Texas Supreme Court Hears Argument on Whether to Adopt Exception to Eight-Corner Rule

At oral argument in the case of State Farm Lloyds v. Janet Richards,[1] the Texas Supreme Court heard from both sides on whether or not Texas courts should recognize a policy-language based exception to the eight-corners rule, applied when evaluating whether an insurer can introduce extrinsic evidence to contest its duty to defend the insured for a third-party liability claim. The so-called eight-corners rule allows a court to refer only to the relevant policy terms and factual allegations in the complaint against the …

Continue Reading

Texas Supreme Court Asked to Decide if Texas Recognizes Limited Exception to Eight-Corners Rule

In State Farm Lloyds v. Richards, the federal appellate court asked the Texas Supreme Court to decide whether Texas law recognizes a limited exception to the so-called eight-corners rule applied when evaluating an insurer’s duty to defend its insured for a third-party liability claim.[1]

Under the eight-corners rule (referred to as the four corners rule in some jurisdictions), an insurer’s duty to defend is measured by the allegations of the complaint and the language of the policy.  Evidence outside of these materials is …

Continue Reading

Texas Supreme Court Opens the Door for Statutory Damages After Appraisal

Good faith use of the appraisal process to resolve legitimate valuation disputes under a property policy is no longer an absolute defense under Texas law to claims for statutory delay damages. In a pair of decisions regarding appraisal, the Texas Supreme Court held that when appraisal is invoked after the commencement of litigation, the prompt payment of the award by an insurer precludes statutory bad faith claims under Chapter 541 of the Texas Insurance Code, but potentially allows for statutory delay damages of interest and …

Continue Reading

Anti-Concurrent-Causes Clause Bars Coverage When One Cause is Excluded

In JAW The Pointe, L.L.C., v. Lexington Ins. Co., 2015 WL 1870054 (Tex. April 24, 2015), the Texas Supreme Court found an insurer did not violate the Texas Insurance Code and the Texas Deceptive Trade Practices Act by denying coverage where the damages in question were caused in part by flooding, a cause excluded by the policy.

JAW The Pointe purchased an apartment complex in Galveston, Texas in 2007, only 14 months before Hurricane Ike struck. The complex sustained significant damage – estimated at …

Continue Reading

40-Love. Contractual Liability Exclusion Inapplicable in Tennis Court Construction Defect

On certified questions from the Fifth Circuit, the Texas Supreme Court limited the scope of the contractual liability exclusion to situations where the liability is enlarged beyond its duty to exercise ordinary care in fulfilling its contract. In this matter, the policyholder contracted to construct certain additions to a school, including a tennis court.  The contract required the policyholder to perform the work in a good and workmanlike manner. The tennis court was unusable for its intended purpose and the policyholder was sued. Its carrier …

Continue Reading