The “Four Corners rule” (a.k.a. the “Eight Corners rule”) is the foundation for many states’ common law regarding the Duty to Defend under liability policies. Under that regime, the court treats “the underlying complaint and the insurance policy” as “the only documents relevant” to deciding whether an insurer owes the policyholder a duty to defend.  Badger Mining Corp. v. First Am. Title Ins. Co., 534 F. Supp. 3d 1011, 1020 (W.D. Wis. 2021); 1 General Liability Insurance Coverage § 5.02 (5th ed.) (providing a “50-State Survey: Duty to Defend Standard: ‘Four Corners’ or Extrinsic Evidence?”).

The rule presents a problem for policyholders when the complaint’s allegations do not raise a duty to defend on their face, however, during the course of the litigation, it becomes apparent that claims that do give rise to a duty to defend are, in fact, at issue.  If the case is pending in federal court, policyholders can assert the “constructive amendment doctrine”; that is, that the complaint has been effectively amended to include the unpleaded claims and, therefore, the insurance company should provide a defense.

The federal constructive amendment doctrine

Federal courts employ constructive amendment because “the Federal Rules of Civil Procedure … demoted the complaint in federal civil litigation from its queenly role.” Torry v. Northrop Grumman Corp., 399 F.3d 876, 878 (7th Cir. 2005).In federal practice, “the complaint merely serves to put the defendant on notice” and may be “constructively amended as the case develops.” Toth v. USX Corp., 883 F.2d 1297, 1298 (7th Cir. 1989).

Constructive amendment can be accomplished various ways. In Sunbeam Prods., Inc. v. Wing Shing Prods. (BVI), Ltd., 153 Fed. App’x 703, 707 (Fed. Cir. 2005), the court deemed it “fair to interpret the pretrial order as constructively amending the complaint to add the claim of joint inventorship.” In Reyes v. Dollar Tree Stores, Inc., 781 F.3d 1185, 1188-89 (9th Cir. 2015), a class “certification order” “effectively amend[ed] the complaint.” In Whitaker v. T.J. Snow Co., 151 F.3d 661, 663 (7th Cir. 1998), where the parties “addressed the strict liability theory in their summary judgment briefs, the complaint was constructively amended to include that claim.”

The doctrine’s Impact in insurance cases

Some insurance coverage cases support considering the constructive amendment doctrine without expressly mentioning it.

In Maneikis v. St. Paul Ins. Co. of Illinois, 655 F.2d 818, 820 (7th Cir. 1981), the Seventh Circuit found a duty to defend under a lawyer’s professional liability policy where the underlying complaint alleged only intentional wrongdoing by the insured, which was outside his coverage, but the plaintiff “filed a pretrial memorandum which clearly indicated that he sought recovery on theories of fraud and simple malpractice,” potentially bringing the claim within coverage. The defendant’s attorney “requested St. Paul to defend” the day after that memorandum was filed.  Id. at 821.

In McDonald’s Corp. v. American Motorists Insurance Co., 748 N.E.2d 771, 777 (Ill. App. Ct. 2001), where coverage for a settlement depended on whether a federal action alleged an offense within the scope of coverage, the court stated: “[W]e must analyze the underlying complaint in light of the applicable policy provisions to determine whether the complaint actually falls within the coverage of the policy at issue. In federal litigation, the final pretrial order supersedes the complaint. Therefore, in addition to examining the allegations of the underlying complaint, we will consider also the allegations as set forth in the final pretrial order.”

Asserting the doctrine to trigger a defense duty

For obvious reasons, courts recognize that where an initial complaint lacks claims raising a defense obligation, an “Amended Complaint” can be filed that adds claims that do “trigger[]” an insurer’s “duty to defend.” Travelers Prop. & Cas. Co. of Am. v. Hillerich & Bradsby Co., 598 F.3d 257, 273 (6th Cir. 2010). Therefore, it follows that the policyholder should be able to argue that constructive amendment can trigger the insurer’s obligation to defend as well.