DRI – The Voice of the Defense Bar Terms ALI Restatement of the Law, Liability

27 Oct 2017 9:40 AM | Kathi McKeown (Administrator)

The following is a DRI Press Release issued October 26, 2017:

Insurance "Deeply Flawed"


CHICAGO ­– (October 26, 2017)— In a letter earlier this month to Richard Revesz, Executive Director of the American Law Institute (ALI), DRI expressed disagreement and concern with several key provisions of the ALI Restatement of the Law, Liability Insurance. The Restatement was scheduled for a final vote of ALI membership earlier this year, but the organization deferred that final ballot until May, 2018 to give the project’s Reporters additional time to consider and respond to the concerns of DRI and others. 

DRI cited various parts of the Restatement as “at odds with the common law of insurance,” “making coverage litigation more protracted and expensive,” “not supported by existing authority and at odds with professional liability rules and the law governing lawyers,” “seeking to address a problem which does not exist,” and “misleading in the extreme.” 

DRI maintains that the problems that it raised last spring regarding the Restatement still have not been corrected.  “…This project continues on a trajectory that is deeply flawed in several important respects. (Those include) its rejection of settled insurance common law such as the plain meaning rule; its failure to recognize the fundamental problems that would result from its proposal for insurer liability for the actions of defense counsel; and its refusal to defer to legislative determinations such as those regarding whether and when special fee-shifting rules should be applied to insurance law.” 

For instance, Section 12 would create new direct liability on the part of the insurer to the insured for the acts of defense counsel, and would do so in the absence of appropriate case law support.   In fact, the Restatement draft itself acknowledged that “[t]here is little case law on this topic.” If the Restatement were to retain Section 12 as written, there is little doubt that the impact of such a rule would impede the attorney-client relationship of such defense counsel with the policyholder and tread on counsel’s professional obligations. 

DRI maintains the position that it declared in a letter to ALI in May of this year: “In sum the current draft of this Restatement does not codify existing common law, but instead repeatedly stakes out new and controversial positions without adequate grounding in law or public policy.  ALI should not adopt this Restatement project as it stands.” 

“We have great appreciation and respect for the work of ALI,” says DRI president John Kuppens. “Theirs is a difficult task, and they provide a great service to the judicial system. But a Restatement is meant to clarify existing law not to create new law; or to paraphrase the late Justice Scalia, ‘to state what the law is, not what some would like it to be.’” 

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