Pennsylvania Record

Sunday, August 25, 2019

American Law Institute hits the road to explain controversial Restatement; It has been called 'litigation fuel'

Lawsuits

By Nicholas Malfitano | Feb 13, 2019


American Law Institute

PHILADELPHIA – After receiving some criticism - and rejection - of its liability insurance project, an influential legal group is convening events across the country discussing the measure in further detail.

The American Law Institute - a group of lawyers and judges who publish Restatements of law that are designed to guide judges handling certain cases - will hold one such event on Feb. 25 at the U.S. Courthouse in Houston. 

Since its passage last year, the Restatement of the Law of Liability Insurance has been rejected by Ohio lawmakers and a Kansas federal judge. Critics say it aims to create new law rather than restate existing law.

Leading a discussion of the Restatement’s areas of controversy and dispute, along with how it will assist courts and lawyers in Texas, will be one of its architects, Professor Tom Baker of the University of Pennsylvania Law School.

Baker redirected any questions about the upcoming events to the ALI.

The event is labeled as a luncheon and program on the Restatement, hosted by Chief Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas and Judge Carolyn Dineen King of the U.S. Court of Appeals for the Fifth Circuit.

Jennifer Morinigo, the ALI's Chief Communications & Marketing Officer, provided more information.

“There have been and will be many panel discussions on the [Restatement], including at the Defense Research Institute, the International Association of Defense Counsel, the University of Connecticut, the Connecticut Bar Association, the LA Association of Business Trial Lawyers, and various law firms. We just found out about a presentation during the upcoming ABA ICLC that includes the Restatement because of an email announcement that we received,” Morinigo said.

“People who want to have panel discussions of the [Restatement] will ask ALI for permission to use portions of the draft in their presentation, and that is how we know about most of these programs. Most of the programs have local practitioners, and include lawyers who represent both policyholders and insurers. In Texas, in addition to Tom Baker, the panelists are Brian Martin of Thompson Coe, Vince Morgan of Pillsbury and Jamie Carsey of Markel Corporation.”

ALI Passed Restatement After Eight-Year Journey

After eight years, the American Law Institute’s Restatement of the Law of Liability Insurance received approval from the group’s membership at its annual meeting last May – though reactions to its passage remain mixed.

The ALI publishes the Restatement of Torts, which serves as a standard that judges can use to decide the law in applicable cases.

“Liability insurance is an important meeting place between tort and contract law, legal fields in which the ALI has a long tradition of involvement,” Baker said.

“Liability Insurance case law can also vary from one jurisdiction to the next. By closely examining the existing common law, we believe that the membership approved a product that will be quite valuable to the courts.”

Kyle Logue, the Restatement’s Assistant Reporter and a professor at University of Michigan Law School, also expressed his gratitude at the time for working on the project and its approval.

“This is a great honor, to be chosen to participate. There is a great sense of accomplishment after eight years of hard work,” Logue said. “I learned more about insurance law from our experts, to improve my teaching. I think we’ve produced a product that will influence the courts and improve the law.”

The insurance liability project began in 2010, but a draft version caught plenty of attention when critics claimed the ALI wasn’t restating law, it was creating it for the benefit of plaintiffs’ lawyers.

Disagreement reigned, leading up to the annual meeting in 2017, and the ALI decided to postpone the vote to rework the Restatement.

A number of motions, filed and submitted prior to the 2018 meeting, were discussed in thorough detail during the session on the Restatement, which raised constructive criticisms to the document. Among others, these motions concerned subjects like:

-Striking certain principles from the black-letter law of the document;

-The influence of industry custom practice and usage as it relates to the “Plain-Meaning Rule” of insurance contract interpretation with respect to ambiguity; and

-The accountability of insurers for the independent negligence of their selected defense counsel.

All were rejected through a majority vote of the ALI membership, with the exception of a motion to amend Section 46, from David B. Goodwin of Covington & Burling in San Francisco concerning “Insurance of Known Liabilities."

Goodwin’s motion aimed to remove Section 46’s Sub-Section 2A, which would have retained the “known loss” doctrine’s applicability to a liability insurer’s duty to indemnify an insured’s known liabilities, but not extend it to the insurer’s duty to defend.

It was the only pre-filed motion that passed.

Among several changes to the draft made at the ALI’s January Council Meeting was the modification of the Restatement’s “presumptive plain meaning rule” to simply the “plain meaning rule,” as it related to insurance contract interpretation. Under the original “presumptive” standard, a plaintiff could use extrinsic evidence to argue against a contractual term.

A lawmakers group hosted a discussion on the Restatement, with one participant calling part of the draft “litigation fuel.”

However, further controversy was to take place surrounding the Restatement after its passage.

In Ohio, lawmakers issued a first-of-its-kind rejection of the ALI. Three months after the group passed the insurance law Restatement, Gov. John Kasich in August signed into law a bill that specifically warned that the ALI’s views do not “constitute the public policy of Ohio.”

And in September, a Kansas federal judge rejected a plaintiff’s use of the Restatement to prove his bad faith case, writing that she was “not inclined to use a non-binding Restatement as a means to overturn or expand Kansas law.”

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com

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The American Law Institute University of Michigan Law School University of Pennsylvania

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