{"id":899712,"date":"2022-03-15T14:51:08","date_gmt":"2022-03-15T20:51:08","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=899712"},"modified":"2022-03-15T14:51:10","modified_gmt":"2022-03-15T20:51:10","slug":"eight-corners-cements-exception","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/eight-corners-cements-exception\/","title":{"rendered":"Texas Supreme Court Cements Exception to \u201cEight-Corners\u201d Rule Through Two Recent Rulings"},"content":{"rendered":"\n<p>Jeremy Macklin | <a href=\"https:\/\/www.traublieberman.com\/perspectives\/texas-supreme-court-cements-exception-to-eight-corners-rule-through-two-recent-rulings\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Traub Lieberman<\/a><\/p>\n\n\n\n<p>The Texas \u201c<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/duty-to-defend-beyond-eight-corners\/\" target=\"_blank\" rel=\"noreferrer noopener\">eight corners<\/a>\u201d rule precludes insurers from disclaiming a defense obligation based on facts not alleged in the underlying pleadings.\u00a0Texas federal and appellate courts have been issuing rulings addressing exceptions to the eight corners rule and recently sought guidance from the Texas Supreme Court on whether Texas law recognizes such exceptions to the \u201ceight corners\u201d rule.\u00a0The Texas Supreme Court has now spoken on the issue.\u00a0<\/p>\n\n\n\n<p><em>Monroe Guar. Ins. Co. v. BITCO Gen. Ins. Corp.<\/em>, 65 Tex. Sup. Ct. J. 440 (2022).\u00a0<\/p>\n\n\n\n<p>In&nbsp;<em>Monroe<\/em>, David Jones contracted with 5D Drilling &amp; Pump Services in the summer of 2014 to drill a 3,600-foot commercial irrigation well on his farmland.&nbsp;In 2016, Jones sued 5D for breach of contract and negligence relating to 5D\u2019s drilling operations on Jones\u2019s property.&nbsp;Jones\u2019s pleading was silent as to when the damage flowing from 5D\u2019s alleged acts of misconduct occurred.&nbsp;BITCO and Monroe stipulated that 5D\u2019s drill struck a bore hole during 5D\u2019s drilling operations in or around November 2014.&nbsp;<\/p>\n\n\n\n<p>The coverage dispute was between two insurance companies who both insured 5D Drilling &amp; Pump Services but during different periods: BITCO General Insurance Corporation insured 5D from 2013-2015 and Monroe Guarantee Insurance Company from 2015 to 2016.&nbsp;The policies issued by both insurance companies only afford coverage if \u201cproperty damage\u201d occurs during the policy period.&nbsp;Monroe denied coverage on the basis that \u201cproperty damage\u201d occurred prior to the inception of its policy in 2015.&nbsp;<\/p>\n\n\n\n<p>The Texas Supreme Court specifically referenced and approved of the exception to the eight-corners rule applied in&nbsp;<em>Lova Ins. Co. v. Avalos<\/em>, 610 S.W.3d 878 (Tex. 2020), which allowed consideration of extrinsic evidence if it is relevant to collusion between the insured and a third party to make false representations of fact to create coverage where it would not otherwise exist.&nbsp;The&nbsp;<em>Monroe<\/em>&nbsp;court acknowledged, however, that principles governing when (and what) extrinsic evidence can be considered have not been uniform among Texas intermediate courts.&nbsp;<\/p>\n\n\n\n<p>After addressing various other rulings considering the use of extrinsic evidence relevant to the duty to defend, the Texas Supreme Court also \u201cexpressly approve[d] of the practice of considering extrinsic evidence in duty-to-defend cases to which&nbsp;<em>Avalos&nbsp;<\/em>does not apply.\u201d&nbsp;The court was clear that it is not abandoning the eight corners rule, which \u201cwill resolve coverage determinations in most cases.\u201d&nbsp;But, where there is a gap in the plaintiff\u2019s pleading against the insured, courts can rely on extrinsic evidence to determine an insurer\u2019s duty to defend when the evidence: (1) goes solely to an 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.<\/p>\n\n\n\n<p>The court also considered whether the date of an occurrence is the type of extrinsic evidence that can be considered under the three-part test.&nbsp;The court held that such evidence may be considered, but the stipulation offered in the case before it could not be considered because it \u201coverlaped\u201d with the merits of liability.&nbsp;Specifically, in the underlying case, 5D would likely have sought to prove that the sticking of the drill bit was not the cause of Jones\u2019s damage, meaning 5D would necessarily argue that some of Jones\u2019s damages occurred after November 2014.&nbsp;<\/p>\n\n\n\n<p><em>Pharr-San Juan-Alamo Indep. Sch. Dist. v. Tex. Pol. Subdivisions Prop.\/Casualty Joint Self Ins. Fund, No. 20-0033, 2022 Tex. LEXIS 149, at *1 (Feb. 11, 2022)<\/em><\/p>\n\n\n\n<p>The Texas Supreme Court also decided a separate case on the same day as&nbsp;<em>Monroe<\/em>&nbsp;further addressing the contours of exceptions to the \u201ceight corners\u201d rule.&nbsp;In&nbsp;<em>Pharr-San<\/em>, Alexis Flores was injured after being thrown from a golf cart driven by an employee of the Pharr-San Juan-Alamo Independent School District. The underlying lawsuit against the School District alleged that the employee was acting within the scope of his employment when he recklessly and negligently operated the golf cart. Flores\u2019s petition specifically alleged that the employee suddenly, and without warning, turned the golf cart abruptly, throwing Flores from the vehicle.<\/p>\n\n\n\n<p>The School District had automobile-liability insurance through the Texas Political Subdivisions Property\/Casualty Joint Self Insurance Fund. The School District requested that the Insurance Fund provide a defense against Flores\u2019s claims and indemnify it against any resulting liability.&nbsp;The policy at issue provided, in relevant part, coverage for bodily injury or property damage related to use of a \u201ccovered auto.\u201d The policy defined \u201cauto\u201d to mean \u201ca land motor vehicle [. . .] designed for travel on public roads [. . .].\u201d &nbsp;The Insurance Fund refused to defend, asserting that a golf cart was not designed for travel on public roads and was thus not an \u201cauto\u201d as defined by the policy. &nbsp;<\/p>\n\n\n\n<p>The coverage dispute that made its way to the Texas Supreme Court turned on whether a golf cart is designed for travel on public roads.&nbsp;The Texas Supreme Court found that golf cards are not designed for travel on public roads and, in turn, found that the Insurance Fund had no duty to defend.<\/p>\n\n\n\n<p>To reach its conclusion, the Texas Supreme Court looked to the common, ordinary meaning of the term \u201cgolf cart\u201d in light of the context of its use within the underling petition. The Court found that the term golf cart as alleged in the underlying lawsuit refers to a motorized cart designed for use on a golf course, not designed for travel on public roads. Applying the eight corners rule (i.e., looking at only the underlying petition and the insurance policy), the Texas Supreme Court found that the petition did not include an allegation that Flores was thrown from a vehicle \u201cdesigned for travel on public roads.\u201d&nbsp;Rather, the petition only alleged that Flores was \u201cthrown from a golf cart.\u201d The Insurance Fund, therefore, had no duty to defend.<\/p>\n\n\n\n<p>The Texas Supreme Court further concluded that its new exception to the eight-corners rule in&nbsp;<em>Monroe<\/em>&nbsp;did not apply.&nbsp;The Court found that the allegations conclusively established that the vehicle from which Flores was thrown was not \u201cdesigned for travel on public roads.\u201d&nbsp; Of significance, the Court explained:<\/p>\n\n\n\n<p>&#8220;If Flores had alleged only that Alexis was thrown from a \u201cvehicle,\u201d without any indication of the type of vehicle or whether it was designed for travel on public roads, a gap would exist that prevents us from determining the duty to defend based solely on the petition\u2019s allegations and the policy\u2019s provisions, and extrinsic evidence proving that the vehicle was or was not designed for use on public roads would not contradict the general allegation that the accident involved a \u201cvehicle.\u201d But by pleading that the vehicle was a \u201cgolf cart,\u201d the petition provided all the information necessary to determine the duty to defend.&#8221;<\/p>\n\n\n\n<p>These two decisions significantly impact the analysis of an insurance company\u2019s duty to defend under Texas law.\u00a0 The now-recognized exception to the eight-corners rule is a fact-specific inquiry that will require consideration of the allegations against the insured, policy terms, nature of the extrinsic evidence, theories of liability against the insured, and the insured\u2019s defenses to liability.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jeremy Macklin | Traub Lieberman The Texas \u201ceight corners\u201d rule precludes insurers from disclaiming a defense obligation based on facts not alleged in the underlying pleadings.\u00a0Texas federal and appellate courts have been issuing rulings addressing exceptions to the eight corners rule and recently sought guidance from the Texas Supreme Court on whether Texas law recognizes&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/eight-corners-cements-exception\/\">Continue reading <span class=\"screen-reader-text\">Texas Supreme Court Cements Exception to \u201cEight-Corners\u201d Rule Through Two Recent Rulings<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10721],"tags":[9895,11646,22,155],"class_list":["post-899712","post","type-post","status-publish","format-standard","hentry","category-insurance","tag-advise-consult","tag-eight-corners-rule-2","tag-insurance","tag-texas","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Texas Supreme Court Cements Exception to \u201cEight-Corners\u201d Rule Through Two Recent Rulings - Advise &amp; 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