The Eight-Corners Rule
The social work profession is truly noble, founded on service, integrity, and clinical expertise. However, it can also be stressful and even dangerous at times. The nation is grateful for what you do, and so are we. Thank you!
What a curious title for this article! It sounds like a cube game with blocks, or perhaps a set of driving rules for a unique street intersection. But no—it is not traffic law. It’s a legal term that can twist you into a pretzel. Here’s what it’s about.
The Eight-Corners Rule is a legal doctrine focused on liability allegations. Under this rule, the insurance carrier is required to treat all allegations in a lawsuit as if they are true. That can spell trouble. The key question is this: if the allegations are true, and if they fall within the policy’s coverage, then coverage applies. The word “if” is doing a lot of work here.
Jurisdictions like Pennsylvania and Washington, D.C.—along with many others—have adopted the general eight-corners rule. This rule establishes the liability insurance carrier’s duty to provide a legal defense by comparing the allegations in the lawsuit complaint with the provisions in the liability insurance policy.
Texas, on the other hand, allows its courts to consider extrinsic evidence in certain insurance coverage cases—as long as that evidence doesn’t contradict the lawsuit’s pleadings. In the case of Northfield Insurance Company v. Loving Home Care, Inc., the U.S. Court of Appeals for the Fifth Circuit applied Texas law, which permitted extrinsic evidence to support a duty to defend. According to the Northfield decision, courts may consider extrinsic evidence when:
- “It is initially impossible to discern whether coverage is potentially implicated,” and
- “The evidence goes solely to a fundamental issue of coverage which does not overlap with the merits or engage the truth or falsity of any facts alleged in the underlying case.”
New York and New Jersey are not eight-corners states. Virginia and Maryland follow a modified version of the rule. As such, state laws vary. As an insured, your risk of coverage—or denial of it—depends on whether your state recognizes the eight-corners rule. If you practice in multiple states and a lawsuit is filed against you, hopefully, one of the states where you practice is an eight-corners jurisdiction. Equally important, you may be able to move the lawsuit to a state that follows the eight-corners rule, even if that’s not where it was originally filed.
Under the eight-corners rule, even if the allegations are groundless, only the four corners of the lawsuit complaint and the four corners of the insurance policy are considered. All other facts—those outside these two documents—are excluded. This means that a motion for summary judgment filed by the insurance carrier on your behalf may be dismissed. That leaves two outcomes: pre-trial settlement or trial.
Trials are expensive. They require extensive preparation, numerous billable hours, and high courtroom fees. Think of it like a taxicab meter ticking away at hourly rates of $300 to $1,500, often prorated in 10-minute intervals. Some attorneys even charge for travel time at their hourly rate.
Plaintiffs’ attorneys know this. Many file meritless suits with a contingency cause of action to force a pre-trial settlement, knowing that without one, the lawsuit will proceed to court—leading to costly legal defense fees for the insurance carrier. Depending on the nature of the alleged injury (if any), plaintiffs often demand two to five times more than what they are willing to accept in settlement. Savvy plaintiff’s attorneys press for fast settlements, especially when they know the insurance carrier’s settlement history and appetite. Some carriers refuse to settle meritless lawsuits, understanding that doing so only invites more frivolous claims. Carriers that routinely settle become easy targets.
Here’s a real-life example
A lawsuit was brought against a social worker insured by her liability policy. The suit included numerous malpractice allegations, even though the social worker had never provided any professional services to the plaintiff—had no contact with them whatsoever—and never completed a client intake. Despite these facts, the motion to dismiss filed by the insurance carrier was denied by the court due to the eight-corners rule.
Here’s what happened: the “client” found the social worker’s name in a magazine and called the office. No appointment was made, no intake was completed, and no services were rendered. Still, the plaintiff sued the social worker for $250,000 in damages. Since no settlement occurred, the case went to trial.
The judge, aware of the lawsuit’s baselessness, limited the trial to two days. After a four-hour extension on the third day—requested by the jury to review related emails and notes—the nine-member jury unanimously found in favor of the social worker. No indemnity was paid, but the insurance carrier still paid over $125,000 in legal defense fees—far less than the original damage claim. The plaintiff’s attorney’s fees were not disclosed. If the case was taken on a contingency basis (as many are), the attorney likely received nothing. That’s an expensive lesson in targeting the wrong insurer.
In closing, consider the long game—where you practice, where you are covered, and where you are not. In states that do not follow the eight-corners rule, there’s a higher likelihood your carrier can successfully file a motion to dismiss. Knowing your legal landscape is essential.
