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Superior Court Holds that Extrinsic Evidence Should Not Be Considered When Determining Duty to Defend

The Superior Court of Pennsylvania recently held that extrinsic evidence could not be used in determining whether an insurer had a duty to defend. See Kiely v. Philadelphia Contributionship Ins. Co., 206 A.3d 1140 (Pa. Super. Ct. 2019).

In Kiely, an insured was sued by her home aide for intentional torts after the insured allegedly attacked the aide, caused injuries, and then terminated the aide’s employment. The insured had both homeowner’s and umbrella policies with the insurer. Both policies provided coverage for personal liability arising from bodily injury, and provided that if a suit was brought against the insured, the insurer would provide a defense to that suit. However, the policies also included exclusions limiting coverage for an expected or intended injury, and for “personal injury sustained by any person as a result of an offense directly or indirectly related to the employment of this person by the insured.” Based on the allegations of the aide’s complaint and the policy exclusions, the insurer refused to provide the insured with a defense.

The insured filed a declaratory judgment action against the insurer and also asserted claims for breach of contract and bad faith. At trial, the insured argued that she did not have the mental capacity to intentionally injure the aide, and was therefore entitled to coverage. The insurer ultimately moved for and was granted a compulsory nonsuit because the insured failed to establish that she had a diminished mental capacity such that she would be entitled to coverage. The insured appealed.

Although the Superior Court did affirm the trial court’s order, the Superior Court also held that the trial court erred in permitting the insured to introduce extrinsic evidence regarding her mental capacity because the underlying complaint did not allege or even suggest that the insured lacked mental capacity.  Instead, the Superior Court held that the duty to defend and indemnify is based solely upon the allegations contained in the complaint.  In this instance, the underlying complaint alleged an intentional act rather than a covered “occurrence,” and the Superior Court affirmed the trial court’s entry of a nonsuit.