In answering  a certified question from the Fifth Circuit, the Texas Supreme Court held that the eight-corners rule applied when determining the duty to defend even if the policy did not promise to defend suits that were "groundless, false or fraudulent." Richards v. State Farm Lloyds, 2020 WL 1313782 (Tex. March 20, 2020).

    The insureds' grandson died from an accident when he was driving an all-terrain vehicle on the grandparents' property. The child's mother sued the grandparents, alleging negligent failure to supervise and instruct the boy. 

    The insureds' homeowners policy with State Farm Lloyds provided,

If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence, we will:

. . . 

2. provided a defense at our expense . . . 

    State Farm Lloyds defended under a reservation of rights and then sued the grandparents in federal district court, seeking a declaration that it had no duty to defend or indemnify. State Farm Lloyds argued based upon the policy language, the eight-corners rule did not apply and it could rely upon extrinsic evidence to determine its duty to defend. State Farm Lloyds asserted that the eight-corners rule only applied when the policy provided a defense even when the allegations were "groundless, false or fraudulent." 

    The federal district court agreed. The insureds' policy did not include a groundless-claims clause, so the eight-corners rule did not apply. The district court granted summary judgment to State Farm Lloyds.

    The grandparents appealed and the Fifth Circuit certified the question to the Texas Supreme Court: does the eight-corners rule not apply when the policy does not include language requiring the insurer to defend "all actions against its insured no matter if the allegations of the suit are groundless, false, or fraudulent."

    Before the Texas Supreme, Court the insureds argued that the eight-corners rule was not dependent on the presence of a groundless-claims clause. The court's analysis of the duty to defend had never turned on the presence of such language in the policy. The Texas Supreme Court agreed. State Farm Lloyds did not contract away the eight-corners rule altogether merely by omitting from the policy an express agreement to defend claims that were "groundless, false, or fraudulent."