Four Corners Rule Determines Employment Status in Coverage Case

Burns & Scalo Roofing Co. was the defendant in an underlying state court action brought by a former employee who had developed mesothelioma due to exposure to asbestos while employed by Burns & Scalo. Burns & Scalo sought defense and indemnity from National Union, which had issued occurrence-based policies to Burns & Scalo for a four-year period after the underlying plaintiff’s employment had ended. After initially denying coverage, National Union agreed to defend Burns & Scalo under a reservation of rights. National Union then filed a declaratory judgment action to determine the application of an exclusion in its policies for bodily injury sustained by an employee in the course of her employment.

National Union argued that the underlying complaint alleged that Burns & Scalo was liable as the underlying plaintiff’s employer, which clearly fell within the language of the exclusion and therefore outside the policies’ coverage. Burns & Scalo argued that there was extrinsic evidence suggesting that the underlying plaintiff was not employed by Burns & Scalo during the entire period of his exposure to asbestos, leaving some portion of the damages within the scope of coverage. The court held that National Union’s duty to defend was determined solely by the four corners of the underlying complaint. None of the evidence Burns & Scalo relied on appeared in the underlying complaint. Therefore, the underlying complaint contained no allegations that even arguably fell within the scope of coverage provided by the National Union policies.

Read the full decision here.