PHILADELPHIA – Legislation stating the American Law Institute’s Restatement of the Law of Liability Insurance does not constitute law or public policy if it conflicts with established federal, state or case law recently passed in the states of Utah and Kentucky.
The states added themselves to a list concerned that judges will take the Restatement, which has been criticized as "litigation fuel," to be the law of their lands.
In HB-0037, a bill sponsored by Utah Rep. James A. Dunnigan which “amended and enacted provisions under the Insurance Code and related to certain health benefit plans and the Health Reform Task Force," an amendment was introduced by Utah Sen. Curtis S. Bramble.
In the amendment, it proposed that “a liability insurance restatement is not law or public policy of the state if the statement of law is inconsistent or in conflict with: the Constitution of the United States, the Utah Constitution, a state statute, state case law or state-adopted common law.”
Additionally, the amendment stated, “Nothing in this section precludes a court from referencing or considering a restatement or other legal treatise.”
“There’s concern that the American Law Institute’s Restatement is, in some cases, going beyond what the law really states, in their interpretation," Dunnigan said.
"There is some concern that they’re creating law with their interpretation. When our state passes a law, we want that to be the law. We don’t want it to be somebody else’s interpretation which isn’t a legally binding interpretation of it to be the law."
Concern that judges would feel obligated to use the Restatement as a guide has manifested itself as legislative actions and judicial rulings in, at least, Oklahoma, West Virginia, Kentucky, Tennessee, Ohio, Delaware, Kansas and North Dakota.
The Philadelphia-based ALI has long published Restatements with the goal of providing summaries to judges who deal with certain issues, though criticism of the group says in recent years it has swung toward creating law instead of restating it.
The Restatement concerns when insurers can be found liable in civil lawsuits.
Notably, an insurer would need to cover punitive damages in some instances, rather than the insured who engaged in the reckless behavior – even if they’re not covered in the policy (a National Council of Insurance Legislators discussion provided a deep dive into other issues).
Dunnigan reiterated, however, that a point in the bill still allows the Restatement to be used as a tool for purposes of information and clarity in a given legal field, but that it does not supersede federal law, state law, state-adopted common law or state case law.
According to Dunnigan, lobbyists on both a local level and from outside Utah representing ALI expressed their feedback to the bill’s wording in various versions and their desire for changes.
“There were a variety of partners that were interested in this, and I did my best to bring them together and to try to map out something that was good policy. But, it was the gift that kept on changing. In the beginning and throughout the entire session, people wanted changes and we thought we had it agreed upon, and then someone would wiggle out some additional change or interpreted this or that differently,” Dunnigan said.
But, Dunnigan added that most of the stakeholders who worked on the bill were “reasonable.”
“We were trying to understand what [their] concerns were, and there were more than a couple of concerns that I thought were valid. Wording makes a difference; it’s important. But, I’m very pleased with where we landed. I think it’s very appropriate and needed for what we did,” Dunnigan said.
“It just shows the hierarchy of what the law is, and we need to be careful with people that start giving their interpretation or Restatement of it outside the courtroom.”
After passing in both the state House of Representatives and state Senate, Utah Gov. Gary Herbert signed the legislation into law on March 24.
Similarly, HB-150 was introduced in Kentucky by Reps. Joseph Fischer and Ed Massey, and “proposed the creation of a new section of Subtitle 1 of KRS Chapter 304 to provide that a statement of law in the American Law Institute’s Restatement of the Law, Liability Insurance does not constitute the law or public policy of the Commonwealth when in conflict with listed authority.”
Reps. Fischer and Massey did not respond to requests for comment from the Pennsylvania Record.
HB-150 passed in the Kentucky House of Representatives 66-16, with 18 representatives not participating in the vote. It also passed in the Kentucky Senate 28-0, with 10 senators not participating in that vote.
Subsequently, it was signed by state Speaker of the House David Osborne and state Senate President Robert Stivers, before being delivered to the office of Kentucky Gov. Andy Beshear.
In opposing the legislation in Kentucky, the American Law Institute has spent $9,601 in lobbying fees over a time period spanning last Sept. 1 to Feb. 29, through utilizing the services of agents Julia B. Crigler, Katherine W. Hall, M. Patrick Jennings and Karen Thomas-Lentz.
These bills also follow and coincide with similar ones initiated in other states, where legislative actions and rulings have taken place in Tennessee, Ohio, Delaware, Kansas and North Dakota.
In the Delaware and Kansas cases, the courts declined an invitation to follow a Restatement, because they did not want to predict how those other jurisdictions would address a particular Restatement section.
However, other states have already cited the Restatement in their court ruling, such as South Dakota in the action Sapienza v. Liberty Mutual Fire Insurance Co. In that case, the court rejected the argument made by some insurers that Sections of the Restatement are not based in case law.
“This Court addresses Liberty Mutual’s argument that it was error to rely on Section 12. Liberty Mutual contends that the Supreme Court of South Dakota would not adopt Section 12(2) because the American Law Institute created the section ‘out of a complete absence of precedent.’ But that is simply not true. There are cases supporting the Restatement’s position that insurers can be liable for overriding defense counsel’s independent professional judgment,” said U.S. District Court Judge Roberto A. Lange.
Last year, the ALI also embarked on a “road show” of sorts – events like one in Texas that featured a federal judge that defend the Restatement.
ALI Deputy Director Stephanie Middleton, when previously asked about the legislation opposing the Restatement, commented on the mission of the organization in crafting such a document.
“Unlike a political process, the ALI does not represent or attempt to mediate between various contending interests and forces, such as consumers or policyholders or insurers,” Middleton said.
“Our mission is to clarify the law in simple and straightforward language so that courts and the public have a stable and knowable legal system. In a Restatement, we attempt only to state what the law is where there is consensus among the states or where the law seems to be moving where there is not consensus.”
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com