In May 2018, the American Law Institute (ALI) gave final approval to its “Restatement of Law, Liability Insurance.” Portions of the restatement continue to prove controversial, and state legislators have begun pushing back against it.
The ALI is an independent organization of legal professionals that seeks to clarify and simplify U.S. case law to help judges in their decisions. To this end, the ALI publishes a variety of materials that describe what the case law says in various areas, including insurance. One of the materials the ALI publishes is called a “restatement of law,” which attempts to describe common law and its statutory elements. It’s basically a way for judges to know where the law currently stands on a variety of issues.
The latest restatement addresses liability insurance and includes provisions that have met with vocal opposition from state legislatures, the insurance industry, and lawyers. These include, among other things, possible changes to how insurance policies can be interpreted; how coverages are triggered for “long-tail” claims (claims that can last for many years, like environmental losses); and how an insurer might be held responsible for breaching its duty to defend.
Opponents argue that some provisions of the restatement could fundamentally – and improperly – change how liability law operates. That in so changing liability law, the restatement arrogates powers to regulate insurance that properly belong to state legislatures. That many aspects of the restatement do not accurately reflect current state case law and weigh the scales against the legal rights of insurance companies. That portions of the restatement are less a description of law than they are a “wish list” for what the law should be.
Others have called these criticisms of the restatement unfounded or have sought a more balanced response to its changes.
But regardless of who is right, state legislatures have begun to act against the restatement. The National Conference of Insurance Legislators has come out against it. Arkansas, Michigan, North Dakota, Ohio, Tennessee, and Texas have all recently passed legislation that in some form seeks to curtail or condemn the use of the restatement under their respective insurance laws. The Kentucky and Indiana legislatures have also passed resolutions stating their opposition to the ALI’s restatement.
How this will all shake out remains to be seen: will the restatement of law for liability insurance begin to make its mark in case law? Will legislation against the restatement continue to spread? Only time will tell.