## Facts

- John J. Fitzpatrick, Jr. died while operating a three-wheel all-terrain vehicle (ATV) on property owned by Cherrywood Property Owners Association.
- The wrongful-death complaint alleged the ATV was owned by Frank Moramarco and that Fitzpatrick used it while performing yardwork and household chores with Moramarco’s permission, connected to work for the property owners association.
- Moramarco was an officer, shareholder, and director of Cherrywood Landscaping, Inc. (CLI), an independent company retained to perform landscaping on the property.
- The ATV had been purchased by Moramarco on behalf of CLI for use in CLI’s landscaping business.
- CLI was insured under a liability policy issued by National Casualty Company covering bodily injury arising out of CLI’s business.
- The policy extended “insured” status to CLI executive officers, directors, or shareholders while acting within the scope of their duties, though Moramarco was not a named insured.
- Moramarco timely requested a defense from National; National refused, relying on the wrongful-death complaint’s allegations as not implicating CLI’s business operations.
- Moramarco filed a third-party action seeking a declaration that National owed a defense and reimbursement of defense costs, and he submitted evidence that Fitzpatrick was hired by Moramarco on CLI’s behalf to do landscaping for CLI’s client and that the accident arose from CLI’s business operations.

## Issues

1. Whether an insurer’s duty to defend can be triggered by the insurer’s actual knowledge of facts showing a reasonable possibility of coverage when the underlying complaint, read alone, does not allege a covered occurrence.

## Decision

- The New York Court of Appeals reversed the Appellate Division.
- The court held that National had a duty to defend Moramarco because it had actual knowledge of facts establishing a reasonable possibility of coverage.
- The court ruled the insurer could not rely on a third party’s pleadings to avoid its contractual defense obligation when it knew the suit involved a potentially covered event.
- The case was remitted for further proceedings consistent with the duty-to-defend holding.

## Legal Principles

- An insurer must defend when there is a reasonable possibility of coverage; the duty to defend is broader than the duty to indemnify.
- The duty-to-defend analysis is not confined to the complaint’s allegations when the insurer has actual knowledge of facts that bring the claim within policy coverage.
- A rigid “four corners of the complaint” approach cannot be used to deny a defense where the complaint is incomplete or misleading and the insurer knows facts indicating coverage.
- The duty to defend protects the insured’s contractual expectation of defense costs and litigation protection when coverage is reasonably possible.

## Conclusion

The court held that an insurer’s duty to defend arises not only from the allegations in the complaint but also from the insurer’s actual knowledge of facts creating a reasonable possibility of coverage, and it required the insurer to provide a defense despite underinclusive pleadings.


Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61 (N.Y. 1991)