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Extrinsic Evidence Bounces Back: Exception to Four Corners Rule Found in Trampoline Case (NY)

October 1, 2020

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<p style="text-align: justify;">In <a href=""><em>Philadelphia Indem. v. Streb</em>,</a> the Southern District of New York explored an emerging exception to New York’s four corners rule, which restricts the use of extrinsic evidence outside of the complaint when determining coverage. The court ruled that although the facts triggering a policy exclusion for trampoline use were not included in the complaint, the exclusion should still apply since the extrinsic evidence at issue was unrelated to the merits of plaintiff’s action and clearly removed the case from the purview of coverage.</p>
<p style="text-align: justify;">The underlying dispute arose out of a personal injury that occurred at an acrobatics class. The plaintiff, Shana Guins, was injured while attempting a forward tumble from a small trampoline and sued the facility. The facility’s insurance policy contained an exclusion barring coverage for “[a]ny claims arising out of the use of any aerial equipment including but not limited to the use of a trapeze or trampoline.” But importantly, it was undisputed that the complaint did not mention that Ms. Guins was using a trampoline when she was injured. Instead, that fact came to light during a deposition. Unsurprisingly, the insurer denied coverage based on the exclusion and the facility initiated a declaratory judgment for coverage.</p>
<p style="text-align: justify;">In analyzing the coverage dispute, the court affirmed the general rule in New York, commonly known as the “four corners rule,” that “the duty to defend remains even though facts outside the four corners of the pleadings indicate that the claim may be meritless or not covered.” This typically means that insurers may not disclaim coverage on the basis of facts outside the claim. Nevertheless, the court found this situation fit an exception, holding that extrinsic evidence could be considered where it was “unrelated to the merits of plaintiff’s action [and] plainly take[s] the case outside the policy coverage.” Because the evidence of trampoline use could be considered, the court found there was no coverage under the trampoline exclusion.</p>
<p style="text-align: justify;">This case represents a win for insurers and creates an avenue for argument in situations where a fact pertinent to coverage is not included in the underlying complaint. This prevents artful pleadings from creating coverage where none exists. It also further underscores the importance of robust discovery if coverage litigation arises.</p>
<p style="text-align: justify;">Thanks to Andrew Debter for his contribution to this post. If you have any questions or comments, please contact <a href="">Colleen Hayes</a>.</p>

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