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SPLIT DECISION: A “true facts” exception to the “eight corners” rule in insu

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In today’s decision in Avalos v. Loya Insurancy Company, a panel of the 4th Court applied the “eight corners” rule in determining whether a lawsuit against an insured triggered the insurance company’s duty to defend. As the majority notes, “Under the eight-corners rule, ‘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.'”

The majority applied the “eight corners” rule, following the Texas Supreme Court’s precedent of not recognizing a “true facts” exception, which would allow courts to look outside the four corners of the pleadings and the four corners of the insurance policy to determine whether there are undisputed or “true” facts that would negate the insurer’s duty to defend.

The concurring opinion noted that there is dicta in a supreme court that arguably left open the “true facts” exception to the “eight corners” rule. The concurring opinion stated, “an exception to the eight-corners rule should exist in a situation like this one where the undisputed evidence shows the insured participated in collusion and fraud ‘solely to create a duty to defend.'”

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