A panel of the Sixth Circuit Court of Appeals said in a 2-to-1 decision that it was not able to find any Kentucky State Court cases saying that an answer to the question of a duty to defend should include "known facts" outside the allegations appearing from the face of the underlying complaint against the insured. The case involved an apparently standard liability policy with a standard assault and battery exclusion.
The same Sixth Circuit Court of Appeals panel observed that "several federal-court decisions applying Kentucky law do state a 'known facts' rule, and the proposition that an insurer has a duty to defend if known facts outside the complaint demonstrate the possibility of coverage enjoys support in many jurisdictions." United Spec. Ins. Co. v. Cole's Place, Inc., 936 F.3d 386, 403 n.3 (6th Cir. 2019).
This observation did not affect the outcome however. The trial court in this case entered a summary judgment of no coverage in favor of the carrier, and the two judges in the panel majority affirmed on appeal.
The dissenting judge would have reversed the summary judgment in favor of the carrier on coverage as a matter of law, and she would have also addressed a second issue in the case, namely, whether there was federal declaratory relief jurisdiction and she would have ruled that in this case, there was not.
The room for Coverage of a Claim Known But Not Pleaded and its consequences for Fulfillment or Enforcement of Good Faith Duties, are discussed based on the case law that decides them including the United Specialty Ins. Co. v. Cole's Place decision, in Section 3:54 in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH (Thomson Reuters West, 3d Edition, forthcoming 2020 Supplement).
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