Significant Decision on Exception to "Eight Corners" Rule

On February 11, the Texas Supreme Court issued an opinion that will significantly impact insurance litigation and claims handling. In the opinion, the court recognized the Northfield exception to the “eight corners” rule, which permits courts to consider extrinsic evidence in determining an insurer’s duty to defend in certain circumstances. However, the court also ruled that the exception does not permit consideration of the extrinsic evidence at issue—the parties’ stipulation regarding when the drill bit stuck in the well borehole, offered to show that no property damage occurred within the commercial general liability (CGL) policy period—because the evidence overlaps with the underlying merits.