Courts scrutinize a complaint’s factual allegations to decide whether the allegations trigger a duty to defend. [1] If the facts unambiguously exclude coverage, there is no duty to defend. [2] But what if the factual allegations fall within a policy exclusion, but the allegations are untrue or questionable? What if the true facts would mean the exclusion doesn’t apply? In that case, many courts have found that the insurer should base its decision on the policyholder’s version of the “true facts.” [3] An insurer can’t rely on the complaint’s allegations to deny coverage when the facts that the insurer knows or can ascertain show that the claim is covered. [4]

A recent case, United Minerals & Properties Inc. v. Phoenix Insurance Co., No. 4:23-cv-00050 (N.D. Ga.), illustrates these policy interpretation principles.

Reprinted courtesy of Rachel E. Hudgins, Hunton Andrews Kurth and Syed S. Ahmad, Hunton Andrews Kurth

Ms. Hudgins may be contacted at rhudgins@HuntonAK.com
Mr. Ahmad may be contacted at sahmad@HuntonAK.com