The duty to defend is a key responsibility of insurers under most insurance policies.1 While the duty to indemnify is also of great importance, the need for indemnity may be reduced or even eliminated by a successful defense. And insureds count on their policies to guard against not only the risk of their potentially bona fide liability to others but also the risk of having to defend against lawsuits based on highly disputed—or even outright frivolous—allegations. For this reason, the duty to defend is broadly construed across jurisdictions,2 and the insurer should always carefully consider the risks inherent in denying a claim for defense or withdrawing a defense during a lawsuit.
Yet, the duty to defend has real limitations.3 Insurance policies are designed to provide coverage for only certain risks, and they contain important exclusions to coverage. Where the duty to defend is too broadly construed or applied, the result is an expansion of the risk beyond that for which the insurer bargained. So, while it is true that the duty to defend may be triggered if the allegations of a complaint may potentially give rise to coverage for indemnity, it is conversely true that where a complaint alleges only facts excluded from coverage, there is no duty to defend.4 Thus, while insurers fairly evaluate claims and provide defense and indemnity when owed, it is important for insurers to closely examine claims to identify instances where the duty to defend may not apply. Because of the risks inherent in wrongfully denying or withdrawing a defense, the determination of whether the duty to defend is owed must be made carefully, with due consideration given to the laws of the jurisdiction and the procedural posture of the case.
Overview of the Duty to Defend
The duty to defend is an insurer’s obligation under a policy to defend the insured against lawsuits or other claims brought by third parties. Often, the insurer will have the right to select counsel for the defense, to control the defense, and to settle claims against the insured.5 Under some policies, however, the insurer may be obligated only to fund the insured’s defense, conducted by counsel of the insured’s selection.6 In either case, it is generally true that whether the duty to defend has been triggered is determined only by comparing the allegations in the complaint to the insuring agreement and other provisions of the policy, the so-called eight corners rule.7 Under that rule, if the allegations in a lawsuit against the insured could possibly give rise to the duty to indemnify the insured for a judgment against it, the duty to defend is triggered.8 Ordinarily, there must be lodged against the insured a lawsuit (or other demand or claim) for the duty to defend to exist.9 The allegations in such a lawsuit that will trigger the duty to defend will depend on the language of the policy at issue. The language of the policy is thus paramount in determining the existence of the duty to defend.
In contrast to the duty to defend, which is determined in most cases solely by the allegations in a complaint against the insured, the duty to indemnify the insured for a settlement or judgment is determined by the facts as they are uncovered and established.10 Thus, the duty to defend may exist even if it is ultimately found that the insurer has no duty to indemnify.11 And if there is never a duty to defend, there can generally be no duty to indemnify.12 In this respect, the duty to defend is said to be broader than the duty to indemnify.13
Determining the Duty to Defend
The eight corners rule. Under the eight corners rule, the allegations within the four corners of the complaint against the insured are compared to the language within the four corners of the policy. If the allegations in the complaint could possibly result in the establishment of facts that would give rise to the duty to indemnify the insured for a judgment rendered against it in the lawsuit, then the insurer has a duty to defend the lawsuit.14
Investigation of the facts. Because the allegations in a lawsuit against the insured must at least potentially trigger the duty to indemnify for the duty to defend to exist, the potential existence of the duty to indemnify affects the determination of the duty to defend; and the duty to indemnify depends on the facts, not merely allegations. Thus, in most cases, the insurer will want to have as much factual information as possible before rendering a decision on the duty to defend.
Usually, the policy will require the insured to provide the insurer with copies of any written claims, demands, pleadings, or other papers served on it, as well as certain other information available to the insured about the events giving rise to the lawsuit. The information provided by the insured will usually be sufficient for the insurer to determine the existence of the duty to defend. In many jurisdictions, the insurer may actually have a duty to investigate the facts before denying a defense, such as where the insured notifies the insurer of unpleaded facts that would potentially bring the lawsuit within the ambit of the duty to defend. Indeed, in Colonial Oil Industries v. Underwriters Subscribing to Policy Nos. TO31504670 & TO31504671,15 the court held that although the insurer generally had no obligation to independently investigate the claims against its insured, the insurer did have an obligation to give due consideration to its insured’s factual contentions and to base its decision on true facts. The requirement for an insurer to base its decision on true facts would thus necessitate that the insurer conduct a reasonable investigation into its insured’s contentions.16 The court reasoned that “[t]o relieve an insurer of any duty to investigate its insured’s contentions would allow the allegations of a third-party to determine the insured’s rights under its contract.”17 Accordingly, the court concluded that an insurer that denies a defense without adequately investigating the insured’s contentions (in addition to the pleaded facts) may be found to have wrongfully denied the defense if a reasonable investigation would have demonstrated that the duty to defend existed.18 In this respect, the eight corners rule can be considered a one-way street because in many jurisdictions it may prevent the insurer from looking to extrinsic facts to deny a defense but permit (or even require) the consideration of extrinsic evidence in determining whether the duty to defend exists.19
Potential exceptions to the eight corners rule. Where the duty to defend is not certain based on the allegations alone, or where the development of the facts and allegations as the lawsuit progresses may alter an initial determination as to the duty to defend, the insurer may have an interest in further investigating the facts. Indeed, in some instances, such as where the allegations are so vague as to render the determination of the duty to defend impossible based on allegations alone, the insurer may determine it is necessary to obtain additional underlying facts to accurately determine the existence of the duty to defend. In these circumstances, the insurer may inquire as to whether it is permitted to consider extrinsic evidence in denying the duty to defend.
In some jurisdictions, the eight corners rule is axiomatic and without exceptions.20 In other words, even if the insurer obtains facts demonstrating that there can be no duty to indemnify, the duty to defend will still exist until such facts are judicially established as long as the allegations against the insured still trigger the duty to defend. In other jurisdictions, as mentioned above, extrinsic evidence may be considered to trigger the duty to defend,but not to deny it.21
In other jurisdictions,22 there exist certain limited exceptions to the eight corners rule.23 In many cases, however, the scope and application of such exceptions are not clearly established by case law. In other cases, courts within a given jurisdiction may disagree about the very existence of such exceptions. In still others, such exceptions may be cast not as exceptions to the eight corners rule but rather as inquiries falling outside the scope of the eight corners rule. Thus, where the insurer believes that there are or may be facts outside the pleadings that could affect the existence of the duty to defend, it should carefully examine the law of the jurisdiction before relying on facts outside the pleadings in deciding to deny or withdraw a defense. When there is some doubt, the insurer may consider a declaratory judgment action on the duty to defend while continuing to provide such a defense under a reservation of rights.
One potential exception to the eight corners rule may allow extrinsic evidence to be considered in determining whether the party seeking a defense is, in fact, an insured or additional insured under the policy.24 Some courts have held that a defendant’s status as a noninsured may be shown by extrinsic evidence even if such evidence contradicts allegations in the underlying complaint, as long as the evidence is undisputed.25 Whether a defendant is an insured may also be cast as an inquiry outside the eight corners rule because a party that is not insured under a policy would not be entitled to a defense at all in most instances, and the eight corners rule only applies in determining whether an insured is entitled to a defense.26 Still other cases have found that the identity of the defendant as an insured is, in fact, determined from within the underlying complaint.27
Extrinsic evidence may also be considered in some jurisdictions in determining the existence of the duty to defend where the facts to be considered go solely to an issue affecting coverage and do not contradict or otherwise go to the veracity of the allegations against the insured, the right of recovery of the third party pursuing the lawsuit against the insured, or a defense by the insured. Such an exception may involve an insured’s failure to fulfill conditions precedent to coverage in a policy that have no relevance to third parties and no impact on a third party’s claim against the insured.28 Facts relating to such coverage conditions would not normally be pleaded by a third party because it would have no knowledge of or concern for them.
For example, Composite Structures, Inc. v. Continental Insurance Co. involved a policy that provided pollution coverage only where the “occurrence” became known to the insured within 72 hours after it commenced and was reported in writing to the insurer within 30 days thereafter.29 It was undisputed that the occurrence was not timely reported as required by the policy, yet the insured argued that because the complaint was silent as to when the claim was reported to the insurer, the duty to defend still applied. The court disagreed and held that the insurer was permitted to consider that extrinsic fact in denying the duty to defend—in an exception “to the general rule that the duty to defend is determined solely from the allegations of the complaint” because it was “not a fact that would normally be alleged in the complaint.”30 The court noted in support of its conclusion that the plaintiff “would likely not know, when filing suit, when a defendant informs its insurer of the incident.”31 And such a fact would not impact the veracity or legal validity of the plaintiff’s claims against the insured defendant.
In another case illustrative of this type of exception to the eight corners rule, Pompa v. American Family Mutual Insurance Co.,32 an insured on a homeowners policy was involved in an altercation with another person that resulted in that person’s death. It was undisputed that the insured was thereafter convicted of negligent homicide for the victim’s death. The victim’s heirs brought a wrongful death lawsuit against the insured. The insurer denied a defense to the insured based on intentional injury and criminal conviction exclusions in its policy. A judgment was rendered against the insured in the wrongful death action, and he settled with the plaintiffs, the victim’s heirs, agreeing to sue the insurer and assign to the plaintiffs much of the proceeds he might obtain. In his suit, the insured argued that the insurer was precluded from considering his conviction in denying the defense due to the eight corners rule because the complaint against him did not allege that he had been convicted of any crime. The Colorado district court granted summary judgment in favor of the insurer, and the insured appealed to the Tenth Circuit Court of Appeals.33
On appeal, the Tenth Circuit first articulated two reasons for the eight corners rule: (1) it protects the insured’s legitimate expectation of a defense, such that any uncertainty as to coverage should fall on the insurer; and (2) it prevents the insured’s defense from being compromised by a declaratory judgment action brought by the insurer while the underlying lawsuit is in progress.34 The Tenth Circuit found that the Colorado Supreme Court had not explicitly recognized any exceptions to the eight corners rule but noted that other courts had and quoted an insurance treatise for the proposition that “an insurer should not have a duty to defend an insured when the facts alleged in the complaint ostensibly bring the case within the policy’s coverage, but other facts that are not reflected in the complaint and are unrelated to the merits of the plaintiff’s action plainly take the case outside the policy coverage.”35 Given what it characterized as “authoritative support” for some exceptions to the eight corners rule and the Colorado Supreme Court’s suggestion that it might recognize an exception in an appropriate case, the Tenth Circuit applied an exception based on its belief that the Colorado Supreme Court would do so in the case presented.36
The Pompa court thus found it appropriate for the insurer to have considered extrinsic evidence in denying the insured a defense in the wrongful death action for a few reasons. First, the fact of the insured’s conviction for negligent homicide was undisputed, and that fact was not an element of any cause of action or defense in the wrongful death case. Second, the court found that recognizing an exception to the eight corners rule would not undermine the reasons behind the rule. In particular, the court found that the insured’s legitimate expectation of a defense would not be defeated “because an insured can have no reasonable expectation of a defense when an indisputable fact, known to all parties, removes the act in question from coverage,” and the omission of the insured’s criminal conviction in the underlying complaint could not turn the insured’s subjective expectation of a defense into a reasonable one.37 Further, the court found that applying an exception to the eight corners rule would not jeopardize the insured’s defense of the wrongful death action because the conviction was undisputed and known to all parties.
Importantly, the Tenth Circuit in Pompa noted that applying an exception to the eight corners rule would serve “a beneficial purpose: freeing an insurer from having to defend an action that from the outset clearly falls outside the policy’s coverage, particularly when, as here, the insurer has no realistic hope of recovering the costs of the defense from its insured.”38
In sum, extrinsic facts that are undisputed and have nothing to do with the merits of the claims and defense in the underlying lawsuit against the insured (such as the insured’s failure to satisfy other conditions to coverage under the policy) may be considered in denying a defense in certain jurisdictions. Courts may even be willing to follow the trend of creating such an exception where not already explicitly recognized.39 For such an exception to apply, some courts may also require that it not be possible to determine the duty to defend based on the allegations in the complaint.40 This requirement should be satisfied, however, where the extrinsic fact affecting the duty to defend has nothing to do with the merits of the underlying case, as it is not likely that such an irrelevant fact (from the plaintiff’s perspective) would be alleged.
Importantly, it may be the case that the existence and scope of potential exceptions to the eight corners rule are not clearly established by the law of the jurisdiction. Courts within a jurisdiction may even disagree about the existence and scope of such exceptions.41 If so, insurers should be circumspect in relying on facts outside the pleadings in deciding to deny or withdraw a defense. One course of action may be to institute a declaratory judgment action to determine the duty to defend while providing a defense under a reservation of rights. In that case, the insurer should be aware that the declaratory judgment action would likely be stayed pending the adjudication of the underlying lawsuit against the insured unless it is absolutely clear that the extrinsic facts relied on were undisputed and would have absolutely no impact on the insured’s potential liability in the underlying action.
Critically, even where a jurisdiction permits the consideration of extrinsic evidence in denying a defense, the information cannot contradict or in any way involve the allegations in the underlying lawsuit.42 This is true because even extrinsic evidence that may seem to clearly establish that a claim is not covered may not be admissible into evidence in the underlying action or—if disputed—simply may not be believed by a jury if admitted. In other words, even if philosophically a “fact,” unless judicially established or undisputed, extrinsic evidence in any way involving the merits of the claims and defenses in the underlying action may not form the basis of the denial of a defense. This is illustrated by the fact that an insurer will be bound to defend even groundless, false, or frivolous claims.43
Groundless, false, or frivolous lawsuits. Generally, if the duty to defend is triggered by the allegations of a lawsuit, it will exist even if the lawsuit is groundless, false, or frivolous.44 Indeed, the defense of groundless or frivolous lawsuits can be said to be one benefit of insurance for which the insured bargained.45 This is true precisely because the duty to defend is based on allegations, not facts. Alternatively, the insured would be forced to defend such lawsuits at its own expense, and it is possible that a jury could find an insured liable even if the allegations were groundless (from the insured’s perspective), especially where the evidence is sparse and based on the testimony of witnesses whose credibility may be questionable.
Scope of the Duty to Defend
Effect of covered and uncovered claims. If the duty to defend exists, an insurer generally will be obligated to defend the entire lawsuit against the insured, even if the lawsuit includes claims that if alleged alone would not trigger the duty to defend.46 The existence of both covered and uncovered claims in one lawsuit raises the question of whether the insurer can allocate defense costs such that the insured will bear defense costs with respect to uncovered claims and the insurer will bear defense costs with respect to covered claims.47 In some jurisdictions, such an allocation will not be permitted unless defense costs can be divided easily among covered and noncovered claims. For example, in Voorhees v. Preferred Mutual Insurance Co.,48 the New Jersey court held that the insurer was required to bear the entire defense cost because there was no reasonable means of prorating the costs between the covered and noncovered items. The court reasoned that any precise allocation of expenses would be impossible where a great deal of the costs were incurred in general preparation and could not be separated by distinct claims or time periods.
In other jurisdictions, however, the presumption is reversed such that an allocation will be permitted unless defense costs cannot be easily attributed to covered and noncovered claims.49 This may ultimately be a distinction without a difference because ,in most cases, defense costs will not be readily apportionable among covered and uncovered claims, at least where the claims arise from the same incident.50 However, where a lawsuit involves distinct incidences or types of wrongdoing, some of which are covered and some of which are not, allocation of defense costs may be feasible and permitted. For example, in Burlington Drug Co. v. Royal Globe Insurance Co.,51 the Vermont district court concluded that the claims and the time spent on the claims were distinguishable enough to apportion attorney fees accordingly based on the attorney’s affidavit of his time spent on each claim. In most cases, the insurer will have the burden of proving the proper allocation.52 Sometimes, the policy, especially one providing for reimbursement of defense costs rather than a pure defense, may provide for such an allocation, either prospectively or retroactively. For example, some policies provide that allocation will be decided by mediation or arbitration between the insurer and the insured.
Dispositive motions as to covered claims. Where a lawsuit against the insured contains both covered and uncovered claims, the conduct of the defense may also affect coverage. For example, the insurer may believe that a motion to dismiss or summary judgment motion is proper with respect to claims that are covered but likely groundless (i.e., where the lawsuit has been “pleaded into coverage”). The insured will obviously not have an interest in eliminating claims that are giving rise to its defense by the insurer (thereby leaving it to defend the lawsuit at its own expense), especially where it may have a legitimate belief that the covered claims have merit. This raises a variety of ethical considerations, especially where the insured’s defense counsel has been retained by the insurer under the right to control the defense. A full discussion of these issues is beyond the scope of this article.53 However, where defense counsel can determine the outcome of a coverage issue by the manner in which the lawsuit is defended, a conflict of interest will generally exist. This is especially true where a certain course of action could result in mutually exclusive outcomes, one of which would benefit the insured and one of which would benefit the insurer, such as a dispositive motion on a covered claim as described above.54 In such a case, the insurer may be prohibited from controlling the defense.
Continuination of the defense after policy limits are exhausted. Some policies’ limits (typically those providing for the reimbursement of defense costs as opposed to a defense) may be reduced by the payment of defense costs as well as amounts paid in settlement or in satisfaction of judgments against the insured. Other policies (typically purely defense policies) will provide that limits may be reduced only by the payment of settlements or judgments. In the latter case, the question arises of whether and under what circumstances or conditions the defense of the insured must continue after exhaustion occurs.
Policies will usually provide that the duty to defend terminates when the policy’s limits are exhausted by the payment of settlements or judgments, and such provisions will typically be enforced as long as they are clearly written and the insurer’s settlement was made under circumstances that comply with the rules of the jurisdiction.55 For example, the court in Pareti v. Sentry Indemnity Co.56 upheld a provision that a duty to defend would terminate upon exhaustion of limits by settlement payment, but noted that “inappropriate” settlements would be safeguarded by good faith duties of the insurer to guard against prejudicing the insured by the timing of its withdrawal from the litigation. Accordingly, prejudice to the insured may be considered in determining whether the duty to defend may terminate by the payment of a settlement, especially where trial is looming. Statutory law may also mandate that the duty to defend will continue after the exhaustion of policy limits under certain types of policies.57
Withdrawing a Defense
As discussed above, insurers are generally obligated to defend even groundless or frivolous lawsuits against insureds. Thus, in most cases, even if it appears from the evidence that a lawsuit will ultimately not give rise to a duty to indemnify, an insurer will not be permitted to withdraw a defense as long as the allegations against the insured trigger the duty to defend. The duty to defend does have important limitations, though, and an insurer is clearly within its rights to deny or withdraw a defense when justified by the circumstances. Even when justified, external factors such as the potential for prejudice to the insured by withdrawal of a defense near trial may affect an insurer’s determination of whether to withdraw a defense. Because of the risks of wrongfully withdrawing a duty to defend, insurers are generally careful to do so only when clearly warranted and may also consider declaratory judgment action to decide the issue of the duty to defend (while continuing to defend under a reservation of rights) rather than a unilateral withdrawal of a defense.58
In general, although the withdrawal of a defense is to be undertaken only after due consideration, it is proper in many circumstances. Obviously, if the underlying complaint is amended so that potentially covered claims are no longer alleged, the duty to defend will end and a defense may be withdrawn.59 Where a court enters summary judgment disposing of all potentially covered claims, the duty to defend should also terminate, permitting the withdrawal of the defense. Indeed, in Conway Chevrolet-Buick v. Travelers Indemnity Co.,60 the court reasoned that once the covered claims were dismissed by the court’s grant of summary judgment, there were only counts falling directly within the policy exclusions remaining, resulting in no continuing basis for coverage. Thus, where the complaint asserted no live counts outside the exclusion, Travelers did not breach its contractual duty to defend when it withdrew. But some courts have found the duty to continue despite an interlocutory ruling disposing of all covered claims.61 And, as discussed above, the withdrawal of a defense may also be permissible where the policy’s limits have been exhausted.62
In jurisdictions that allow an exception to the eight corners rule, another basis for withdrawing a defense may be the discovery of facts extrinsic to the underlying complaint—unrelated to the underlying lawsuit against the insured—that take the matter outside the scope of coverage, as discussed above. However, it will usually be true that the duty to defend existed until such facts were discovered by the insurer; otherwise, the defense would presumably not have been provided in the first instance. Thus, in such a case—depending on the strength of the extrinsic evidence impacting coverage—it may be advisable for the insurer to seek a declaratory judgment on its duty to defend after reserving the right to withdraw and continue to defend under a reservation of rights until prevailing on the declaratory judgment action.
An insurer’s right to withdraw a defense may be tempered by the doctrine of estoppel. In many jurisdictions, if the insurer has knowledge of facts (or had the ability to obtain such knowledge) and undertakes a defense of the insured, it may be estopped from withdrawing the defense if doing so would prejudice the insured.63 Whether the insurer had or could have had such knowledge will be impacted by its investigation of the facts prior to accepting a defense (including whether it had a duty to do so), as discussed above. Prejudice to the insured can be demonstrated where defense counsel also assists the insurer in formulating a coverage defense, where there is evidence of inadequate representation by defense counsel, or where the insurer has been defending for a long period of time and trial is looming.64 Where estoppel is shown, an insurer should be liable only for damages stemming from the insured’s actions, as coverage cannot be expanded by estoppel.65 In some jurisdictions, however, the assumption of a defense with knowledge of facts later relied on to deny the defense may waive the coverage defense, potentially exposing the insurer to liability to indemnify the insured for an otherwise uncovered risk.66 Note that some commentators have questioned the propriety of waiver or estoppel preventing an insurer from withdrawing a defense where the facts or procedural developments establish the termination of the duty to defend.67 The risk of being precluded from withdrawing a defense by waiver or estoppel may be guarded against in certain jurisdictions by the insurer obtaining a nonwaiver agreement or sufficiently reserving its right to deny coverage and withdraw a defense.68
Finally, if an insurer elects to pursue a declaratory judgment action on the duty to defend, such an action may be stayed until the conclusion of the underlying lawsuit if it involves coverage issues that overlap with those in the underlying lawsuit. If not, the declaratory judgment action may proceed; and if the insurer prevails, its duty to defend would cease.69
Certainly, claims professionals are familiar with the duty to defend. Yet, it is important to frequently review the scope and contours of the duty so it may be evaluated and applied correctly. For while the duty is broad and there are risks to making an incorrect determination as to its existence, it does have important limitations that must be enforced. This is necessary to ensure that losses are well understood and reliably accounted for so that insurance may be affordably provided to the very insureds that rely on it. n
. See State Farm Fire & Cas. Co. v. Harper, No. 89-15598, 1990 U.S. App. LEXIS 19253, at *2 (9th Cir. Oct. 31, 1990) (“[T]he nature and kind of risk covered by the policy [i]s a limitation on the duty to defend. Where there is no possible liability under the policy because the claim is not of the ‘nature and kind’ covered by the policy, there is no duty to defend.” (alterations in original) (citation omitted)).
. See Burlington Ins. Co. v. Normandy Gen. Partners, 560 F. App’x 844, 848 (11th Cir. 2014); ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 840 (5th Cir. 2012); Ross Dev. Corp. v. PCS Nitrogen Inc., 526 F. App’x 299, 305 (4th Cir. 2013).
. See Duty to Defend, Int’l Risk Mgmt. Inst., www.irmi.com/online/insurance-glossary/terms/d/duty-to-defend.aspx (last visited May 7, 2021).
. See Hartford Cas. Ins. Co. v. Trinity Universal Ins. Co. of Kan., 153 F. Supp. 3d 1323, 1349 (D.N.M. 2015). The eight corners rule is also referred to in some jurisdictions as the “four corners rule,” the “complaint allegation rule,” the “exclusive pleading rule,” or the “scope of the allegations test.” Canal Ins. Co. v. XMEX Transp., LLC, No. EP-13-CV-156-KC, 2014 U.S. Dist. LEXIS 123605, at *33 (W.D. Tex. Sept. 4, 2014); Susan Randall, Redefining the Insurer’s Duty to Defend, 3 Conn. Ins. L.J. 221, 226–28 (1997).
. Acadia Ins. Co. v. Hinds Cnty. Sch. Dist., 582 F. App’x 384, 387–88 (5th Cir. 2014); Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318, 1324 (11th Cir. 2014); Columbia Cas. Co. v. Ga. & Fla. Railnet Inc., 542 F.3d 106, 110–11 (5th Cir. 2008); Home Ins. Co. v. St. Paul Fire & Marine Ins. Co., 229 F.3d 56, 66 (1st Cir. 2000).
. Id. However, because the facts adduced at trial may differ from the allegations, a duty to indemnify can sometimes be shown after trial even if there was no duty to defend during the lawsuit. Colony Ins. Co. v. Peachtree Constr., Ltd., 647 F.3d 248, 254 (5th Cir. 2011).
. 491 S.E.2d 337, 338–39 (Ga. 1997). Of course, where the insurer accepts the defense, the insured likely would not challenge whether the insurer adequately investigated the claim beforehand. However, such an investigation (or lack thereof) prior to accepting a defense may be relevant if the insurer later uncovers facts upon which it seeks to withdraw a defense, as its prior knowledge of such facts could serve as grounds to estop the insurer from withdrawing the defense. This is discussed below.
. E.g., Wendel v. Travelers Cas. & Sur. Co. of Am., 472 F. App’x 620, 622 (9th Cir. 2012) (“[I]n Washington an ‘insurer may not rely on facts extrinsic to the complaint to deny the duty to defend—it may do so only to trigger the duty.’”(emphasis in original)); Nautilus Ins. Co. v. Nevco Waterproofing, Inc., No. H-04-2986, 2005 U.S. Dist. LEXIS 30939, at *32–37 (S.D. Tex. July 11, 2005) (discussing the eight corners rule exception, which allows consideration of extrinsic evidence giving rise to a duty to defend).
. See, e.g., Canal Ins. Co. v. XMEX Transp., LLC, No. EP-13-CV-156-KC, 2014 U.S. Dist. LEXIS 93006, at *36–37 (W.D. Tex. Sept. 4, 2014) (“Tennessee law does not appear to allow any exceptions to its eight-corners rule.”); Sustache v. Am. Family Mut. Ins. Co., 735 N.W.2d 186, 191 (Wis. Ct. App. 2007) (“[T]he four-corners rule is the law in Wisconsin when measuring an insurer’s duty to defend, and the rule knows no exceptions until the supreme court unequivocally holds otherwise.”).
. Although a survey of jurisdictions that do and do not allow exceptions to the eight corners rule is beyond the scope of this article, permitting some limited exceptions to the rule appears to be a trend. See, e.g., Pompa v. Am. Family Mut. Ins. Co., 520 F.3d 1139, 1147 (10th Cir. 2008) (“Although the Colorado Supreme Court has not recognized any exceptions to the complaint rule, other courts have. . . . Given this authoritative support for some exceptions to the complaint rule, we believe that the Colorado Supreme Court would recognize an exception when doing so would not undercut the purposes served by the rule. Lending support to our belief is the Colorado Supreme Court’s suggestion that it might, in an appropriate case, recognize such an exception.”).
. E.g., Composite Structures, Inc. v. Cont’l Ins. Co., 560 F. App’x 861, 865 (11th Cir. 2014) (“The Florida Supreme Court has recognized there are exceptions to the general rule that the duty to defend is determined solely from the allegations of the complaint: ‘[T]here are some natural exceptions to this standard 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.’ Similarly, Florida District Courts of Appeal have concluded that, under certain circumstances, facts outside the underlying complaint can be considered when assessing the duty to defend.” (citation omitted)).
. E.g., Weingarten Realty Mgmt. Co. v. Liberty Mut. Fire Ins. Co., 343 S.W.3d 859, 869 (Tex. App. 2011) (“[U]nder the narrow exception created by the facts in this case, we conclude that an insurer marking a party seeking a defense as a total stranger to the policy does not contradict allegations material to the underlying merits when it shows by extrinsic evidence that there are no facts that could be pleaded under which the party would be entitled to a defense.”).
. E.g., Blue Ridge Ins. Co. v. Hanover Ins. Co., 748 F. Supp. 470, 473 (N.D. Tex. 1990); cf. Calderon v. Mid-Century Ins. Co., No. 03-97-00735, 1998 Tex. App. LEXIS 7982, at *11–13 (Dec. 29, 1998) (refusing to follow Blue Ridge because whether the defendant had permission to drive the car causing the accident at issue, and thus would have been an insured under the policy, was disputed).
. E.g., ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 839–41 (5th Cir. 2012) (“[O]ur analysis begin[s] with a determination of whether Freeport qualifies as an ‘additional insured’ under Brand Energy’s insurance policy, which includes a review of the 2009 purchase agreement. If we determine that Freeport qualifies as an additional insured during the relevant time period, our analysis will then proceed to the eight-corners rule to decide if the facts alleged in the underlying state court proceedings were sufficient to trigger ACE’s duty to defend Freeport as an additional insured under Brand Energy’s insurance policy.” (emphasis added) (citation omitted)).
. Id. at 1148. In dicta, the Tenth Circuit noted that recognizing an exception to the eight corners rule might not be necessary because the trial court could have taken judicial notice of the conviction, and judicially noticeable facts may be considered to be included in the four corners of a complaint. Id. at 1149.
. See ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 840 (5th Cir. 2012) (noting disagreement among Texas appellate courts as to whether any exception to the eight corners rule exists, and reasoning that any such exception would apply, if at all, only where “it is initially impossible to discern whether coverage is potentially implicated and when extrinsic evidence goes solely to a fundamental issue of coverage which does not overlap with the merits of or engage the truth or falsity of any facts alleged in the underlying case” (emphasis in original)).
. Compare Tex. Farm Bureau Underwriters v. Graham, 450 S.W.3d 919, 923–25 (Tex. App. 2014) (refusing to apply an exception to the eight corners rule while recognizing that other Texas courts had done so and that the Fifth Circuit had considered the possibility of such an exception), with Weingarten Realty Mgmt. Co. v. Liberty Mut. Fire Ins. Co., 343 S.W.3d 859, 865–69 (collecting cases and applying an exception to the eight corners rule).
. See Wausau Underwriters Ins. Co. v. Unigard Sec. Ins. Co., 80 Cal. Rptr. 2d 688, 697 (Ct. App. 1998) (“[T]he insurer may not decline to defend a suit merely because it is devoid of merit, but instead must assert appropriate defenses on its insured’s behalf in the underlying action. . . . This duty [to defend], which applies even to claims that are ‘groundless, false, or fraudulent,’ is separate from and broader than the insurer’s duty to indemnify.”). But see State Farm Fire & Cas. Co. v. Helminiak, 659 N.E.2d 385, 387 (Ohio Ct. Com. Pl. 1995) (“If, on the other hand, the ‘groundless, false, or fraudulent’ language does not appear in the policy, the determination of the duty to defend is not limited to the allegations in the underlying complaint and, in order to defeat coverage, the insurer may offer extrinsic evidence of the ‘true facts’ of the underlying complaint.”). The Helminiak decision has been criticized. See Valley Ford Truck, Inc. v. Phoenix Ins. Co., 813 F. Supp. 2d 859, 863–64 (N.D. Ohio 2011).
. See Travelers Prop. Cas. Co. of Am. v. Kan. City Landsmen, L.L.C., No. 14-11006, 2015 U.S. App. LEXIS 453, at *11 (11th Cir. Jan. 12, 2015); Phila. Indem. Ins. Co. v. Chi. Title Ins. Co., 771 F.3d 391, 399 (7th Cir. 2014); Perdue Farms, Inc. v. Travelers Cas. & Sur. Co. of Am., 448 F.3d 252, 258 (4th Cir. 2006).
. See, e.g., EEOC v. S. Publ’g Co., 894 F.2d 785, 791 (5th Cir. 1990); Okada v. MGIC Indem. Corp., 823 F.2d 276, 282 (9th Cir. 1986); Harborside Refrigerated Servs., Inc. v. IARW Ins. Co., 759 F.2d 829, 831 (11th Cir. 1985).
. See Liberty Mut. Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54, 63 (1st Cir. 2001). But see Santa’s Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339, 351 (7th Cir. 2010) (explaining variances in burden by jurisdiction).
. See U.S. Fire Ins. Co. v. Zurich Ins. Co., 768 N.E.2d 288, 295–98 (Ill. App. Ct. 2002); In re E. 51st St. Crane Collapse Litig., 923 N.Y.S.2d 64, 65 (App. Div. 2011); Am. States Ins. Co. of Tex. v. Arnold, 930 S.W.2d 196, 200–01 (Tex. App. 1996); Teigen v. Jelco of Wis., Inc., 367 N.W.2d 806, 810 (Wis. 1985); cf. Viking Ins. Co. v. Hill, 787 P.2d 1385, 1389–90 (Wash. Ct. App. 1990) (finding that a policy provision that the duty to defend would end when the insured had paid the “entire limit of liability for damages” would be enforced if the limits had been paid in good faith settlement rather than by unilateral payment into registry of the court). Under older policies not containing such language, the duty to defend may survive the exhaustion of limits. See Md. Cas. Co. v. W.R. Grace & Co., 794 F. Supp. 1206, 1221 (S.D.N.Y. 1991).
. See Mut. Serv. Cas. Ins. Co. v. Country Life Ins. Co., 859 F.2d 548, 552 (7th Cir. 1988) (“Insurance companies do not breach their requisite duties to defend when they bring suits for declaratory judgment even after first defending under a reservation of rights.”).
. E.g., Scottsdale Ins. Co. v. Bungee Racers, Inc., No. 4:04CV376, 2006 U.S. Dist. LEXIS 57730, at *20–23 (N.D. Miss. Aug. 14, 2006); Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 781–82 (Tex. 2008). Some jurisdictions may reach the same result under a waiver doctrine. E.g., Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1175 (5th Cir. 1992).