ALI's Restatement of the Law of Liability Insurance the subject of strong debate at group's annual meeting

By Nicholas Malfitano | May 30, 2017

ALI's Restatement of the Law of Liability Insurance the subject of strong debate at group's annual meeting

WASHINGTON – Insurers, state officials and corporate counsel are likely to be feeling relief after members of the American Law Institute opted to delay voting on a controversial change to liability insurance law - but the proposed Restatement was still the subject of plenty of debate at the group's annual meeting on May 23.

Prior to the discussion on the Proposed Final Draft of the organization’s Restatement of the Law of Liability Insurance, the ALI opted to postpone any final changes until at least 2018.

What ALI labeled a “thought-provoking discussion” at the meeting’s session in Washington, D.C., was devoted to the Restatement and offered some insight into the rationale behind that decision. The ALI publishes the Restatement of Torts, which serve as standards that judges use to decide the law in applicable cases.

Among a number of motions submitted for discussion at the meeting was an Omnibus Motion to Recommit dated March 28, which sought to recommit the black letter text of sections of the Restatement that covered a wide variety of topics in liability insurance law.

“The Proposed Final Draft of the RLLI is likely to harm the ALI’s well-deserved reputation for objectivity and legal scholarship,” the motion’s introduction read.

“If approved in its current form, courts will recognize that this Restatement does not meet the ALI’s traditional high standards for accurate and neutral summaries of law.”

The Omnibus Motion to Recommit originated from attorney Peter Y. Solmssen of AIG in New York City and was co-signed by 19 other attorneys from firms and insurance companies across the United States. Besides its legal exceptions taken with the Restatement’s Proposed Final Draft, it came appended with case law the signers believed supported those very same exceptions. This Omnibus Motion was later withdrawn at the meeting.

Another Motion to Postpone the Final Vote on the Restatement’s Proposed Final Draft came from attorney Victor E. Schwartz of Shook Hardy & Bacon, in Washington, D.C.

Schwartz noted an “understandable desire” to complete the Restatement project, but cautioned “it should not come at the cost of causing lasting, potentially irreparable harm to the ALI.”

Further, a letter dated May 19 from counsel for Eli Lilly and Co., ConocoPhillips and others expressed concerns over a number of subjects covered in the Restatement, including the consideration of extrinsic evidence despite clear contract language, an apparent endorsement of one-way attorney fee shifting, and a perceived attempt at creating new and different rules governing consumer contracts – much the same as the Omnibus Motion.

ALI Council Member Gary L. Sasso, presiding over the session, noted the many concerns over the Proposed Final Draft and said those concerns had been heard and felt by both the ALI and the legal scholars working on the project.

The Reporter for the Restatement is Tom Baker, a professor at the University of Pennsylvania Law School and working as Associate Reporter is Kyle Logue, a professor at the University of Michigan Law School. Both were present at the session to respond to feedback on the Proposed Final Draft from ALI members.

An oft-heard thread of criticism among some ALI members towards the Restatement’s Proposed Final Draft both before and during the meeting was its perceived quality to view where the law could be in an aspirational sense, as opposed to where it stands currently.

Solmssen took an opportunity at the microphone to “compliment the reporters on their hard work and intentions”, but added he was “deeply distressed at this desire to legislate” through the Restatement project.

In response to another attorney’s comment, Baker labeled the Restatement project as “the most important” one of his entire career and emphasized the “enormous amount of hours” spent to get it right.

ALI Council Member David Rivkin, of Debevoise & Plimpton in New York City, expressed his opinion of the importance of reflecting majority rule and believed there were too many sections of the Restatement’s Proposed Final Draft where minority rule was adopted in black letter instead, or case law not reflected.

“I’m glad the reporters gave us a chance to clarify these positions over the next year,” Rivkin said.

However, Guy Struve of Davis Polk, also located in New York City, stated his belief in the standards for the Restatement and his own opinion that the reporters involved with the project had adhered to those very same standards, while labeling any suggestion of the contrary as “grossly mistaken.”

As a result of the concerns expressed, Baker and Logue look to have another tentative draft of the Restatement up for discussion this fall with the ALI’s Advisors and Members Consultative Group, followed by the approval of a new Council Draft and a new Proposed Final Draft, ready for a vote by the ALI membership at its annual meeting next year.

Also noteworthy is while the ALI’s membership vote on the Proposed Final Draft of the Restatement of the Law of Liability Insurance has been delayed until next year, the group did vote to approve the Restatement's Chapter 4 on enforceability and remedies, as well as give final approval to Sections 13 and 24.

Sections 13 and 24 covered such topics as conditions under which an insurer must defend and an insurer’s duty to make reasonable settlement decisions.

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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Shook Hardy & Bacon LLP The American Law Institute

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