The Restatement of the Law of Liability Insurance is scheduled for a debate and vote at the ALI’s Annual Meeting in Washington, D.C. on Tuesday, May 23. To the surprise of many, however, the ALI announced this morning that any final vote on the project as a whole will be deferred until May 2018 to give the Reporters time to address a multitude of issues that have been raised in recent weeks.
In the days leading up to this year Annual Meeting, the ALI has been bombarded with a surprising number of letters of concern from state regulators, industry trade groups, insurance executives, defense bar associates and outside counsel. The common theme is that many provisions in this Restatement stray from the common law and that further consideration is required to ensure that it is a useful and accurate source of legal authority.
In addition to the commentary that outsiders have submitted, ALI members have filed over a dozen motions that will be argued in the course of the two hour debate on Tuesday morning. Nearly all have been submitted by ALI members who are aligned with the insurance industry.
Omnibus motions have been filed by Peter Olmssen of AIG and others asking that the entire project be recommitted with clearer instructions to the Reporter as to whether and when to diverge from majority rules of contract interpretation. It is now unclear whether these motions will be argued.
Notwithstanding the fact that the entire project is being resubmitted to the Reporters for further consideration, the ALI membership will be asked to debate those provisions of Chapter 3 that have been changed since years meeting (ie. Sections 13(3) and 24) as well as the new Chapter 4. If time permits, members will also be permitted to speak further concerning sections that were approved at earlier meetings but remain controversial, particularly the rules of contract interpretation set forth in Sections 3 and 4.
The membership will also hear debate on the following motions have been filed as to individual sections:
–Section 3: Vanita Banks of Allstate has moved to restore the “plain meaning” rule for interpreting insurance policies in lieu of the Reporters’ proposed “presumption” of plain meaning.
–Section 4: Vanita has also moved to eliminate language that would have treated manuscripted provisions as being written by the insurer even if the language was supplied by the policyholder or broker.
–Section 8: Joanne Locke of Liberty Mutual has moved to amend the treatment of misrepresentations to eliminate the requirement that misstatement not only be “material” but have a “substantial” impact.
–Section 12: Mary Massaron Ross of Plunkett & Cooney has moved to delete Subsection (2) that would impose liability on an insurer for negligence in hiring defense counsel or for not checking that the firm had adequate malpractice insurance.
–Section 13: Natasha Nye of Peters & Nye has moved to revised Subsection (2) to make clear that extrinsic facts should only trigger a duty to defend if the insurer has actual knowledge of it, whereas the Reporters would also include such facts as a “reasonable insurer” would have been aware of.
–Section 13: Bill Barkers of Dentons has moved to restore the Reporters’ earlier language that would have allowed insurers to refuse to defend based on undisputed material facts rather than the few enumerated exceptions that the Reporters adopted in 2016.
–Section 21: Rich Hodyl has moved to amend Sections 21, 25 and 48 to acknowledge rights of recoupment and restitution for payments made on claims that are not covered.
–Section 24: Joanne Locke has moved to amend Subsection (1) to make clear that liability for failing to settle only applies where there is a potential for a judgment in excess of limits and the loss is covered under the policy. Joanne has also filed a separate motion to clearly state that insurer’s do not have a pro-active duty to make a settlement offer.
–Section 24: Michael Aylward of Morrison Mahoney has moved to delete any consideration of “procedural factors” in assessing whether insurers may be liable for not settling.
–Section 27: Bill Barker has moved to add language to make clear that an insurer may only be liable for failing to settle within policy limits if an excess judgment enters thereafter.
–Section 35: Bill also proposes to amend the consent section to require actual consent by an insurer where the policy so provides.
–Section 36: Michael Aylward has moved to amend Subsection (2) to eliminate language allowing insurers to report claims after policies have expired.
–Section 42: Larry Stewart of Stewart Tilghman has filed a policyholder motion asking the Reporters to adopt an “unavailability” exception for long tail allocation so that policyholders are not responsible for orphan shares attributable to losses continuing after 1986 when asbestos and pollution coverage was largely deleted from standard CGL forms.
–Section 45: Joanne Locke has moved to amend this section to confirm its provision to the treatment of “mandatory terms” else in the text.
–Section 47: Michael Aylward has moved to revise the treatment of “known loss” to preclude coverage in situations where the insured has already been sued or received a written demand for damages.
–Section 47: Natasha Nye has moved to revised Subsection (2) to eliminate the Reporters’ assertion that the “known loss” doctrine does not apply to “claims made” insurance.
–Section 48: Victor Schwartz of Shook, Hardy & Bacon has moved to revise Sections 48, 49 and 51 to restore the “American Rule” and eliminate the Reporters’ proposed fee shifting to insurers.
Stay tuned.
