In Lupa v. Loan City, LLC, the Third Circuit Court of Appeals confirmed the standard upon which an insurer’s defense obligations are triggered under Pennsylvania law.
In Lupa, the insured sought coverage from its insurer for various claims asserted against it. In response to the insured’s request for defense, the insurer denied the insured’s claim, contending the complaint against the insured did not trigger coverage under the policy. On appeal, the insured contended that the four corners rule should not be applied to determine coverage under a policy. The Court of Appeals disagreed. The court held that, under Pennsylvania law, an insurer’s duty to defend could only be triggered by allegations within the four corners of the complaint. The court continued that there were no exceptions to this rule, which would require an insurer to rely on facts introduced outside of the complaint, i.e. extrinsic evidence.
Accordingly, this case confirms that courts applying Pennsylvania law will apply the four corners test to determine whether an insurer’s obligation to defend has been triggered.
Thanks to Colleen Hayes for her contribution to this post.