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Vol. 6, Iss. 7
September 13, 2017

ALI Restatement Not Final:
But This Court Not Waiting For The Plus-Sized Performer To Croon

While the American Law Institute postponed the vote on final approval of its “Restatement of the Law, Liability Insurance” until May 2018, at least eight courts have not let the lack of a bow on it stop them from citing it. And in a few instances the Restatement was relevant in the court’s decision. Translation – there is good reason to become familiar with the Restatement, even if it’s not officially in the books.

A recent example of a court, not waiting till the plus-sized performer croons, is Mid-Continent Casualty Co. v. Petroleum Solutions, Inc., No. 09-422 (S.D. Tex. July 12, 2017). The case is protracted (2009 docket number) and complex. It’s one of those cases that only the parties understand.

For purposes here, the court addressed Mid-Continent’s argument, that it was entitled to a new trial, because the court improperly charged the jury on the meaning of the policy’s cooperation clause. Mid-Continent argued that the court’s instruction, that “PSI [the insured] complied with the cooperation clause if PSI’s conduct was reasonable and justified under all the circumstances that existed,” improperly defined “cooperate.” Mid-Continent had proposed the definition of “cooperate” as “to be helpful by doing what someone asks or tells you to do.”

The court rejected Mid-Continent’s argument. It did so based on the court’s conclusion that its definition of “cooperate” was tied to longstanding Texas law. However, in further support of its conclusion, the court also cited to Tentative Draft No. 1, § 29, Comment b, of the ALI’s Restatement of the Law, Liability Insurance. This section, titled “The Insured's Duty to Cooperate,” provides as follows: “b. Reasonable assistance. They duty to cooperate should take into account the position of the particular insured whose conduct is at issue, as well as the needs of the insurer. What is reasonable depends on, among other things, the knowledge and experience of the insured, the extent of the risks presented by the legal action, the complexity of the action, the ability of the insurer to obtain the information or other object of cooperation from sources other than the insured, the good-faith effort of the insured, and the extent to which cooperation is needed to reduce the insurer’s exposure.”

Most significantly, the court cited to the ALI Liability Insurance Restatement, despite noting that it had not yet been finalized. The court stated: “At the 2017 ALI Annual Meeting on May 23, 2017, ALI announced that rather than hold a final vote on the proposed draft of the Restatement of Law of Liability Insurance as scheduled, the draft’s Reporters agreed that another year of work was needed on the project generally. The proposed final draft is expected to be presented at the 2018 ALI Annual Meeting.”

As I said, there is good reason to become familiar with the Restatement, even if it’s not yet signed and sealed.

Status of the ALI Liability Insurance Restatement

As part of the work toward next year’s final vote on the ALI Liability Insurance Restatement, the ALI held a meeting on September 7th, at its offices in Philadelphia, with the project’s Reporters, Advisors and Members Consultative Group. [Disclosure – I am a member of the MCG and was in the room where it happened.]

Participants at the meeting discussed the current draft of the Restatement, including the revisions made by the Reporters following the May 2017 postponement of the final vote. The revisions, released in early August, were summarized by the Reporters – Professors Tom Baker (Penn Law) and Kyle Logue (Michigan Law) – in an accompanying memorandum: “As promised, we have gone through the entire draft, considering the comments and motions presented during the period leading up to and following the Annual Meeting. We have made a few changes to black letter, a larger number of changes to Comments, and many changes to Reporters’ Notes. In all cases, our intent has been to clarify and improve the statement of the rules, the explanation of the reasons for the rules, and the description of the legal authority upon which the rules are based.”

In other words, the postponement of the final vote resulted in very few changes to the actual rules themselves -- the so-called Black Letter (which makes up 22 pages). The changes made were to the Comments and Reporters’ Notes (about 400 pages). While admittedly important, they are the fine print.

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