Texans’ Duty to Defense: Declining or Not Declining


Texas is among the minority of states that allow few, if any, deviations from the “Eight Pillars Rule,” which states that an insurer’s duty to defend must be determined from the complaint and the policy, regardless of external evidence or facts. in Petco General Incremental. Company v. Monroe Guar. ins companyNo. 19-51012, 2022 WL 1090800 (5th April 12, 2022) (“Petco“), the Fifth Circuit Court of Appeals has refused to consider outside evidence in determining Bitco’s duty to defend and determine when a court applying Texas law could deviate from the state’s strict eight-angle rule under Monroe an exception.

Bitco and Monroe have released commercial general liability policies for 5D Drilling & Pump Services, Inc. for the years 2013-2014 and 2015-2016, respectively. 5D was sued after it allegedly failed to drill a well properly in the summer of 2014. Both insurers were notified. Bitco agreed to defend 5D and Monroe refused, citing the exclusion of two business risks and asserting that the damage occurred outside the document’s term. Bitco has filed a clarification requesting a declaration that Monroe also owes a duty to defend and seek to recover Monroe’s share of the defense costs. The district court issued an expedited ruling in Bitco’s favor based on the complaint’s underlying allegations. Monroe resumed.

On appeal, Monroe relied on a clause between the parties that the loss occurred in November 2014, outside of her policy period. However, since the condition was outside of politics and the underlying complaint, a problem arose as to whether the external condition could be considered when determining the duty to defend.

On appeal, the court in Petco Note that in Northfield Ins. Inc. v. Loving Home Care, Inc., 363 F. of the primary issue. according to Northfieldthe fifth district in Petco I endorsed two important questions to the Texas Supreme Court:

  1. Whether the exception in Northfield Is it permissible under Texas law?
  2. In applying such an exception, the court may consider external evidence of the history of an occurrence when (i) it is in principle impossible to determine whether a duty of defense exists from the eight aspects of policy and pleadings alone; (ii) The date only goes to the issue of coverage and does not interfere with the liability benefits; and (3) the history does not imply the truth or falsity of any facts alleged in the third party’s pleadings?[1]

In response, the Texas Supreme Court issued in Monroe laying down what is now referred to as ” Monroe Exception,” which provides:

[I]If the primary petition provides for a claim that could give rise to a duty to the defense, and the application of the eight-angle rule, because of a gap in the plaintiff’s plea, does not specify whether or not coverage exists, Texas law permits consideration of external evidence provided Evidence (1) goes only to a case coverage and does not interfere with the merits of liability, (ii) does not conflict with the facts alleged in the plea, and (iii) conclusively establishes the fact of coverage that must be established.[2]

The Monroe The court also considered its previous decision in Richards vs. State Farm Lloyd’s, 597 SW 3d 492 (Tex. 2020), where the court had previously addressed the use of external evidence and refused to allow a deviation from the octagon rule. in Richardsthe policy requires a defense in the event “a claim is made or a claim is made against the insured for bodily injury damages . . . to which this coverage applies.” The Court noted that “[w]While some liability policies agree to defend the insured even if the claims of the lawsuit are “unfounded, false or fraudulent,” [] The policy in question does not contain that language.” However, the insurer sought to rely on external evidence to prove that the complaint’s primary allegations were false. The court rejected the insurer’s attempts to rely on a “policy language exception” in avoiding the eight angles rule, noting that “the existence of Or the absence of an unfounded claims clause was seldom important to Texas courts’ “analysis of the contractual duty of defence,” and asserted that the court “never established or suggested that the eight angles rule hinges on the unfounded claims clause.”

In remand, Fifth Circuit in Petco Refrain from considering the condition and application of the newly established Monroe an exception. The text will unduly interfere with the determination of liability benefits because “[a] dispute in terms of when Damage to property also entail whether Property damage occurred on that date, forcing the insured to recognize damages on a certain date to invoke coverage, when his position may be that no damage was done at all.”[3]

Petco It makes clear that courts applying Texas law are still bound by strict standards as to when they may allow outside evidence in determining a defense duty. So far, Texas allows outside evidence in very few cases. In addition to Monroe Exception, the Texas Supreme Court also recently approved a “fraud” exception. in Loya Ins. Company against Avalos610 SW3d 878, 881 (Texas 2020), reh’g denied (October 2, 2020), the court ruled that “[g]Given the contractual underpinnings of the Eight Pillars Rule, we conclude that it does not preclude the courts from considering such external evidence of collusive fraud by the insured in determining the insurer’s duty to defend.”


[1] Petco General Incremental. Company v. Monroe Guar. ins company846 F. App’x 248, 252 (5th Cir.2021), Accept the approved question (March 19, 2021), approved question answer, 640 SW3d 195 (TX 2022).

[2] Monroe Guar. Additional Co. against BITCO Gen. Ins. corp.640 SW3d 195, 199 (TX 2022) (“Monroe“). The Monroe The exception was recently implemented in Far San Juan Alamo Indip. Sch. Dist. against tex. Proposing political subdivisions / Cass. Common Self Functions. financeNo. 20-0033, 2022 WL 420491 (TX 2022).

[3] Petco2022 WL 1090800, at *3 (cited by Monroe640 SW3d at 203) (originally stressed).



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