In Monroe Guaranty Insurance Company v. BITCO General Insurance Corporation, No. 21-0232, 2022 Tex. LEXIS 148 (Tex. Feb. 11, 2022), the Supreme Court of Texas articulated an exception to the eight-corners rule governing whether an insurer owes a duty to defend.  Instead of looking solely to the allegations in the pleadings and the terms of the insurance policy, Texas courts may now look beyond the eight corners of those documents to extrinsic evidence under certain circumstances.  On the same day it published Monroe, the Court issued its opinion in Pharr-San Juan-Alamo Indep. Sch. Dist. v. Tex. Pol. Subdivisions Property/Casualty Joint Self Ins. Fund, No. 20-0033, 2022 Tex. LEXIS 149 (Tex. Feb. 11, 2022), in which it further discussed its newly articulated extrinsic evidence exception.  The following provides an overview of these opinions and analysis of some effects they may have on coverage litigation moving forward.

I. The Monroe Decision

In the underlying lawsuit, the plaintiff alleged the insured negligently drilled an irrigation well, causing damage to the plaintiff's land.  The complaint, however, did not provide any detail regarding when any allegedly negligent acts, or the alleged resulting damage, occurred.  The insured had commercial general liability ("CGL") coverage from two insurers: BITCO General Insurance Corporation ("BITCO") issued two consecutive one-year CGL policies covering October 2013 to October 2015, while Monroe Guaranty Insurance Company ("Monroe") issued one CGL policy covering October 2015 to 2016.

The insured tendered the complaint to both insurers and each took a different position with respect to the duty to defend, with BITCO agreeing to provide the insured a defense under a reservation of rights, and Monroe refusing to defend on the grounds that the alleged damage fell outside of its policy period.  BITCO filed suit against Monroe seeking a declaration that Monroe owed the insured a duty to defend, and in that dispute, the insurers stipulated that the allegedly negligent acts and resulting damage occurred "in or around November 2014" – about ten months before BITCO's CGL coverage ended and Monroe's began.  Based on this stipulation, Monroe maintained it had no duty to defend because the damage occurred during BITCO's policy period.  The district court rejected Monroe's argument, holding it could not consider the stipulated extrinsic evidence.  Monroe appealed to the Fifth Circuit, and the Fifth Circuit certified the issue to the Supreme Court of Texas.