ALI Restatement of the Law, Liability Insurance

In 2019, The American Law Institute (ALI) published the Restatement of the Law, Liability Insurance (RLLI). The RLLI does not actually “restate” existing law, but rather attempts to reshape the liability insurance law landscape by recommending novel rules for courts to adopt. The RLLI contains 50 sections of recommended or aspirational “black letter” liability insurance rules that do not restate the law of any jurisdiction.

Four particularly troubling areas of the RLLI are: (1) a recommendation that insurers should be subject to vicarious liability for the legal malpractice of selected defense counsel even though no court has adopted such a rule; (2) a proposed rule that would subject insurers to liability for the negligence of selected defense counsel whenever it can be shown the insurer exercised too much control over the selected counsel’s professional judgment; (3) recommended reduction of circumstances in which an insurer may properly deny a duty to defend an insured and withdraw a defense that has been undertaken; (4) recommended expansion of an insurer’s liability for extra-contractual damages for breaching its settlement duties, in particular, by allowing an insured who has been punished by a court for reprehensible behavior to shift the imposition of punitive damages to the carrier, even though every court to consider this approach has refused.

Several states have enacted legislation to prevent courts from relying on any part of this controversial publication. Arkansas, Michigan, North Dakota and Ohio adopted laws rejecting the RLLI before it was even published. Shortly after the RLLI’s publication in 2019, Texas adopted a law broadly cautioning the judiciary against relying on ALI Restatements. Indiana, Louisiana and Kentucky have adopted resolutions to discourage courts from following the RLLI.

ADLA has closely monitored the RLLI and the legislation to reject its use in court. We are evaluating options for addressing the RLLI with the Alabama Legislature in the near term, and will keep our members informed of our action.  If you want to participate in these efforts, please email the Chair of ADLA’s Legislative Committee, Stephen Still, at sstill@starneslaw.com.

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