Loya Insurance Company v. Avalos – A New Weapon for Insurance Companies

By: Matt Sherwood and Kurt Taylor

Loya Insurance Company v. Avalos – A New Weapon for Insurance Companies

The “eight-corners rule” in insurance defense law states that only the four corners of the insurance policy and the four corners of the petition against the insured are relevant in deciding whether a duty to defend an insured applies. In Loya Insurance Company v. Avalos et al., the Supreme Court of Texas considered whether evidence of the insured’s fraud to deceive the insurance company can be considered by a trial court, even though the fraud was not in the petition or the policy. The Court held that this extrinsic evidence can be considered by trial courts to determine whether an insured lied to an insurance company in order to secure coverage from the insurance company. If the insurance company can prove such fraud, then it owes no duty to defend the insured.

In the case, the insured’s insurance policy had an exclusion for the insured’s husband. The husband nonetheless drove the car and collided with a third party, which led to a lawsuit. The insured lied to the insurance company and told the insurance company that she, and not her husband, had been driving the car at the time of the accident. The lie came to light during a lawsuit related to the car wreck, which led to a legal battle between the insured and the insurance company and ended with the insurance company winning in the highest court in Texas.

The lesson of Loya Insurance Company is that insurance companies now have additional tools to try to avoid providing coverage to an insured. While you should always fight hard to obtain coverage under an insurance policy, Loya teaches us that you cannot be deceitful.

This is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Matt Sherwood, J.D. and Kurt Taylor, J.D. are members of Brown & Fortunato’s Litigation team. Matt is a shareholder and is Board Certified in Civil Trial Law and Personal Injury Trial Law. The litigation team routinely represent clients in litigation matters involving contracts, construction, employment matters, personal injury, professional liability, products liability, real estate, oil and gas, tort, and insurance defense. The Litigation team at Brown & Fortunato can be reached at 806-345-6300. You can contact Matt Sherwood directly at msherwood@bf-law.com or Kurt Taylor at ktaylor@bf-law.com.