Lee H. Shidlofsky on Additional Insured Status in Strict Eight Corners States: The Possible Impact of D.R. Horton-Texas, Ltd. v. Markel Int'l Ins. Co.
Insurance coverage can oftentimes be won or lost depending on whether a particular jurisdiction follows a strict “eight corners” analysis for determining the duty to defend or permits the introduction of extrinsic evidence. This issue is particularly relevant in the additional insured context.
In this expert commentary, Lee H. Shidlofsky, a founding partner of Visser Shidlofsky LLP in Austin, Texas discusses how the Supreme Court of Texas will have the opportunity to determine whether the “eight corners” rule should be more lax in the additional insured context, if it decides to accept the petition for review filed in D.R. Horton-Texas, Ltd. v. Markel Int’l Ins. Co., 2006 WL 3040756 (Tex App.—Houston [14th Dist.] Oct. 26, 2006, pet. filed).
Shidlofsky explains: “The D.R. Horton case is just one example of how a strict “eight corners” approach to the duty to defend can affect additional insured status. In D.R. Horton, the Houston Court of Appeals addressed whether extrinsic evidence can be used to trigger the duty to defend for an additional insured. In the declaratory judgment action against the additional insured carriers, D.R. Horton sought to introduce extrinsic evidence that the alleged damages were caused by the masonry subcontractor (i.e., the named insured). The trial court refused to allow the introduction of the evidence. The court of appeals, despite recognizing that D.R. Horton “produced a significant amount of summary judgment evidence that . . . links [the masonry subcontractor] to the injuries claimed by the Holmeses,” concluded that the trial court was right to exclude the evidence.”
Shidlofsky writes: “D.R. Horton has filed a petition for review with the Supreme Court of Texas, which requested full briefing in January 2007. In its petition, the homebuilder refutes the appellate court’s finding that the extrinsic evidence at issue related to both liability and coverage. Rather, D.R. Horton argues that the extrinsic evidence it sought to introduce went solely to coverage. (i.e., additional insured status). Finally, D.R. Horton urges the Supreme Court to take Fielder Road one step further by expressly adopting a “coverage only” exception to the “eight corners” rule.”
Shidlofsky points out that “the Supreme Court of Texas will have the opportunity, if it takes the D.R. Horton case, to significantly direct insurance law throughout Texas and perhaps other jurisdictions that follow a strict “eight corners” approach to determining the duty to defend. Notably, the Supreme Court can soften the “eight corners” test by allowing a “coverage only” exception, or it can solidify the test by disallowing any exception to the rule. The latter result will cause significant problems in the additional insured context, as outlined by D.R. Horton.”
Shidlofsky concludes that this issue is not limited to Texas and applies to all states that adhere to a strict “eight corners” approach to the duty to defend.
Readers may access the author’s martindale.com law directory listing here.