Hunton Insurance Recovery Blog

In responding to a certified question from the Fifth Circuit in Richards v. State Farm Lloyds, the Texas Supreme Court held that the “policy-language exception” to the eight-corners rule articulated by the federal district court is not a permissible exception under Texas law.  See Richards v. State Farm Lloyds, 19-0802, 2020 WL 1313782, at *1 (Tex. Mar. 20, 2020).  The eight-corners rule generally provides that Texas courts may only consider the four corners of the petition and the four corners of the applicable insurance policy when determining whether a duty to defend exists.  State Farm argued that a “policy-language exception” prevents application of the eight-corners rule unless the insurance policy explicitly requires the insurer to defend “all actions against its insured no matter if the allegations of the suit are groundless, false or fraudulent,” relying on B. Hall Contracting Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634, 645 (N.D. Tex. 2006).  The Texas Supreme Court rejected the insurer’s argument, citing Texas’ long history of applying the eight-corners rule without regard for the presence or absence of a “groundless-claims” clause.

Law360 sought the perspective of Walter Andrews, head of Hunton & Williams LLP’s insurance coverage practice, when collecting its list of cases to watch in 2017. Andrews identified a case pending with the Texas Supreme Court – USAA Texas Lloyds Co. v. Menchaca, which we reported on in October.  As Andrews explained to Law360, “If the Texas Supreme Court comes down in the policyholder’s favor here, it would provide a substantial weapon for policyholders’ arsenals, as far as what they have to [use against] insurers that don’t reasonably investigate claims. That would ...

With hurricane season in full swing, policyholders should keep an eye on the Texas Supreme Court for a decision that may impact future recovery efforts. On Tuesday, October 11, 2016, the Texas Supreme Court heard oral argument in USAA Texas Lloyds Co. v. Gail Menchaca, Case No. 14-0721, regarding whether a jury’s award of damages for the insurer’s failure to conduct a reasonable investigation (in violation of the Texas Insurance Code) could stand despite the jury’s finding that the insurer did not breach the insurance policy.