The Houston Lawyer magazine has published an article by Hicks Thomas partners Courtney Ervin and J. Stephen Barrick and associate Stacie Osborn exploring the Texas Supreme Court’s opinion recognizing exceptions to the eight-corners rule. The article, “Monroe Guaranty v. BITCO: Texas Supreme Court (Finally) Recognizes Exceptions to the Eight-Corners Rule,” details the decision that allows courts to consider extrinsic evidence when evaluating whether an insurer has a duty to defend.
In the article, Ms. Ervin, Mr. Barrick, and Ms. Osborn explore the eight-corners rule, which is an analytical tool that Texas courts use to evaluate whether a liability insurer has a duty to defend it's insured against a claim or lawsuit. Under the rule, an insurer’s duty to defend is determined solely on the allegations in the underlying pleading and the terms of the insurance policy, without considering any “extrinsic” evidence relating to coverage.
Ms. Ervin, Mr. Barrick, and Ms. Osborn write that for years, the Texas Supreme Court has refused to address whether there are exceptions to the eight-corners rule, but that changed in February 2022, when the court issued its opinion in Monroe Guaranty Insurance Company v. BITCO General Insurance Corporation, No. 21-0232. It held that extrinsic evidence can be considered in evaluating whether an insurer has a duty to defend if the extrinsic evidence “(1) goes solely to the issue of coverage and does not overlap with the merits of liability, (2) does not contradict facts alleged in the pleading, and (3) conclusively establishes the coverage fact to be proved.”
“While BITCO’s modification to Northfield appears minimal,” they write, “there will be an uptick in lawsuits as policyholders and insurers alike seek to understand the outer limits of this exception to the eight-corners rule.”
To read the full article, click here.