CACI Int’l, Inc. v. St. Paul Fire & Marine Insurance Company ─ Courts Continue to Struggle with the Boundaries of the Eight Corners Rule

CACI Int’l, Inc. v. St. Paul Fire & Marine Insurance Company ─ Courts Continue to Struggle with the Boundaries of the Eight Corners Rule

In their article appearing in the November/December 2009 issue of Coverage, “CACI Int’l, Inc. v. St. Paul Fire & Marine Insurance Company ─ Courts Continue to Struggle with the Boundaries of the Eight Corners Rule,” John Mumford and Kathryn Kransdorf find that the apparent simplicity of the Eight Corners Rule is deceptive. The Eight Corners Rule calls for a comparison of the “four corners” of the insurance policy at issue against the “four corners” of the underlying complaint. If any allegations in the complaint are potentially covered by the insurance policy, the insurer has a duty to defend its policyholder. However, the article points out that when the Eight Corners Rule has been applied issues have arisen, including: (1) when, if ever, can the court examine other documents to determine if the insurer has a duty to defend; and (2) what other documents, if any, can the court examine.
 
The article examines the 2008 Eastern District of Virginia decision and the 2009 decision of the Fourth District in the case of CACI Int’l, Inc. v. St. Paul Fire & Marine Ins. Co. to determine that the courts continue to find the Eight Corners Rule problematic to apply. In this case, the policyholder corporation (CACI) entered into two contracts with the U.S. Government to provide, in pertinent part, interrogators to assist with military intelligence operations in Iraq. Two lawsuits were filed against CACI alleging that CACI interrogators abused detainees. CACI tendered those lawsuits to its insurer, St. Paul, asking St. Paul to defend it pursuant to CACI’s CGL policy. The policy covered the interrogators in Iraq “for a short time on [CACI’s] business.” St. Paul referred to CACI’s government contracts to establish that the interrogators were deployed in Iraq for an extended duration. The issue thus became whether the courts could consider those contracts under the Eight Corners Rule. The district could held they could be considered because they were expressly incorporated into the complaints and some allegations in the complaints were based on the relationship established by the contracts. This led to the court’s decision that the interrogators were not deployed in Iraq for a short time and that St. Paul accordingly did not have the duty to defend CACI. On appeal, the Fourth Circuit upheld the decision that there was no duty to defend, but disagreed with the lower court in finding that the contracts should not have been considered. This was because the allegations in the complaints in and of themselves “foreclosed the possibility of coverage” under the “short time” provision. The article concludes: “For both policyholders and insurers, an understanding of how a particular jurisdiction actually applies the Eight Corners Rule, and what expectations or nuances there might be, is vital and can mean the difference between defense and denial.”