The U.S. Court of Appeals for the Fifth Circuit has asked the Supreme Court of Texas to decide if there is an extrinsic evidence exception to Texas' eight-corners rule.
The Case
After a 10-year-old died in an all-terrain vehicle accident at his grandparents' house, the boy's mother sued the grandparents, the Richards. The Richards asked their homeowners' insurer, State Farm Lloyds, to defend (and if necessary, to indemnify) them.
State Farm refused and sought a declaration from the U.S. District Court for the Northern District of Texas that it had no duty to defend or indemnify the Richards.
In doing so, State Farm relied on extrinsic evidence.
The Richards argued that the district court could not consider that evidence under Texas' eight-corners rule.
Under the eight-corners rule, an insurer's duty to defend is determined by the claims alleged against the insured and the coverage provided in the policy. The rule takes its name from the fact that only two documents ordinarily are relevant to the determination of the duty to defend: the policy and the pleadings of the third-party claimant. Facts outside the pleadings, even those easily ascertained, ordinarily are not material to the determination and allegations against the insured are liberally construed in favor of coverage.
The district court disagreed with the Richards, found that extrinsic evidence was admissible, and granted summary judgment in favor of State Farm.
The dispute reached the Fifth Circuit.
The Fifth Circuit's Decision
In its decision, the Fifth Circuit explained that the issues in the case concerned Texas' eight-corners rule and whether a potential extrinsic evidence exception to that rule applied in this case.
Finding that there was no controlling Texas Supreme Court caselaw determining whether there was a policy language exception to the eight-corners rule, the Fifth Circuit certified the following question to the Supreme Court of Texas:
Is the policy-language exception to the eight-corners rule articulated in B. Hall Contracting Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634 (N.D. Tex. 2006), a permissible exception under Texas law?
The case is State Farm Lloyds v. Richards, No. 18- 10721 (5th Cir. Sep. 9, 2019).
Insurance Coverage Law Center Comment
We will follow this case and discuss developments as warranted.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].