In Texas courts, the eight-corner rule follows when interpreting whether an insurer is required to defend its insured, the facts alleged in the underlying lawsuit and the terms of the policy will determine the insurance company's obligation to defend.
I Kinsale Insurance Company v ETOPSI Oil & Gas LLC, dba East Texas Oilfield Productions SVC, Inc., and McBride Operating, LLC No. 6: 19-cv-00413, United States District Court Eastern District Of Texas (August 7, 2020) urged the USDC to apply the rule to determine if Kinsale owed ETOPSI a defense.
McBride hired defendant ETOPSI as a consultant for the design and construction of a new injection well. When constructed, this well was approximately 200 feet deep to reach the desired underground geological formation. Efforts to expand the depth of the well were unsuccessful and the well is now useless. In addition, McBride claims that ETOPSI "caused various liquids, clays and other substances injected into the borehole", which reached the area near the geological formation. McBride then sued ETOPSI in state court for this error.
When ETOPSI designed McBride's well, Kinsale provided ETOPSI with insurance coverage under a general liability policy. Following McBride's action against ETOPSI in the Texas State Court, Kinsale filed that action and sought a declaratory judgment that its liability policy does not require coverage.
The court will grant a decision only if one of the parties is entitled to a judgment as a matter of law. Overall proposals for a brief assessment can reveal a genuine dispute about material facts as often as not.
Texas Legislates Kinsale's Explanatory Judgment. In declaration assistance measures regarding insurance coverage, Texas follows the eight corner rule. According to this rule, the facts alleged in the underlying lawsuit and the insurance terms will determine the insurance company's obligation to defend. If there is doubt as to whether the allegations of a complaint against the insured indicate a reason for action within the scope of a liability insurance that is sufficient to compel the insurer to defend the measure, this doubt will be resolved in favor of the insured. [1
Kinsale claims that to the extent that McBride and ETOPSI have established coverage in the first place, Kinsale identifies various exceptions to coverage that apply to the dispute.
Kinsale refused coverage to ETOPSI because McBride did not claim "bodily injury" or "property damage" as required by the insurance contract. Kinsale was wrong because the presence of a malfunctioning well on McBride's land is a property damage. The useless well constitutes a physical damage to material property.
However, Kinsale also argued that if the installation of the non-functioning well is damage to property, then various exceptions to the policy disclaim coverage. In a relevant part, this exclusion stipulates that “
The Fifth Circuit previously considered an almost identical argument and concluded that the property damage, ie the completion of the well at an incorrect depth, undeniably arose from the company that designed and monitored the building's operations. Although McBride's underlying presentation refers to ETOPSI as a "consultant" on various points, it further explains that ETOPSI designed the injection well, engaged the drilling contractor, consulted and advised the owner and drilling contractor, determined the total depth of holes, decided how deep to put the casing. controlled drilling.
There, the USDC concluded that there was no genuine dispute as to whether the alleged damage to McBride's physical property occurred during the performance of ETOPSI's activities. The underlying petition alleges that ETOPSI agreed to provide McBride with a functioning good and that ETOPSI failed to do so. The petition further alleges that ETOPSI completed a well that did not function that damaged its property "on October 25, 2017 or later." The court must focus on the actual allegations showing the origin of the damage, and McBride argued that the origin of its damages is ETOPSI documents on or around October 25, 2017.
Kinsale met its burden of determining the application of an exclusion where there is no genuine question of essential fact. Thus, the court found that exclusion j (5), damage to real property, was applied to this dispute and entitles Kinsale to a declaratory judgment.
In this case, the eight corner rule worked. It defeated the insurer's first defense and accepted its second defense – the clear and unambiguous exclusion.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, handling insurance claims, bad faith insurance and insurance fraud almost equally for insurance policyholders. He also serves as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and attorney management attorney and more than 52 years in the insurance industry. He is available at http://www.zalma.com and email@example.com.
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