## Facts

- A child died in an ATV accident while under the supervision of his grandparents, Janet and Melvin Richards, at or near their property.
- The child’s mother sued the grandparents in Texas state court, alleging negligent failure to supervise and instruct the child in operating the ATV.
- The Richardses sought a defense and indemnity under their homeowner’s policy issued by State Farm Lloyds.
- State Farm provided a defense under a reservation of rights and filed a federal declaratory-judgment action seeking a declaration of no duty to defend or indemnify.
- State Farm relied on policy exclusions, including a motor-vehicle exclusion (for certain off-premises motor-vehicle use) and an insured-related exclusion tied to alleged conservatorship status.
- The federal district court granted summary judgment for State Farm after concluding the Texas eight-corners rule did not apply absent a “groundless, false or fraudulent” defense clause.
- The Fifth Circuit certified to the Texas Supreme Court whether Texas law recognizes this “policy-language exception” to the eight-corners rule.

## Issues

1. Whether Texas’s eight-corners rule applies to determine an insurer’s duty to defend only when the policy contains a “groundless, false or fraudulent” clause.
2. Whether the absence of that clause creates a “policy-language exception” permitting courts to depart from the eight-corners rule in duty-to-defend disputes.

## Decision

- The Texas Supreme Court answered the certified question by rejecting the proposed “policy-language exception.”
- The Court held the eight-corners rule applies under Texas law regardless of whether the policy includes “groundless, false or fraudulent” language.
- The Court did not decide whether State Farm owed a defense or indemnity on the underlying ATV-accident lawsuit; it resolved only the validity of the asserted exception.

## Legal Principles

- Under Texas’s eight-corners rule, the duty to defend is determined by comparing the live pleadings’ allegations with the policy’s terms, without considering the truth of the allegations.
- The eight-corners rule functions as a default rule of construction for interpreting the contractual duty to defend and is not contingent on particular boilerplate defense language.
- Contracting parties may alter the duty-to-defend framework only through clear, express policy language; omission of a groundless-claims clause does not, by itself, displace the default rule.
- Rejection of the “policy-language exception” does not resolve other, limited questions about whether extrinsic evidence may ever be considered under recognized Texas law exceptions.

## Conclusion

The Texas Supreme Court held that Texas courts must apply the eight-corners rule to duty-to-defend disputes even when the liability policy lacks a “groundless, false or fraudulent” clause, and that the absence of such language does not create a valid exception to the rule.


Richards v. State Farm Lloyds, 597 S.W.3d 492 (Tex. 2020)