United States: Finding Coverage For "Additional Insured," Third Circuit Cautions That "Insurer Cannot Bury Its Head In The Sand"

Executive Summary Using the "four corners" rule, the U.S. Court of Appeals for the Third Circuit decided in Ramara, Inc. v. Westfield Insurance Co., No. 15-1003 (3d Cir. Feb. 17, 2016), that an insurer owed a garage owner a duty to defend because it was an "additional insured" under a subcontractor's commercial general liability policy. The Third Circuit held that duty was triggered because – applying either a "but-for" causation standard or the more demanding "proximate" causation standard – the bodily injury alleged in the underlying complaint was "caused" by the subcontractor's acts or omissions. Ultimately agreeing that "but-for" causation was the relevant standard, the court considered not just the policy's "Additional Insured Endorsement" but another policy provision, explaining that courts must construe the policy "as one harmonious document." The Third Circuit also addressed the propriety of recognizing the impact of the Pennsylvania Workers' Compensation Act in applying the "four corners" rule, holding that, in assessing coverage, an insurer cannot ignore the impact the Act may have on plaintiff's counsel's drafting of a personal-injury complaint. "[A]n insurer cannot bury its head in the sand," the court cautioned, "and disclaim any knowledge of coverage-triggering facts."

Discussion At issue in Ramara was whether a parking garage owner was entitled to a defense under a subcontractor's general liability insurance policy in a suit brought by one of the subcontractor's employees, who was injured while working at the owner's garage. The insurer denied coverage, based largely on the perceived absence of allegations in the complaint regarding the role of the subcontractor, which allegations the insurer viewed as necessary to trigger an obligation to defend the garage owner. Despite the state of the pleadings, however, the insurer had knowledge that the underlying plaintiff was the subcontractor's employee, and it was clear that had the plaintiff alleged actions by the subcontractor, he could have risked facing defenses under the Pennsylvania Workers' Compensation Act.

Pennsylvania's "four corners rule" The Third Circuit observed that the question whether the insurer owed the garage owner a defense required it to compare "the language of the allegations" in the underlying complaint "to the language of the [p]olicy." "Pennsylvania adheres to the 'four corners' rule (also known as the 'eight corners' rule), under which an insurer's potential duty to defend is determined solely by the allegations of the complaint in the [underlying] action," the court explained.

Policy language and causation Pursuant to the policy's "Additional Insured Endorsement," the garage owner was covered under the subcontractor's policy "only with respect to liability for 'bodily injury' ... caused, in whole or in part, by" the subcontractor's "acts or omissions ...." The insurer argued that this provision limited coverage to only those instances where a subcontractor's acts or omissions proximately caused a plaintiff's injuries. The garage owner countered that only less-restrictive "but-for" causation was required to trigger coverage for "additional insureds."

The court concluded that the insurer's obligations were triggered here under either test. It found that the injured employee's complaint was "rife with allegations" indicating that the subcontractor's acts were a proximate cause of the employee's injuries, even though the complaint asserted no claim against the subcontractor itself. Because the complaint satisfied the more restrictive "proximate" cause test, the court concluded that it also necessarily satisfied the "but-for" cause test. That said, the court held that the garage owner's "but-for interpretation is correct," reasoning that the policy's "Other Insurance Endorsement" could not be squared with the insurer's restrictive "proximate" cause test, and stating that "[c]ourts must interpret an insurance policy as one harmonious document and resolve ambiguities in favor of coverage."

The Pennsylvania Workers' Compensation Act Finally, the Third Circuit considered the interplay between the Pennsylvania Workers' Compensation Act and the "four corners" rule. The court acknowledged that the employee pleaded very little about his employer, the subcontractor, in the complaint against the garage owner, but recognized this was because the Act barred any such claim. The Third Circuit continued: "The four corners rule – even under Pennsylvania's strict construction – does not permit an insurer to make its coverage decision with blinders on, disclaiming any knowledge of coverage-triggering facts." Rather, the court held that where the Act is "relevant to a coverage determination," the Act must serve as an "interpretive constraint" in applying the "four corners" rule – meaning that insurers "must interpret the allegations of an underlying complaint recognizing that the plaintiff's attorney in the underlying action drafted the complaint taking the Act into account." The court took pains to emphasize that its conclusion expressed only "what should be obvious" – that "an insurer cannot bury its head in the sand and disclaim any knowledge of coverage-triggering facts[.]" Viewing the case against the garage owner through the prism created by the Workers' Compensation Act, the court found it natural and understandable that the complaint said very little expressly about the employer, but read the complaint in a more fulsome manner to acknowledge the employer's contribution to the factual scenario.

Impact of Ramara The Third Circuit's Ramara decision will make it more difficult for insurers to evade defense obligations, particularly where the insurer knows that the underlying complaint may not expressly tell the entire story of the claim against the insured. While the decision does not change Pennsylvania's strict "four corners" rule of determining a duty of defend, it signals significant dangers for any insurer that attempts to construe the allegations of a complaint too narrowly in an effort to escape defense obligations when it has other, independent knowledge counseling that its interpretation of the factual allegations is too cramped. In Ramara, the court concluded that, knowing the contextual impact of the Workers' Compensation Act on the allegations, it was unreasonable for the insurer to interpret the complaint as it had.

When confronted with a claim or suit, it is critical for insureds to seek guidance from experienced coverage counsel, who can help ensure that insureds receive the defense to which they are entitled. Should you have any questions, please contact the authors of this Alert; Reed Smith Insurance Recovery Group's Global Practice Group Leader Douglas E. Cameron; or any of the Reed Smith attorneys with whom you routinely work.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions