On September 18, 2019, a Texas federal court vacated its prior ruling and entered summary judgment for the insured, finding that after a hacker impersonating the customer convinced the insured to wire $1 million out of the customer’s account, the insurer had a duty to defend its insured against claims by its customer because the potential for coverage existed.  See Quality Sausage Company, LLC, et al. v. Twin City Fire Insurance Co., Civil Action No. 4:17-CV-111 (S.D.TX) (Dkt. No. 110).  The prior order was based on disputed extrinsic evidence, which the court considered in deciding the duty to defend, even though Texas’ narrow exception to the “eight corners” rule is limited to only undisputed extrinsic evidence.

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A federal court in Virginia recently held in Travelers Casualty and Surety Company v. Schur, No. 3:15CV60-HEH (E.D.Va., Nov. 24, 2015), that a liability insurer’s so-called “business pursuits” and “known falsity” exclusions do not preclude a defense against defamation allegations where the allegations raised at least a potential for coverage under the policy.  The decision illustrates the continued application of Virginia’s “eight corners” and “potentiality” rules, which mandate a narrow application of the underlying allegations against the language of the policy and require a defense if any allegation raises even a potentiality for coverage.

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