February 12, 2022 | Law360 | 1 minute read|Houston

Bracewell’s Vince Morgan examined with Law360 the so-called “eight-corners rule,” whereby the court looks only at the four corners of the insurance policy and the four corners of the complaint against the policyholder to determine whether the insurer has a duty to defend.

On February 11, the Texas Supreme Court issued decisions in two cases argued in September to determine whether the state could deviate from the “eight-corners rule.”

In her opinion, Justice Rebeca A. Huddle established that Texas law permitted the Northfield exception to the “eight-corners rule,” albeit in a narrower form. The unanimous court found that Texas law allows the consideration of extrinsic evidence if it does not overlap with any liability aspects of the case, does not contradict facts alleged in the pleading and conclusively establishes whether coverage exists.

“This issue has been percolating in the Texas courts for 20 years — maybe longer — I think everybody is probably going to welcome the guidance,” said Morgan.

Now that the court has stated an exception exists and laid out “what is a pretty simple test” to determine exceptions to the “eight-corners rule,” Morgan predicts the disputes will begin. “It’s going to open up questions about whether the evidence somebody is going to want to offer meets this narrow exception,” he said. “With this exception there’s another line of analysis and another avenue for disputes to arise. We’re probably going to see more litigation, and that’s probably not great.”

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