{"id":423,"date":"2022-02-17T14:25:28","date_gmt":"2022-02-17T18:25:28","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/insurancelaw\/?p=423"},"modified":"2022-02-17T14:27:54","modified_gmt":"2022-02-17T18:27:54","slug":"texas-law-allows-courts-to-look-beyond-eight-corners-analysis-consider-extrinsic-evidence-in-certain-circumstances","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/insurancelaw\/2022\/02\/17\/texas-law-allows-courts-to-look-beyond-eight-corners-analysis-consider-extrinsic-evidence-in-certain-circumstances\/","title":{"rendered":"Texas Law Allows Courts to Look Beyond Eight-Corners Analysis, Consider Extrinsic Evidence, in Certain Circumstances"},"content":{"rendered":"

By: Daniel B. Heidtke<\/a><\/strong><\/p>\n

In a significant ruling issued less than one week ago, the Supreme Court of Texas adopted a modified form of the \u201cNorthfield <\/em>exception\u201d to the \u201ceight-corners rule\u201d previously set out by the U.S. Court of Appeals for the Fifth Circuit in Northfield Ins. Co. v. Loving Home Care, Inc.<\/em>, 363 F.3d 523 (5th Cir. 2004).<\/p>\n

The court in Monroe Guaranty Ins. Co. v. BITCO General Ins. Co<\/em>., Case No. 21-0232, explained that the practice of looking at extrinsic evidence outside of the four corners of the complaint and four corners of the insurance policy is permissible, in certain circumstances.\u00a0 As explained by the court, those circumstances require that the extrinsic evidence \u201c(1) goes solely to the 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.\u201d<\/p>\n

<\/p>\n

The coverage dispute arose out of underlying litigation claiming that an irrigation well was negligently drilled and damaged the underlying plaintiff\u2019s (Jones) land.\u00a0 The two parties in the coverage dispute\u2014Monroe Guaranty Ins. Co. and BITCO General Ins. Co.\u2014each provided commercial general liability insurance to the insured, 5D Drilling & Pump Service, Inc. (\u201c5D\u201d).\u00a0 5D performed the allegedly negligent drilling on Jones\u2019s land. Monroe and BITCO\u2019s policies covered 5D over different time periods.\u00a0 Monroe\u2019s policy covered October 2015 to October 2016; BITCO\u2019s policy covered October 2013 to October 2015.<\/p>\n

In the underlying litigation, Jones filed suit against 5D claiming that 5D performed several purportedly negligent acts.\u00a0 But, as the court noted, \u201cthe pleading alleges that<\/em> Jones\u2019s land was damaged in different ways but is silent as to when <\/em>any of the alleged damage occurred.\u201d\u00a0 5D, in turn, demanded a defense from both its insurers.\u00a0 BITCO agreed to defend 5D, under a reservation of rights, but Monroe refused.<\/p>\n

BITCO ultimately sued Monroe in federal district court, seeking a declaration that Monroe owed a duty to defend 5D.\u00a0 During that litigation, BITCO and Monroe stipulated that 5D stuck the drilling bit in the bore hole (allegedly rendering the well \u201cpractically useless\u201d according to Jones), \u201cin or around November 2014,\u201d or about ten months before BITCO\u2019s policy would end and Monroe\u2019s would begin.<\/p>\n

Both BITCO and Monroe moved for summary judgment.\u00a0 Monroe argued it had no duty to defend because the stipulation proved that any property damage occurred before its policy period.\u00a0 The district court determined it could not consider the stipulated extrinsic evidence because of the eight-corners rule.\u00a0 Monroe appealed.\u00a0 On appeal, the Fifth Circuit concluded that the question whether the court consider extrinsic evidence\u2014\u201cthe stipulated date the drill bit became stuck\u201d\u2014was \u201c[k]ey to deciding\u201d the case.\u00a0 It then certified two questions to the Texas Supreme Court:<\/p>\n

    \n
  1. \n
      \n
    1. \n
        \n
      1. Is the exception to the eight-corners rule articulated in Northfield Ins. Co. v. Loving Home Care, Inc.<\/em>, 363 F.3d 523 (5th Cir. 2004), permissible under Texas law?<\/li>\n
      2. When applying such an exception, may a court consider extrinsic evidence of the date of an occurrence when (1) it is initially impossible to discern whether a duty to defend potentially exists from the eight-corners of the policy and pleadings alone; (2) the date goes solely to the issue of coverage and does not overlap with the merits of liability; and (3) the date does not engage the truth or falsity of any facts alleged in the third party pleadings?<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n
          \n
        1. \n
            \n
          1. <\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

            Answering those two questions, the court noted its prior opinions that identified exceptions to the eight-corners rule, including in Loya Ins. Co. v. Avalos, <\/em>610 S.W.3d 878 (Tex. 2020).<\/p>\n

            Ultimately, the court adopted and \u201cexpressly approve[d] the practice of considering extrinsic evidence in duty-to-defend cases\u201d but noted that the eight-corners rule \u201cremains the initial inquiry\u201d and \u201cwill resolve coverage determinations in most cases.\u201d\u00a0 As explained above, that practice is limited to situations where the extrinsic evidence \u201c(1) goes solely to the 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.\u201d<\/p>\n

            Thereafter, the court applied this \u201crefinement\u201d of the Northfield <\/em>exception, and answered the second certified question.\u00a0 The court held that \u201cwhile there is no categorical prohibition against extrinsic evidence of the date of an occurrence, the stipulation in this case overlaps with the merits of liability and cannot be considered.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

            By: Daniel B. Heidtke In a significant ruling issued less than one week ago, the Supreme Court of Texas adopted a modified form of the \u201cNorthfield exception\u201d to the \u201ceight-corners rule\u201d previously set out by the U.S. Court of Appeals for the Fifth Circuit in Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d … <\/p>\n

            Continue reading “Texas Law Allows Courts to Look Beyond Eight-Corners Analysis, Consider Extrinsic Evidence, in Certain Circumstances”<\/span><\/a><\/p>\n","protected":false},"author":243,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[308,57,134,282,471],"ppma_author":[431],"class_list":["post-423","post","type-post","status-publish","format-standard","hentry","category-general","tag-daniel-heidtke","tag-duty-to-defend","tag-extrinsic-evidence","tag-insurance-law","tag-texas"],"authors":[{"term_id":431,"user_id":243,"is_guest":0,"slug":"dbheidtke","display_name":"Daniel B. Heidtke","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2024\/10\/Danny-Heidtke-LinkedIn-6249-e1729870422263-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/423","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/users\/243"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/comments?post=423"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/423\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/media?parent=423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/categories?post=423"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/tags?post=423"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/ppma_author?post=423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}