Argonaut-Midwest Insurance Company, dba Argo Group v. Koppers Performance Chemicals, Inc., fka Osmose Wood Preserving Co. of America, Inc., fka Osmose Wood Preserving Inc., fka Osmose, Inc.

The Fourth Circuit deviated from established insurance law in Hawaii by creating a novel standard which is not accepted by any courts sitting in Hawaii or the Ninth Circuit Court of Appeals. As recognized by the Hawaii Supreme Court and the Ninth Circuit Court of Appeals, Hawaii follows the complaint allegation rule under which an insurance carrier’s “duty to defend ‘is limited to situations where the pleadings have alleged claims for relief which fall within the terms of coverage of the insurance contract.’” Burlington Ins. Co. v. Oceanic Design & Const., Inc., 383 F.3d 940, 944 (9th Cir. 2004) (quoting Hawaiian Holiday Macadamia Nut Co. v. Indus. Indem. Co., 76 Haw. 166, 169, 872 P.2d 230, 233 (1994)). Moreover, “[w]here pleadings fail to allege any basis for recovery within the coverage clause, the insurer has no obligation to defend.” Id. Here, both the South Carolina District Court and the Fourth Circuit Court of Appeals agree that the operative complaint unambiguously fails to allege any covered claims. The District Court found no duty to defend. But the Fourth Circuit reversed, imposing a duty to defend under a novel theory of law. The questions presented are:

1. Did the Fourth Circuit err in creating an exception to Hawaii’s complaint allegation rule?

2. Did the Fourth Circuit err in finding an ambiguity in the policies’ named insured designation and construing it against Argonaut Midwest?