A Connecticut trial court recently ruled that a liability insurer breached its duty to defend the City of Waterbury as an additional insured under a tenant’s liability insurance policy. The insurer failed to defend the city in a lawsuit seeking damages for personal injuries sustained by a patron of a restaurant located at a city-owned golf course. The court entered summary judgment in favor of the city and awarded the defense fees the city incurred in defending the underlying action. City of Waterbury v. Hospitality Franchise Associates, Inc., Docket No. CV-14-6025014 (Conn. Super. Dec. 22, 2014).  You may read the court’s decision here.

The city was named as a defendant in a personal injury lawsuit filed by a woman who was injured while walking from a restroom to a dressing room at the restaurant. The city was alleged to be liable because it owned the golf course and negligently maintained the restroom.  The restaurant was owned and operated by Hospitality Franchise Associates, Inc., which leased the restaurant from the city.  The lease agreement required the tenant to name the city as an additional insured under the tenant’s liability insurance policy for liability arising out of the ownership, maintenance or use of that part of any premises leased by the city to Hospitality Franchise.  The restroom was not part of the premises the city leased to Hospitality Franchise.  The court ruled, however, that the insurer was required to defend the city as an additional insured under the tenant’s policy because the injuries suffered were incident to or connected with the use of the leased premises.   The court determined that no one could reasonably conclude that the use of the restroom by restaurant customers would not be connected with, incident to, grow out of, or have its origins in consuming food and drink at the restaurant.

The court applied two important principles of insurance law in determining that the insurer breached its duty to defend. First, the court refused to consider the lease between the city and the tenant when considering the insurer’s argument that the incident occurred outside the leased premises and therefore there was no duty to defend.  The lease was extrinsic evidence and an insurer may not use evidence outside the allegations of a complaint filed against the insured which gives rise to a claim for coverage to avoid the duty to defend.  Extrinsic evidence, however, may be considered if it establishes coverage and a duty to defend.  Second, although it was not clear whether the incident giving rise to the claim for coverage occurred within the area of the leased premises, the allegations of liability against the city appeared to bring the claim within the policy coverage.  When a claim against an insured or additional insured potentially falls within coverage under an insurance policy, the insurance company is obligated to defend the insured.