Even as the May 23 date for a final vote on the American Law Institute’s Restatement, Law of Liability Insurance draws near, a torrent of criticism from outside parties is raising questions with respect to the fate of this project.
On May 5, the President of DRI, the Voice of the Defense Bar weighed in, arguing that many of the provisions in the Proposed Final Draft do not reflect settled law as required for a Restatement and impose duties on insurers that will impede the ability of defense lawyers to effectively carry out their responsibilities.
May 5 also saw a letter posted from the National Conference of Insurance Legislators, urging reconsideration of the Restatement sections dealing with policy interpretation (Sections 3 and 4), the consequences of failing to defend (Section 19), the duty to settle (Section 24) and fee shifting (Section 48). The letter seeks a meeting with the ALI Reporters to detail their concerns and threatens a public resolution challenging the legitimacy of this project is a meeting is not granted.
That same day, a senior vice president at broker Guy Carpenter Co. (Malcolm Rowland) also urged delay to allow time for reconsideration.
Earlier in the week, the Property & Casualty Insurance Association of America (PCIAA) expressed concerns about the impact that this project would have on the availability of insurance and the proper interpretation of insurance policies, particularly as regards Section 19 and 24.
As yet only one Motion has been formally filed. It seems certain that ALI members who favor policyholder and insurer positions will be filing further Motions in the next two weeks, challenging contentious provisions dealing with policy interpretation, exclusions and bad faith. Meanwhile, policyholders have pulled back with respect to the challenge that they presented to the Restatement’s treatment of allocation issues under long-tail claims, such as environmental contamination and asbestos. Whereas a Motion that was presented (but not debated) at the 2016 Meeting asked that the Reporters adopt an “all sums” approach, a new Motion filed by Larry Stewart accedes to a “pro rata” approach but urges the Reporters to add an “unavailability” exception that would relieve policyholders of any duty to bear responsibility for orphan shares allocable to years after 1986 when most insurers began including mandatory exclusions for asbestos and pollution liabilities.