FRANKFORT, Ky. – Legislation clarifying that the American Law Institute’s controversial insurance liability Restatement does not constitute law or public policy if it conflicts with established federal, state or case law overwhelmingly passed in Kentucky but was vetoed Tuesday by Gov. Andy Beshear.
“I am vetoing House Bill 150 because it violates Section 27 of the Kentucky Constitution and the separation of powers doctrine. In particular, House Bill 150 instructs the judicial branch on how to treat any statement or restatement of the law in a legal treatise, scholarly publication, textbook or other explanatory text as a controlling authority,” said Gov. Beshear in a statement.
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.”
The National Conference of Insurance Legislators (NCOIL) passed a Model Act on this issue last July, which was also sponsored by Rep. Fischer.
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.
“The governor basically cited the separation of powers doctrine as his reason for vetoing the bill. I certainly fundamentally disagree that it’s an unconstitutional encroachment on the separation of powers doctrine,” Rep. Fischer said.
Fischer added not only does Section 27 of the Kentucky Constitution divide governmental powers into three branches - legislative, executive and judicial - but it also confines the powers to those same, separate branches.
“What this bill intended to do was basically confine the powers of state government to those three branches by removing non-governmental sources, such as treatises or textbooks from the lawmaking, policymaking, enforcement or judicial review functions that are reserved to the respective branches of government, so it’s entirely consistent with Section 27 of our state constitution,” Fischer stated.
Fischer said if any veto override sessions were to be scheduled in the near future, 51 Republican members of the Kentucky House of Representatives and 23 Republican members of the Kentucky Senate would be needed for a quorum to be held and an override to be executed.
Any such override sessions would be conducted remotely, due to ongoing concerns over the coronavirus pandemic.
However, Fischer clarified, the final word on constitutionality “always belongs to the courts.”
“The governor claimed we were encroaching on the judiciary. At the end of the day, if the judiciary finds this to be unconstitutional encroachment on their authority, they can declare it unconstitutional. This cannot be an encroachment on their authority,” Fischer said.
Mark Treesh, Executive Director of the Insurance Institute of Kentucky, also said efforts were being undertaken to have the veto overridden.
“In Kentucky, the Constitution only requires a simple majority in each chamber to override, rather than a super majority. That bill passed with fairly hefty majorities in each chamber, and we feel very good about the chances of overriding it,” Treesh said.
According to Treesh, the bill was one that provided courts with correct instruction.
“We believe the bill gave proper instruction to the courts. It is up to the General Assembly to pass law and also speak to the law, and we believe that it merely asserts the proper priority of traditional interpretations,” Treesh stated.
In regards to the legislation in Kentucky, the American Law Institute 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.
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 (an NCOIL discussion provided a deep dive into other issues).
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.
Last year, the ALI also embarked on a “road show” of sorts – events like one in Texas which featured a federal judge that defended the Restatement.
“When this was brought to my attention, I also serve on NCOIL as well, and it kind of jolted me a little bit. I have a lot of respect for ALI and what they do, I just think they went beyond their normal mission in this particular instance. That’s the reason I moved that model bill in NCOIL as well as the Kentucky bill,” Fischer said.
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