## Facts

- Loving Home Care, Inc. (LHC) arranged in-home nanny services for the Barrows family through Celia Giral.
- While in Giral’s care, the Barrows’ infant suffered fatal injuries; an autopsy classified the death as a homicide, and Giral was convicted of injury to a child.
- The Barrows sued LHC and its owners/operators (the Daniels), alleging wrongful death and negligence, including negligent hiring, supervision, and retention.
- Northfield Insurance Company insured LHC under a policy with:
  - Commercial General Liability (CGL) coverage containing a “professional services” exclusion.
  - Commercial Professional Liability (CPL) coverage for negligent acts, errors, or omissions in rendering/failing to render professional services, with exclusions for criminal acts and abuse.
- Northfield defended under a reservation of rights and filed a federal declaratory judgment action (Texas law) seeking rulings on defense and indemnity obligations.

## Issues

1. Under Texas duty-to-defend doctrine, when may a court consider extrinsic evidence beyond the pleadings and policy in deciding whether the insurer must defend?
2. Do the CPL criminal-acts and abuse exclusions negate a duty to defend where the petition pleads negligence claims (e.g., negligent hiring/supervision) against the insureds?
3. Does the CGL professional-services exclusion apply to nanny services arranged/provided through LHC, eliminating any duty to defend under the CGL coverage?

## Decision

- The Fifth Circuit affirmed that Texas generally applies the “eight-corners rule,” comparing the petition’s allegations with the policy terms to determine the duty to defend.
- The court predicted a narrow exception permitting extrinsic evidence only when: (1) it is initially impossible to discern potential coverage from petition and policy; (2) the evidence goes solely to a fundamental coverage issue; and (3) it does not overlap with the merits of liability or the truth of pleaded facts.
- The court refused to consider Giral’s conviction and the autopsy’s homicide finding because they overlapped with merits-related questions about the nature of the underlying conduct and were not needed to resolve an initial pleading-based coverage uncertainty.
- The court agreed that the CGL professional-services exclusion applied to the nanny services, so the CGL coverage did not create a duty to defend.
- The court held Northfield owed a duty to defend under the CPL coverage because the petition alleged potentially covered negligence theories against LHC and the Daniels, and the CPL abuse and criminal-acts exclusions did not eliminate all potential for coverage on the face of the pleadings.
- The decision did not resolve indemnity; indemnity depended on facts established in the underlying litigation.

## Legal Principles

- Under Texas law, an insurer’s duty to defend is determined by the “eight corners” of the policy and the live pleading; doubts are resolved in favor of the duty to defend when the petition alleges facts potentially within coverage.
- A court may consider extrinsic evidence in duty-to-defend disputes only in limited circumstances where it addresses a fundamental coverage fact, is necessary because the petition and policy do not permit an initial coverage determination, and does not overlap with merits or contradict pleaded facts.
- When a petition pleads potentially covered negligence claims against an insured, exclusions aimed at intentional/criminal misconduct may not defeat the duty to defend unless the pleadings foreclose coverage for all theories.
- A professional-services exclusion can bar CGL-based defense obligations when the alleged injuries arise from services characterized as professional in nature.

## Conclusion

The Fifth Circuit held that the duty to defend turned on the pleadings and policy, recognized only a narrow path for extrinsic evidence, rejected merits-overlapping proof of criminal abuse, and required Northfield to defend LHC and the Daniels under the CPL coverage while denying a CGL-based defense due to the professional-services exclusion.


Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523 (5th Cir. 2004)