The Eight Corners Rule is a judicially created rule in the District of Columbia.[1] It allows an insurance carrier to determine whether to grant coverage when the insured files a complaint by analyzing only the “four corners” of the complaint and the “four corners” of the policy provisions to determine the scope of coverage and whether the insurance carrier must cover the cost of litigation. This rule prohibits the introduction of evidence.

In Stevens v. United General Title Ins. Co., the D.C. Court of Appeals reasoned that “the majority of jurisdictions follow this ‘eight corners rule,’” the Court held that the insurer has the burden to prove the applicability of an extension within the policy.

The Eight Corners Rule renders proving the actual allegations in the complaint irrelevant. The insurance company must presume all allegations are true. The only factors the insurance company needs to consider are the allegations being made by the plaintiff in the complaint and whether those allegations give rise to an exclusion of coverage in the insurance policy.

For example, if a business owner has standard general commercial liability insurance, the policy typically states:

We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply.

This standard policy language means that unless the action causing the bodily injury or property damage is explicitly covered under the general policy or any supplemental policy, then there will be no insurance coverage for that action.

Here is an example of how this works: a restaurant owner is sued by an assault victim who accuses the restaurant of serving alcohol to his attacker. The restaurant owner, however, has a security video showing that it never served the attacker alcohol. Unfortunately, the restaurant owner declined to obtain the supplemental alcohol policy to its general commercial liability insurance. Thus, even though the restaurant owner is falsely accused in the complaint, its insurance carrier will not cover the cost of the defense.

Consequently, when obtaining insurance for a business in the District of Columbia, it is important for a business owner to request its insurer add language affirmatively requiring a duty to defend – e.g., “even if the allegations of the suit are groundless, false or fraudulent” – to avoid risking a lack of coverage under the Eight Corners Rule.

[1] Courts in a handful of other states also apply the Eight Corners Rule, which is known as the Four Corners Rule in certain states. Virginia and Maryland, as well as most other jurisdictions, follow a modified rule. This modified rule permits that if there is any “potentiality” that the plaintiff’s allegations may state a claim covered by the policy, then the insurer must pay to defend its insured.