Nautilus Insurance v. Strongwell Corp., 968 F. Supp. 2d 807

Nautilus seeks a declaratory judgment that it has no duty to defend or indemnify Strongwell in Black & Veatch's Missouri action.
Black & Veatch alleges defective FRP materials/work by Strongwell on jet bubbling reactor projects, resulting in widespread damage and required repairs.
Nautilus issued two CGL policies covering 2007-2008 and 2008-2009, with insuring clause to defend against suits for bodily injury or property damage.
Nautilus defended under reservation of rights; Nautilus filed this coverage action; Strongwell moved to dismiss the defense-declaration and to stay the indemnity issue.
The court applied the eight corners rule, found potential coverage, and dismissed several exclusion-based declarations while preserving a defense duty; it stayed indemnity discovery in part.
The court directed that discovery on indemnity be limited and held the indemnity issue premature pending resolution of the underlying action.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Eight corners rule governs duty to defend?	Nautilus argues extrinsic evidence may illuminate coverage.	Strongwell contends only policy and underlying complaint matter (eight corners).	Eight corners rule governs; extrinsic evidence not used to determine defense duty.
Do the underlying allegations create potential coverage for occurrence and property damage?	Nautilus contends there may be no occurrence or property damage.	Strongwell contends allegations show covered 'occurrence' and damage.	Yes; allegations show potential occurrence and property damage, triggering defense duty.
Are the policy exclusions clearly excluding coverage to defeat the defense duty?	Nautilus argues exclusions relieve it of duty to defend.	Strongwell argues some claims fall outside exclusions, preserving duty to defend.	Counts IV, V, VI, and VIII dismissed to extent exclusions apply; Count VII does not clearly apply; Count IX not unambiguously applicable.
Indemnity issue should be addressed now or stayed pending underlying action?	Nautilus seeks consideration of indemnity now with discovery.	Strongwell argues indemnity should await underlying resolution.	Indemnity decision stayed in part; discovery limited pending underlying action; decision premature.

CACI Int’l, Inc. v. St. Paul Fire and Marine Ins. Co., 566 F.3d 150 (4th Cir. 2009) (eight-corners rule; determine coverage from policy and underlying complaint)
AES Corp. v. Steadfast Ins. Co., 283 Va. 609, 725 S.E.2d 532 (Va. 2012) (occurrence/accident definition under Virginia law)
Capitol Envtl. Servs., Inc. v. North River Ins. Co., 536 F.Supp.2d 633 (E.D. Va. 2008) (eight-corners approach in Virginia insurance disputes)
Brenner v. Lawyers Title Ins. Corp., 240 Va. 185, 897 S.E.2d 100 (1990) (duty to defend broader than indemnity; boundaries described)
Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20 (Tex. 2008) (eight-corners and insurer duty to defend in Texas; extrinsic evidence generally not allowed)
Marx v. Hartford Accident & Indemnity Co., 157 N.W.2d 871 (Neb. 1968) (definitional standard for professional services)
Parker v. Hartford Fire Ins. Co., 278 S.E.2d 803 (Va. 1981) (only when insurer would clearly not be liable can defense be avoided)
Hotel Roanoke Conference Ctr. Comm’n v. Cincinnati Ins. Co., 303 F.Supp.2d 784 (W.D. Va. 2004) (distinguishes between injury to insured's own work vs. damage to other property)
First Tenn. Bank Nat’l Ass’n v. St. Paul Fire and Marine Ins. Co., 501 Fed.Appx. 255 (4th Cir. 2012) (indemnity determinations often deferred pending underlying action)
First Tenn. Bank Nat’l Ass’n v. St. Paul Fire and Marine Ins. Co., 501 Fed.Appx. 255 (4th Cir. 2012) (indemnity decisions deferred until underlying action resolves)