluded that Composite Structures did not learn of the pollution event within three days of its commencement and report it within thirty-days thereafter, the court agreed that Continental could have no duty to defend or indemnify, since there was no possibility of coverage.