It has now been nine months since the American Law Institute did a switcheroo and converted its Principles of the Law of Liability Insurance to the Restatement of the Law of Liability Insurance. Just a one word change – but an impact that speaks volumes. So what’s been happening with the project during this period? To find out I checked-in with the Restatement’s Reporter – Professor Tom Baker of Penn Law School. Tom was kind enough to send me an informative letter, which I set out here. [Thankfully Tom did not employ some law professor Socratic method thing and make me answer my own question.]

Dear Randy,

Thank you for your interest in the American Law Institute’s Restatement of the Law, Liability Insurance. As you requested, I am providing a brief status report on the project.

The Restatement will have four chapters. Chapter 1 addresses Basic Liability Insurance Contract Rules and contains three major topics: interpretation, waiver and estoppel, and misrepresentation. Chapter 2 addresses the Management of Potentially Insured Liability Claims and contains three major topics: defense, settlement, and cooperation. Chapter 3 addresses General Principles Regarding the Risks Insured and contains three major topics: coverage provisions (e.g. insuring clauses and exclusions); conditions; and the application of limits, deductibles and retentions (e.g. number of occurrences and allocation). Chapter 4 will address enforceability, remedies (including for bad faith), and, tentatively, broker liability.

The ALI approved drafts of Chapters 1 and 2 in May 2013 and 2014, when the project was known as the Principles of the Law of Liability Insurance. In October 2014 the ALI Council reviewed the nomenclature for ALI projects and determined that the Liability Insurance project should be renamed a Restatement. In the Forward to the April 23, 2015 Discussion Draft of the Restatement of the Law, Liability Insurance, ALI Director Richard Revesz explained the name change as follows:

“The Council decided that, consistent with our traditional practice, the Restatement label should be used for projects that seek to provide guidance to courts and where there is a body of established positive law. In contrast, the Principles label is appropriate for projects where the main intended audience for the Institute’s guidance are institutions other than courts, such as legislatures, administrative agencies, or private actors. Under this categorization, Liability Insurance clearly belonged on the Restatement side of our ledger and the Council approved the name change.”

Following that action by the Council, Associate Reporter Kyle Logue and I made a thorough review of Chapters 1 and 2 in light of the new status of the project. Under ALI policy, Restatements “aim at clear formulations of common law and its statutory elements or variations and reflect the law as it presently stands or might appropriately be stated by a court.” The new drafts of the Chapters appear in the April 2015 Discussion Draft, which is available on the ALI website and also on WestLaw. The Reporters’ Memorandum to that draft lists the most significant changes that we made to the two chapters in that process.

ALI members discussed the revised Chapters 1 and 2 at the May 2015 Annual Meeting. The ALI Council will consider those chapters at its Fall 2015 meeting and, if the draft is approved, the Council will submit the two chapters to the membership for consideration and a vote at the May 2016 Annual Meeting.

Kyle Logue and I plan to submit a complete draft of Chapter 3 to our Advisers and Members Consultative Group this coming October for their comments and suggestions at our November 2015 project meetings. If the project moves along as planned, we will submit a further revised draft of Chapter 3 to the Council for consideration at the January 2016 Winter meeting.
Depending on how much progress we have made, the Council may also approve that Chapter and submit it to the membership for consideration and a vote at the same May 2016 Annual Meeting. Either way, there will be a lot of liability insurance on the agenda at the 2016 Annual Meeting.

Our current plan is for Chapter 4 to follow a similar schedule in 2016-17, with the goal of having all four chapters finally approved as of May 2017.

Thank you again for your interest and for your efforts to keep insurance practitioners informed about the Project. I look forward to seeing you at the Members Consultative Group meeting in November.

Very truly yours,
Tom Baker