The Eight Corners Rule In Insurance Law

The “Eight Corners Rule” is unique to insurance law. Dallas / Fort Worth insurance lawyers should be able to explain this rule to their clients. A 2016, Fourteenth Court of Appeals opinion explains the law related to this rule. The style of the case is, Allstate County Mutual Insurance Company v. Bobby Wootten and Mary Wootten, D/B/A Wootton Construction and is an appeal from the 434th Judicial District Court.
In the Policy at issue, Allstate promised to defend and indemnify the Woottons. The duty to defend is distinct from, and broader than, the duty to indemnify. An insurer must defend its insured if a plaintiff’s factual allegations potentially support a covered claim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured. Thus, an insurer may have a duty to defend but, in the long run, no obligation to indemnify.
In determining whether an insurer has a duty to defend its insured, Texas courts follow the eight-corners rule, also known as the complaint-allegation rule, which the Supreme Court of Texas has described as follows: An insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations. Thus, even if the allegations are groundless, false, or fraudulent the insurer is obligated to defend. In making the duty-to-defend determination, the court must resolve all doubts regarding the duty to defend in favor of the existence of a duty, and the court will construe the pleadings liberally. If the petition does not contain factual allegations sufficient to clearly bring the underlying case within or without the coverage, the general rule is that the insurer is obligated to defend if the petition potentially includes a claim that falls within the coverage of the policy. The duty to defend is not affected by facts ascertained before suit or developed in the course of litigation, or by the ultimate outcome of the suit. In applying the eight-corners rule, courts may not read facts into the pleadings or look outside the pleadings; but, the eight- corners rule does not require the court to ignore the inferences that logically flow from the facts alleged in the petition. If a petition potentially includes a covered claim, the insurer must defend the entire suit. With this legal standard in mind, the courts then turn to the language of the Policy.
In this case, the court used several pages of the opinion comparing the pleadings against the Wootten’s with the policy language. The prior paragraph above, is the standard they and other courts use to reach their determination to decide whether or not the insurer has a duty or responsibility to defend an insured when a claim is made.