Alabama uses a modified “four corners” test, whereby the allegations in the complaint are viewed in light of the policy language. In Alfa Mutual Insurance Co. Inc. v. Morrison, 613 So. 2d 381 ( Ala. 1993), the state supreme court stated “the insurance company's duty to defend its insured is determined by the language of the insurance policy and by the allegations in the complaint giving rise to the suit against the insured.” But if the allegations suggest the complaint will not be covered, other facts may be taken into consideration. The insurer has a duty to investigate if allegations are unclear.

If the insurer has doubts about coverage, a reservation of rights letter must be sent; otherwise the insurer cannot undertake a defense and later assert its right to deny coverage. See Home Insurance Co. v. Rice, 585 So. 2d 859 ( Ala. 1991), in which the court found that there need not be actual prejudice to the insured before the insurer that failed to deny the duty to defend was estopped to deny that duty.

Alaska requires an insurer to defend when the true facts—those which are known or reasonably ascertainable by the insurer—are within, or potentially within, coverage, even if the suit alleges facts that are outside the scope of coverage. See National Indemnity Company v. Flesher, 469 P.2d 360 (Alas. 1970). But if the true facts would place the complaint outside coverage, the insurer must still defend if the facts alleged in the suit are potentially covered. See Sauer v. Home Indemnity Company, 841 P.2d 176 ( Alas. 1992).

The insurer can refuse to defend if a complaint alleges facts which are potentially not covered, and when the insurer, having conducted an investigation, confirms the facts provide no basis for coverage. The court in Sauer also found that the insurer is required to give the insured notice of its refusal to defend and its intention to deny coverage, setting forth the reasons for the denial based on its investigation of the facts or based on applicable law, and allowing reasonable time for the insured to defend himself.

The court in Western Casualty and Surety Co. v. Hays, 781 P.2d 38 (Ariz. Ct. App. 1989) stated that “in reviewing a determination on whether an insurance company has a duty to defend a lawsuit brought against its insured, we first examine the facts alleged in the complaint. If the complaint on its face appears to impose a duty to defend, we may then look to other facts not alleged in the complaint to determine whether the case falls outside policy coverage.” Thus, if a complaint appears to allege covered facts, the court may look to the actual facts to make a coverage determination.

By the same token, if the complaint appears to allege facts that are not covered, but the insured provides other facts that might trigger coverage, the insurer must conduct its own investigation to determine if coverage is owed (USF&G v. Advance Roofing & Supply, 788 P.2d 1227 [Ariz. Ct. App. 1990]). An insurer with knowledge of potential noncoverage, but that nonetheless assumes a defense, must notify the insured with a reservation of rights letter.

Arkansas law specifies that even if alleged facts appear to lead to application of an exclusion of coverage, a defense still is owed if there is a possibility that other facts may emerge that would trigger coverage (Northland Insurance Co. v. Heck's, 620 F.Supp. 107 (E. D. Ark. 1985).

California holds that the duty to defend is a broad one, based both on a comparison of the allegations with the terms of the policy, and also on facts that are extrinsic to the complaint which reveal the possibility that the claim (or even a part of the claim) may be covered by the policy. A case outlining many of the California precepts is Gray v. Zurich Insurance Co., 419 P.2d 168 (Cal. 1966), which first stated the rule that an insurer was required to defend whenever facts giving rise to the potential of liability under the policy were ascertained. Two later cases, Horace Mann Insurance Co. v. Barbara B., 846 P. 2d 792 (Cal. 1993) and Montrose Chemical Corporation of California v. Canadian Universal Insurance Co., 861 P.2d 1153 (Cal. 1993) relied on Gray and added that even though coverage might be in doubt, the duty continued until the insurer produced undisputed facts which eliminated the potential for liability.

Even if the insurer believes its insured to be lying, as in Amato v. Mercury Casualty Co., 23 Cal. Rptr. 2d 73 (Cal. App. 1993) without extensive investigation by the insurer to confirm the facts, it is obligated to defend.

Under Colorado law, a duty to defend “arises when underlying complaint against insured alleges any facts that might fall within coverage of policy” unless the “insurer can establish that allegations in complaint are solely and entirely within exclusions in policy” (Hecla Mining Co. v. New Hampshire Insurance Co., 811 P.2d 1083 [Colo. 1991]).

An insurer does not forfeit its right to contest coverage when it breaches its duty to defend, even if the breach was in bad faith (Flannery v. Allstate Insurance Co., 49 F.Supp. 2d 1223 [D. Colo. 1999]).

Connecticut law holds that it is the claim that determines the duty to defend; that is, if the claim alleges any facts that are potentially covered. The duty to defend must be exercised regardless of whether the suit is groundless or, upon full investigation, the insurer finds its information demonstrates conclusively that the allegations are not covered. If the insurer fails to defend when allegations suggest coverage, it may be liable for the entire judgment against the insured, even if the facts later prove coverage is excluded. (Krevolin v. Dimmick, 467 A.2d 948 [ Conn. Super. Ct. 1983]).

Thus, in the case of Schwartz v. Stevenson, 657 A.2d 244 (Conn. Ct. App. 1995), the court found for the insured. The negligence action against Stevenson involved injury resulting from an all-terrain vehicle; the insurer said it had no duty because the claim did not specifically refer to a nonowned ATV. But because “negligence arising out of an ATV” was potentially covered, the insurer had a duty to defend.

The claim as a whole must allege facts for which the insurer has assumed liability (Continental Casualty Co. v. Alexis duPont School District, 317 A.2d 101 ( Del. 1974). Thus, the duty to defend is limited to such claims, but if any doubt exists the duty is resolved in favor of the insured.

Under Delaware law, the insured must prove that a claim is covered by the policy, while the insurer has the burden of proving an exclusion applies (Brosnahan Builders, Inc. v. Harleysville Mutual Ins. Co., 137 F. Supp. 2d 517 [D. Del. 2001]).

The District of Columbia applies the eight corners rule, examining both the complaint and the insurance contract to determine the duty to defend. All possible claims within the complaint are examined to see if any trigger the duty to defend (Continental Casualty Co. v. Cole et al., 809 F.2d 891 [D.C. Cir. 1987]).

The insurer's actual knowledge of extrinsic evidence is not allowed to influence the duty (Stevens v. United General Title Insurance Co., 801 A.2d 61 [D.C. App. 2002]).

The duty to defend is determined by the allegations in the complaint, even if the allegations later prove to be false or fraudulent. If the suit alleges facts that create potential coverage, the insurer must defend (Kopelowitz v. Home Insurance Co., 977 F.Supp. 1179 [S. D. Fla. 1997]).

However, extrinsic facts may sometimes be used to defeat the duty, as in Nateman v. Hartford Cas. Co., 544 So. 2d 810 (Fla. Dist. Ct. App. 1985), where the insurer had no duty to defend a doctor not employed by its insured, even though the suit alleged the doctor was an employee.

Florida law specifically addresses how an insurer may deny coverage based on a particular defense, such as intentionally inflicted bodily injury. The insurer must, within thirty days of knowing of the coverage defense, send a written notice of reservation of rights to the insured at the last known address by registered or certified mail or by hand delivery. Within sixty days of the written notice, or receipt of a summons naming the insured as defendant, whichever is later, but in no case later than thirty days before trial, the insurer must do three things: (1) give written notice to the insured by registered or certified mail of its refusal to defend; (2) obtain a nonwaiver agreement from the insured after full disclosure of the policy provisions providing a coverage defense and the duties of the insurer during the litigation; or (3) retain mutually acceptable independent counsel.

Under Georgia law, the policy language controls the extent of the insurer's duty to defend (Continental Casualty Co. v. Synalloy Corporation et al., 667 F.Supp. 1523 [S. D. Geor., 1983]). Unresolved is whether the insurer has a duty to investigate before determining its duty to defend, and the extent to which an insurer refusing to defend is estopped from raising coverage issues. (Colonial Oil Industries, Inc. v. Underwriters, 106 F.3d 960 [11th Cir. 1997])

Hawaii's laws regarding the duty to defend are neatly summarized in CIM Insurance Corp. v. Masamitsu et al., 74 F.Supp. 2d 975 (D. Haw. 1999). The insurer has a duty to defend where a suit raises a potential for indemnification, even if parts of the complaint fall outside the policy coverage. The insurer has a duty to investigate to determine if the complaint raises a coverage potential. This duty is imposed as well if the allegations differ from facts the insurer knows or can readily determine, or the allegations are ambiguous.

Hawaii law does not require a defense against threatened lawsuits. An insurer defending under a reservation of rights is subject to an enhanced standard of good faith, keeping the insured informed of all developments. If an insurer is ultimately found to have had no duty to defend or indemnify, it may still be liable for bad faith in improperly conducting the defense.

In Idaho, the insurer's duty to defend arises on the filing of a complaint whose allegations, in whole or in part, “read broadly,” reveal a potential for coverage (Hoyle v. Utica Mutual Insurance Co., 48 P.3d 1256 [Idaho 2002]). The duty continues as long as there is a dispute over the facts bearing on coverage or over the application of the policy language to the facts (Construction Management Systems, Inc. v. Assurance Company of America, 23 P.3d 142 [Idaho 2001]). The insurer may consider facts known to it as well as the suit allegations to determine if there is a coverage potential (Black v. Fireman's Fund American Ins. Co., 767 P.2d 824 [Idaho Ct. App. 1989]).

Illinois law states that the insurer's duty to defend is triggered by comparing the allegations of the complaint against the insured to the insurance policy. If any of the facts alleged are covered, the insurer has a duty to defend even if some facts are not. The insurer has no duty to defend if none of the alleged facts are covered, or give the potential for coverage.

Generally, an insurer that has doubts about its duty to defend must bring a declaratory judgment action before or pending trial (Connecticut Indemnity Co. v. DER Travel Service, Inc., 328 F.3d 347 [7th Cir. 2003]). The insurer may also defend under a reservation of rights, or refuse to defend at its peril that it later may be found to have breached its duty to defend. An insurer violating its duty to defend is estopped to deny policy coverage in a later lawsuit by the insured unless there is significant direct conflict of interest between insured and insurer (LaSalle National Trust, N.A. v. Schaffner, 818 F. Supp. 1161 [N. D. Ill. 1993]).

Under Illinois law, if the insured tenders a defense to the insurer, the insurer cannot decline to participate and simply wait for the insured to sue it to determine the insurer's duty (Bedoya v. Illinois Founders Ins., 688 N.E.2d 757 [Ill. App. Ct. 1997]).

In Indiana, the duty to defend is “determined solely by the nature of the complaint against the insured, and not by insurer's investigation of facts underlying the complaint” (Transamerica Insurance Services v. Kopko, 570 N.E.2d 1283 [Ind. 1991]). The plaintiff in a later case stated an earlier ruling on its behalf had misinterpreted the Indiana Supreme Court's statement in Kopko, and asked that this question be certified to the Supreme Court: “May an insurer go beyond the face of the complaint against the insured and refuse to defend based on the factual underpinnings of the claim, and may a court, in determining the insurer's duty to defend, consider such factual underpinning which go beyond the face of the complaint?” The court in Travelers Casualty & Surety Co. v. Elkins Constructors, Inc. et al., 2000 WL 748091 (S.D.Ind.) denied the motion for certification.

However, a case before the court of appeals suggested that the Kopko reading did, in fact, concern an underlying factual dispute. The court in Monroe Guaranty Insurance Co. v. Monroe, 677 N.E.2d 620 (Ind. App. 1997) held that “as a matter of law the Insurer has a duty to conduct a reasonable investigation into the facts underlying the complaint before it may refuse to defend the complaint.”

The insurer is to look at allegations of fact in a third-party's claim against an insured rather than to legal theories on which the third party claims the insured is liable (Employers Mutual Casualty Co. v. Cedar Rapids Television Company, 552 N.W.2d 639 [Iowa 1996]).

The duty to defend arises “whenever there is potential or possible liability to indemnify the insured based on the facts appearing at the outset of the case” (First Newton National Bank V. General Casualty Co. of Wisconsin, 426 N.W.2d 618 ( Iowa 1988).

The insurer's duty to defend continues after a covered cause of action is dismissed if the operative facts of remaining causes of action are arguably covered within the dismissed cause of action (Employers supra).

Kansas law holds that the insurer must look beyond the effect of the pleadings and consider any facts brought to its attention, or any facts which it could reasonably discover through a good faith analysis. If those facts are an indication of potential, even if remote, liability under the policy the insurer is obligated to defend (ASELCO, Inc. v. Hartford Insurance Group, 21 P.3d 1011 [Kan. Ct. App. 2001]).

Kansas courts recognize three possible consequences of the insurer's breach of its duty to defend and its failure to reserve its rights: 1) the possibility of an award in excess of the policy limits; 2) collateral estoppel, and 3) equitable estoppel.

Earlier Kentucky cases appeared to hold that the duty to defend was measured by the actual or adjudicated facts and not by the allegations in the complaint, or the possibility that the allegations would trigger coverage (Cincinnati Insurance Co. v. Vance, 730 S.W.2d 521 [Ky. 1987]). Later decisions, however, said the Vance decision had been interpreted too narrowly (James Graham Brown Foundation v. St. Paul Fire & Marine Insurance Co., 814 S.W.2d 273 [Ky. 1991]). But a dissenting opinion in that case said that the majority had missed the point of Vance and that there was no duty to defend unless the claim obviously fell within the policy coverage.

A more recent case states that “under Kentucky law, if there is any allegation in the complaint which potentially, possibly or might come within coverages of policy, then insurance company has duty to defend” (National Union Fire Insurance Co. of Pittsburgh, Pa. v. United Catalysts, Inc., 182 F.Supp. 2d 608 [W.D. Ky. 2002).

In Louisiana, the insurer's duty to defend is determined by the allegations in the lawsuit. If the suit alleges a covered set of facts, the insurer must defend even if the actual facts appear not to be covered. The insurer may refuse to defend only if the allegations of the suit unambiguously exclude coverage (James v. Hyatt Corp. of Delaware, 981 F.2d 810 [5th Cir. 1993]).

An insured claiming breach of duty to defend must only establish that one claim asserted is covered; the additional uncovered claims do not relieve the insurer of the duty (Stone Petroleum Corp. v. Insurance Company of North America, 961 F.2d 90 [5th Cir. 1992]).

Maine uses a comparision test. The allegations of the suit are to be compared with the provisions of the policy. However, if the underlying complaint reveals the potential that facts ultimately proved may come within liability coverage, the insurer has a duty to defend. Even a claim that is in and of itself insufficient to withstand dismissal will give rise to the duty if it shows intent to state a claim within the insurance coverage (Maine State Academy of Hair Design, Inc. v. Commercial Union Insurance Co., 699 A.2d 1153[Me. 1997]).

The duty to defend is founded solely on the allegations in the complaint, even when the insurer has knowledge of contrary facts (Essex Insurance Co. v. LaKermesse Franco Americaine, 950 F.Supp 413 [D. Me. 1996]).

Under Maryland law, the insurer's duty to defend is established by the allegations made in the underlying action against the insured. The insurer has an obligation to defend when there is a potential that the claim could be covered. Thus, not only are the four corners of the complaint compared with the four corners of the policy, but also with any extrinsic evidence which would allow the insured to establish a potential for coverage (Warfield-Dorsey Co. v. Travelers Casualty & Surety Co. of Illinois, 66 F.Supp. 2d 681 [D. Md.1999]). The extrinsic evidence must pertain to a claim actually asserted, not to one that possibly might be (Reames v. State Farm Fire & Casualty Ins., 683 A.2d 179 [Md. Ct. App. 1996]).

The insurer, however, is not allowed to introduce extrinsic evidence to contest coverage if the allegations in the underlying complaint establish that the claim against the insured is potentially covered (from an unpublished opinion, Mutual Benefit Insurance Co. v. Jordan, 11 Fed.Appx. 79, 2001 WL313880).

Massachusetts law holds that the allegations of the complaint, not the insurer's belief as to the merits of the complaint, determine the duty to defend. In a situation in which counts in a complaint have been dismissed, the insurer may withdraw from the defense once the complaint unambiguously excludes coverage (Premier Homes, Inc. v. Lawyers Title Insurance Corp., 76 F.Supp. 2d 110 [D. Mass. 1999]). The liability insurer has the duty to defend if allegations in a third-party complaint are reasonably susceptible of interpretation that they state or vaguely foreshadow or intimate a claim covered by polity terms, even if claim is baseless, as it is the claim which determines the duty to defend. If the liability insurer has the duty to defend one count of the complaint, it must defend all counts (Mt. Airy Insurance Co. v. Greenbaum, 127 F.3d 15 [1st Cir. 1997]).

The insurer can obtain summary judgment declaring that it has no duty to defend or indemnify the insured when it is clear that the claims against the insured fall outside policy coverage (Aetna Casualty & Surety Co. v. Clasby, 788 F. Supp. 61 [D. Mass. 1991]). The insurer can withdraw its defense once the basis for defending ceases, as when the allegations on which it has accepted the defense are withdrawn (Conway Chevrolet-Buick, Inc. v. Travelers Indemnity Co., 136 F.3d 210 [1st. Cir. 1998]).

The duty to defend in Michigan depends on the allegations in the complaint of the third party in the action against the insured, and extends to actions which are groundless, false, or fraudulent, so long as the allegations against the insured even arguably come within policy coverage. The duty to defend is not limited by the exact language of the pleadings—the insurer has a duty to look behind the allegation to analyze whether coverage is possible. Doubt is resolved in favor of the insured (Detroit Edison Company v. Michigan Mutual Insurance Co., 301 N.W. 2d 832 [Mich. Ct. App. 1980]).

If the insurer contests its obligation to provide coverage, it optimally should provide notice to the insured, reserving its rights to indemnify; at that point the interests of insurer and insured come into conflict, and so an independent counsel must be appointed for the insured (Detroit Edison, supra). An insurer can also refuse to defend and take its chances that there will be no coverage, but the former is the preferred option (Central Michigan Board of Trustees v. Employers Reinsurance Corp., 117 F.Supp. 2d 627 [E.D. Mich. 2000]).

In Minnesota, the duty to defend is based on the allegations contained in the plaintiff's complaint, and the insurer must defend if any part of the claim is arguably within the scope of policy coverage (Economy Fire & Casualty Co. v. Iverson, 445 N.W.2d 824 [Minn. 1989])

If a complaint alleges several claims, and any one of them would require a defense, the insurer must defend against all the claims. If an insurer knows all the facts of a claim and defends without reserving its rights to deny coverage, the insurer may be estopped to later deny coverage (Mutual Service Casualty Insurance Co. v. Luetmer et al., 474 N.W. 2d 365 [Minn. Ct. App. 1991]). But if there is no possible coverage, the insurer has no duty to defend (Thermex Corporation v. Fireman's Fund Insurance Co., 393 N.W.2d 15 [Minn. App. 1986]).

Under Mississippi law the duty to defend is determined by the allegations pleaded; if they are not covered by the policy there is no duty to defend (Titan Indemnity Co. v. City of Brandon, Mississippi, 27 F.Supp. 2d 693 [S.D. Miss. 1997]).

The insurer may defend under a reservation of rights to deny coverage. If the policy covers only a portion of the claim against the insured or only one theory of liability, the insurer should allow the insured opportunity to select an independent counsel. Thus, the insurer does not have a responsibility to defend all claims alleged, but only those covered (Moeller v. American Guarantee and Liability Insurance Co, 707 So. 2d 1062 [Miss. 1998]).

Under Missouri law, the duty to defend arises when the insured is first sued. Normally, the duty to defend is determined by comparing the policy language with the allegations in the complaint. The insurer, however, cannot ignore facts which were known or should have been reasonably apparent at the commencement of the suit. This does not mean that the insurer must conduct a far-reaching investigation, though. Further, the duty to defend need not be based on facts emerging during discovery. But if the insured submits an amended pleading or additional facts that suggest there may be coverage, the insurer must reconsider its duty to defend. (A case summarizing Missouri law is Esicorp, Inc. v. Liberty Mutual Insurance Co., 193 F.3d 966 [8th Cir. 1999].)

A liability insurer may litigate the coverage issue even if it has breached its duty to defend (Royal Insurance Co. of America v. Kirksville College of Osteopathic Medicine, Inc., 304 F.3d 804 [8th Cir. 2002]).

Montana law holds that a duty to defend arises if the pleadings allege a cause which fits within policy coverage (Northwestern National Casualty Co. v. Phalen597 P.2d 720 [Mont. 1979]). However, if the facts clearly demonstrate that there is no coverage, the insurer need not defend, nor is there a further duty to investigate (Burns v. Underwriters Adjusting Co., 765 P.2d 712 [Mont. 1988]).

In the case of Babcock & Wilcox Co. v. Parsons Corporation, 430 F.2d 531 (8th Cir. 1970) the court stated that under Nebraska law the insurer was required to undertake a defense only of the claims asserted against the insured which fell within policy coverage. The allegations of the complaint were the reference for deciding whether the claim was within coverage. If the complaint stated one covered claim, the insurer had a duty to except defense of the entire lawsuit, even those claims not covered.

In Allstate Insurance Co. v. Novak, 313 N.W.2d 636 (Neb. 1981), the court said an insurer had the duty to defend its insured whenever it ascertained facts which might lead to a potential of liability, and could not limit its investigation to the allegations.

Under Nebraska law, the insured must show an absence of reasonable basis by the insurer in denying a defense, and must prove the insurer's knowledge or reckless disregard of a lack of reasonable belief for denial in order to make a bad faith claim (John Markel Ford, Inc. v. Auto-Owners Insurance Company,543 N.W.2d 173 [Neb. 1996]).

Any lawsuit potentially seeking damages that are covered by the policy must be defended; however, if the policy precludes the duty to indemnify, there is no duty to defend (Rockwood Insurance Company v. Federated Capital Corp., 694 F.Supp. 772 (D. Nev. 1988). If facts are alleged which, if proven, would give rise to the duty to defend, then the insurer must defend (Rockwood, supra).

An insurer's duty to defend is determined by whether sufficient facts in the pleadings bring the cause of action within the policy coverage, even though the suit may eventually be found to be without merit. The court must also consider the reasonable expectations of the insured as to its rights under the policy (United States Fidelity & Guaranty Co., Inc. v. Johnson Shoes, 461 A.2d 85 [N.H. 1983]).

While the duty to defend may be based on pleaded facts, the court may look at underlying facts to avoid permitting pleading strategies to control the rights of the parties to an insurance contract. In other words, if the court finds that an allegation of negligence is included in the suit simply to force a defense, the court can disallow the allegation (Winnacunnet Cooperative School District v. National Union Fire Insurance Co. of Pittsburgh, Pa., 84 F.3d 32 (1st Cir. 1996).

Under New Jersey law, the insurer's duty to defend is measured by the allegations in the complaint. If the pleadings state facts which bring the injury within policy coverage, the insurer must defend. Thus, it is the nature of the claim, rather than the ultimate liability of the insured, that determine the duty (Hofing v. CNA Insurance Companies, 588 A.2d 864 [N.J. Super. Ct. App. Div. 1991]). Although the courts give effect to the insured's reasonable expectations, this doctrine does not apply where there is no ambiguity in the exclusionary language of the insurance policy (Hofing, supra.).

If the pleadings do not clearly establish whether or not there is coverage, the insurer must consider extrinsic facts its insured makes known (SL Industries, Inc. v. American Motorist Ins. Co., 607 A.2d 1266 [N.J. 1992]).

If an insurer wrongly refuses to defend, it must reimburse the insured for its defense costs, but the insurer need only reimburse for the allegations covered under the policy. If the apportionment cannot be determined, then the insurer assumes all costs.

In New Mexico, the duty to defend is determined by comparing factual allegations in the complaint with the policy. A determination of whether an exclusion relieves the insurer of the duty to defend must be made in a primary lawsuit, and not in an action for declaratory judgment (Lopez. v. New Mexico Public Schools Insurance Authority, 870 P.2d 745 [N.M. 1994]). The insurer must also examine facts actually known to it at the time demand for defense is tendered; the insurer must still defend even if the complaint does not state facts with sufficient clarity so that it may be determined on its face whether the action is within policy coverage, provided the alleged facts tend to indicate coverage (Sena v. Travelers Insurance Co., 801 F.Supp. 471 [D. N.M. 1992]).

However, the insurer has no duty to conduct an investigation into the facts underlying a lawsuit (Valley Improvement Association, Inc. v. United States Fidelity and Guaranty Corp., 129 F.3d 1108 [10th Cir. 1997]).

Applying New Mexico law, the court in Resure, Inc. v. Chemical Distributors, Inc., 927 F.Supp. 190 (M.D. La. 1996) ruled that a liability insurer may recover fees it has paid under a reservation of rights if it is subsequently found not to owe coverage, unless, suggested the court, the insured had objected.

The duty to defend in New York applies to any action in which facts alleged are within the coverage, and the duty to defend extends to a defense of the entire action (Mendes & Mount v. American Home Assurance Co. et al., 97 A.D.2d 384 [N.Y.S.2d 1983]). If the insurer believes an exclusion will apply to deny indemnification, the insurer must prove that the exclusion is stated in clear  and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case (Commercial Union Assurance Co. et al. v. Oak Park Marina, Inc., 198 F.3d 55 [2nd Cir. 1999]).

Generally, in New York the insurer cannot use extrinsic facts upon which to base a denial of defense; if the complaint or other facts known to the insurer indicate a possibility of coverage the insurer must defend (Fitzpatrick v. American Honda, 575 N.E.2d 90 [N.Y.2d 1991]).

In determining whether the insurer has the duty to defend, the court is to compare the insurance policy with the allegations of the complaint, and if the allegations bring the claim within the coverage, the insurer's duty to defend is absolute. However, matters outside the pleadings may be taken into account where the insurer knows or could reasonably ascertain facts that, if proven, would be covered by the policy (Lozado v. The Phoenix Insurance Co., 237 F. Supp. 2d 664 [M.D. N.C. 2003]).

An insurer believing that claims fall outside policy coverage can seek a declaratory judgment before trial of the underlying action, or defend under a reservation of rights (St. Paul Fire & Marine Insurance Co. v. Vigilant Insurance Co., 724 F.Supp. 1173 [4th Cir. 1990]).

In North Dakota, the obligation to defend is measured by the terms of the policy and the pleading. If the allegations in the complaint would be covered, the duty to defend is present (Kyllo v. Northland Chemical Co. et al., 209 N.W.2d 629 [N. D. 1973]). The insurer need not investigate and ascertain facts independent of pleadings before it resolves whether or not to defend, but if the insurer acquires actual knowledge of additional facts that establish reasonable possibility of coverage, then the insurer must defend (Pennzoil Co. v. United States Fidelity and Guaranty Co., 50 F.3d 580 [8th Cir. 1995]).

The insurer's duty to defend may not be readily apparent from the pleadings in the case against the insured, but if the allegations state a claim “potentially or arguably” within policy coverage, or if there is a doubt whether a theory of recovery within policy coverage has been pleaded, the insurer must defend. The insurer must also take into account facts known or readily discoverable through its investigation. The insurer may defend under a reservation of rights, utilizing discovery to clarify the nature of the claim against the insured (City of Willoughby Hills v. Cincinnati Insurance Co., 459 N.E.2d 555 [Ohio 1984]).

A test of whether the duty to defend has been breached is whether the reservation of rights has made it impossible for the insurer to defend both its own interests and those of the insured (Lusk v. Imperial Casualty and Indemnity Co., 603 N.E.2d 420 [Ohio Ct. App. 1992]).

Although Ohio courts hold as a general rule that waiver and estoppel cannot be used to expand coverage of a policy, the exception occurs when the insurer provides a defense without a reservation of rights (Turner Liquidating Co. v. St. Paul Surplus Lines Insurance Co., 638 N.E.2d 174 [Ohio Ct. App. 1994]).

The actual facts, not just the pleadings, determine the duty to defend. The insurer must thus look to the pleadings, to facts known to the insured, and to facts the insurer may learn when the insured tenders its defense. During the litigation, if facts emerge that suggest coverage, the insured has the responsibility of giving notice of these facts to the insurer (First Bank of Turley v. Fidelity & Deposit Co. of Maryland, 928 P.2d 298 [Okla. 1996]).

Under Oregon law, the insurer has a duty to defend so long as the complaint, without amendment, can reasonably be interpreted to impose liability covered under the policy (Spring Vegetable Co. v. Hartford Casualty Insurance Co., 801 F. Supp. 385 [D. Or. 1992]).

The court assesses an insurer's duty to defend an action against its insured by reviewing the complaint and the insurance policy. The court looks at the facts alleged in the complaint and determines whether those provide a basis for potential coverage (Indiana Lumbermens Mutual Insurance Co. of West Oregon Wood Products, Inc. 268 F.3d 639 [9th Cir. 2001]).

Thus, the court in Ross Sand & Gravel Co. v. General Insurance Co. of America, 472 F.2d 750 (9th Cir. 1973) held that “any duty liability insurer might have had to defend suit against insured evaporated as soon as complaint against insured was supplemented by discovery of material facts; court was not required to avert its eyes from facts properly before it merely because complaint against insured was cast in broad enough language to have required insurer to defend in a state court, and court properly put an end to action against insurer by means of summary judgment.”

Under Oregon law, insurer may be estopped to deny coverage when the party claiming coverage has acted in a reasonable reliance on an agent's representation of coverage that is not “patently absurd” (Spring Vegetable, supra). However, an insurer does not waive, nor is it estopped, from disputing coverage based on an exclusion by previously having refused to defend based on other grounds (Timberline Equipment Co. Inc. v. St. Paul Fire & Marine Insurance Co., 576 P.2d 1244 [Or. 1978]).

The insurer has a duty to defend when the allegations of the complaint could potentially fall within policy coverage. The district court may not go beyond the face of the underlying complaint to determine the insurer's duty for purposes of summary judgment. In order for extrinsic evidence to be admitted at the summary judgment state, the insured must introduce evidence to show that the exclusion upon which the insurer is relying to decline to defend does not apply after all (Air Products and Chemicals, Inc. v. Hartford Accident and Indemnity Co. et al., 25 F. 3d 177 [3rd Cir. 1994]).

If a single allegation of the complaint is potentially covered, the insurer has an obligation to defend against all claims until the possibility of recovery is confined to claims outside the policy (Cat Internet Systems Inc. v. Providence Washington Insurance Co., 153 F.Supp. 2d 755 [E.D. Penn. 2001]).

There is no duty to defend if there is no potential of liability coverage under a policy (Reyes Lopez v. Misner Marince Construction Co., 664 F. Supp. 652 [D. P.R. 1987]).

Under Rhode Island law, the duty to defend can exist even though the claim against the insured appears to lack merit and even though there may be additional facts that tend to negate coverage. The court need not resolve any factual issues in determining whether a duty to defend exists, because initially the allegations of the complaint are compared with the terms of the policy. If the alleged facts fall within policy coverage, the insurer must defend (Employers Mutual Casualty Co. v. PIC Contractors, Inc., 24 F.Supp. 2d 212 [D. R.I. 1998]).

The insurer cannot rely on facts not asserted in the complaint to avoid its duty to defend. If the insured fails to give timely notice of a claim, the insurer must show prejudice arising from the late notice to escape its duty to defend. (Nortek, Inc. v. Liberty Mutual Insurance Co., 858 F.Supp. 1231 [D.R.I. 1994]).

A plaintiff cannot force the duty to defend by labeling the claim as something that is inconsistent with the factual allegations in the complaint (Employers Mutual, supra). In other words, if the allegations indicate the defendant intentionally injured the plaintiff, upon learning that the insurer will not defend, the plaintiff cannot amend the complaint to negligent infliction of injury.

The obligation of the insurer to defend is determined by the allegations of the underlying third party complaint. Reference to the policy itself is essential to determine whether the duty to defend exists (Allstate Insurance Co. v. Best, 728 F.Supp. 1263 [D. S.C. 1990]). Amended complaints which allege actions that may be covered are allowed (South Carolina Medical Malpractice Liability Ins. Joint Underwriting Assoc. v. Ferry, 354 S.E.2d 378 [S.C.1987]); however, in USAA Property and Casualty Insurance Co. v. Rowland, 435 S.E.2d 879 (S.C. Ct. App. 1993) adding the word “negligently” to an allegation of alienation of affections did not serve to force the insurer to defend the complaint.

The insurer must defend where the pleadings allege a covered set of facts, although alternative theories that would exclude coverage may be present in the complaint (North Star Mutual Insurance Co. v. Kneen, 484 N.W.2d 908 [S.D. 1992]).

In determining duty to defend, the court may consider pleadings and, where appropriate, other evidence of record (Allied Mutual Insurance Co. v. Dakota Rose, Inc., 43 F.Supp. 2d 1081 [D. S.D. 1999]).

In Tennessee, the general rule is that the duty to defend depends upon the allegations in the underlying complaint. The allegations of the complaint are compared with the terms of the insurance policy. Once the duty is triggered, it continues until the facts and law establish that the claim is not covered (Standard Construction Co. Inc. v. Maryland Casualty Co., 2002 WL 1477886 [W.D. Tenn. 2002]).

Extrinsic facts have no place; the duty is determined solely by the allegations contained in the complaint (St. Paul Fire & Marine v. Torpoco, 879 S.W.2d 831 [Tenn. 1994], cited with approval in Blake Industries, Inc. v. General Agents Insurance Co. of America, 2000 WL 1031054 [Tenn. Ct. App. 2000]).

Texas applies the “eight corners rule,” under which courts must first look to the factual allegations in the pleadings to ascertain whether the alleged conduct potentially requires coverage. Facts outside the pleadings cannot influence the duty to defend. If the complaint does not state facts sufficient to clearly bring the case within or without coverage, the insurer is obliged to defend if there is a potential case for coverage (St. Paul Fire & Marine Insurance Co. v. Green Tree Financial Corp., 249 F.3d 389 [5th Cir. 2001]).

A complaint which does not initially state a cause of action under the policy and thus create a duty to defend may be amended so as to trigger the duty (Rhodes v. Chicago Insurance Co., 719 F.2d 116 [5th Cir. 1983]). The duty is thus determined solely by allegations in the most recent petition in the underlying action (Mt. Hawley Insurance Co. v. Steve Roberts Custom Builders Inc., 215 F. Supp. 783 [E.D. Tex. 2002]).

An insurer wrongfully refusing to defend an action will be bound, in subsequent proceedings, by a settlement or judgment against its insured (Rhodes, supra).

Under Utah law, the insurer has a duty to defend on the allegations in a suit against an insured which, if proven, could result in liability covered under the policy (Overthrust Constructors, Inc. v. The Home Insurance Co., 676 F.Supp. 1086 [D. Utah 1987]).

As a general rule, the insured's duty to defend is based on a comparison of the language of the insurance policy with the allegations in the policy. Extrinsic evidence is admissible only if the insurance contract allows. If the duty to defend is dependent on the allegations, extrinsic evidence is irrelevant; but if the duty to defend is dependent on whether the language states the insurer will defend a covered claim or suit, extrinsic evidence is allowable to determine if a duty to defend exists (Fire Insurance Exchange v. Estate of Therkelsen, 27 P.3d 555 [Utah 2001]).

The duty to defend in Vermont is measured by the underlying allegations, but occasionally known facts may be considered to understand the application of policy provisions or exclusions. The duty to defend does not extend to circumstances in which there is, as a matter of law, no duty to indemnify (Garneau v. Curtis & Bedell, Inc. et al., 610 A.2d 132 [Vt. 1992]). The only way for an insurer to avoid the duty to defend is to demonstrate at the outset that the allegations are entirely excluded from coverage (Village of Morrisville Water & Light Dept. v. United States Fidelity & Guaranty Co., 775 F. Supp. 718 [D. Vt. 1991]).

Vermont follows a rule referred to as “mend the hold.” Essentially, when one reason is specified by an insurer as a reason for refusing to pay a loss, it cannot “mend its hold” and cite other reasons once litigation has begun. That is, if the insurer has a grip on one exclusion as a basis for denial, and sees its grip loosening, it cannot cite other exclusions to avoid paying the loss. However, the insurer can cite a specific defense and reserve its right to raise other defenses at a later time (Cummings v. Connecticut General Life Insurance Co., 148 A. 484 [Vt. 1930]).

Under Virginia law, the duty to defend arises whenever the complaint alleges facts and circumstances, some of which would, if proved, fall within the policy coverage. If the insured has a duty to defend against part of the suit, the insurer must defend the entire suit, even though some of the costs of defense for noncovered allegations are later apportioned to the insured. The insurer has no duty to defend if it is clear that there would be no liability under the insurance contract (Morrow Corporation v. Harleysville Mutual Insurance Co., 110 F.Supp.2d 441 [E.D. Va. 2000]).

The insured must prove a claim is covered by the policy; the insurer must prove that an exclusion applies. Only the legal claims or causes of action are determinant of the duty to defend (Air Line Pilots Assoc. v. Twin City Fire Insurance Co., 803 A.2d 1001 [D.C. App. 2002], applying Virginia law).

The duty to defend arises whenever a lawsuit is filed against the insured alleging facts and circumstances arguably covered by the insurance policy. To determine if the duty to defend exists, the court examines whether the allegations for coverage are conceivably within the terms of the policy. Then the court determines whether an exclusion clearly and unambiguously bars coverage (DeWitt Construction, Inc. v. Charter Oak Fire Insurance Co., 307 F.3d 1127 [9th Cir. 2002]). But if the allegations of the complaint are in conflict with facts known to or ascertainable by the insurer, the insurer cannot rely only on the pleadings to determine that coverage exists (R. A. Hanson Co. Inc. v. Aetna Insurance Co., 612 P. 2d 456 [Wash. Ct. App. 1980]). Similarly, the insurer cannot rely on extrinsic facts to deny its duty to defend where the complaint can be interpreted as triggering coverage; if in doubt, the insurer can file a declaratory action (Truck Insurance Exchange v. Vanport Homes, Inc., 58 P.3d 276 [Wash. 2002]).

If an insurer breaches its duty to defend, actual prejudice has to be proven to estop the insurer from asserting a coverage defense (Underwriters at Lloyds v. Denali Seafoods, Inc. et al., 927 F.2d 459 [9th Cir. 1991]). If an insurer wrongfully refuses to defend a suit and there is no reasonable means of prorating costs of defense between those items the insurer was required to defend and those it was not required to defend, the insurer is liable for the entire cost of defense (National Steel Construction Co. v. National Union Fire Insurance Co. of Pittsburgh, 543 P.2d 642 [Wash. Ct. App. 1975]).

West Virginia generally uses the four corners test; if the allegations in the complaint are reasonably susceptible of interpretation that the claim is covered, then the insurer must defend (One Gateway Associates v. Westfield Insurance Co., 184 F.Supp.2d 527 [S.D. W. Va. 2002]). However, in Farmers &Mechanics Mutual Fire Insurance Co. of West Virginia v. Hutzler et al., 447 S.E.2d 22 (W. Va. 1994) the state Supreme Court stated: “When a complaint is filed against an insured, an insurer must look beyond the bare allegations contained in the third party's pleadings and conduct a reasonable inquiry into the facts in order to ascertain whether the claims asserted may come within the scope of the coverage that the insurer is obligated to provide.”

In Wisconsin, the court looks at the four corners of the complaint to decide whether the facts alleged therein raise the possibility of coverage under the policy. If there is a possibility of recovery on any covered claim in the complaint, the insurer must provide defense for the entire lawsuit, even if the other allegations in the suit are not covered (Bradley Corp. v. Zurich Insurance Co., 984 F.Supp.1193 [E.D. Wis. 1997]).

In Wisconsin, the insured has the burden of proving that coverage applies, and the insurer, if relying on an exclusion to deny coverage, has the burden of proving the exclusion applies (Rhein Building Co. et al. v. Gehrt et al., 21 F.Supp.2d 896 [E.D. Wis. 1998]).

Under Wisconsin law, an insurer will not breach its duty to defend by denying coverage where the issue of coverage is fairly debatable as long as the insurer provides coverage and a defense once coverage is established; however, when coverage is not determined before a liability trial, the insurer must provide a defense with regard to liability and damages.

Under Wisconsin law, the procedure for an insurer to follow when coverage is disputed is: (1) to intervene in the underlying lawsuit and request a bifurcated trial on coverage and liability issues, and request that determination of the liability issue be stayed until the coverage question is resolved; or (2) to defend the insured while reserving its rights to contest coverage. When this procedure is followed, there is no risk that the insurer will have breached its duty to defend (U.S. Fire Insurance Co. v. Green Bay Packaging, Inc., 66 F.Supp.987 [E.D. Wis. 1999]).

An insurer is obligated to defend as long as the alleged claim rationally falls within the policy coverage. Unless the policy states to the contrary, the insurer is liable for all of the costs of defending the action, including costs of defending both covered and uncovered claims. So, if a policy states the insurer will defend any suit but is silent on allocation of defense costs for covered and uncovered claims, it is to be construed in favor of the insured (Shoshone First Bank, Inc. v. Pacific Employers Insurance Co., 2 P.3d  510 [Wyo. 2000]).