Can the Court Consider a Third Party Complaint In Determining a Carrier's Duty to Defend ?

In American Economy Insurance Co. v. Holabird & Root, 382 Ill. App. 3d 1017, 886 N.E.2d 1166, 320 Ill. Dec. 97 (2008), the issue on appeal was whether the trial court erred in considering outside evidence (a third party complaint) in determining a carrier's duty to defend. The plaintiff carrier, American Economy, had denied additional insured coverage to Holabird under a policy issued to its insured, Metrick (an electrical subcontractor), since the underlying complaint did not allege any negligence against Metrick as required for coverage to apply. In ruling against American Recovery, the trial court looked outside the complaint by taking into account a third-party complaint against Metrick that specifically alleged Metrick negligently performed the installation that was at issue in the underlying case. The Holabird court held that because American Economy was aware of a true but unpleaded fact (that its insured Metrick allegedly performed the installation), it had a duty to defend Holabird.