Shook Partner Mark Behrens and Of Counsel Chris Appel have authored an article for the International Association of Defense Counsel’s newsletter recounting the controversy surrounding the American Law Institute’s (ALI’s) 2019 Restatement of the Law, Liability Insurance (RLLI). “The controversy stems from the RLLI’s purported attempt to reshape the liability insurance law landscape through novel recommended rules for courts to adopt instead of faithfully ‘restating’ existing law,” Behrens and Appel explain. “Numerous stakeholders, including insurance law practitioners, state legislators and business groups, have criticized the RLLI for disadvantaging insurers and increasing their potential liability and costs. The controversial nature of the RLLI is further underscored by the fact that at least five states have taken the unprecedented step of enacting legislation to prevent courts from relying on any part of this ALI work product."
Among the concerns about the restatement are a recommendation that “courts subject an insurer to vicarious liability for the legal malpractice of selected defense counsel” and a 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,” according to Behrens and Appel. “Either of these aspirational rules, which are both contained in just one of the RLLI’s sections, could dramatically expand an insurer’s potential liability if adopted by courts."
“Now that the RLLI is published, courts will consider whether to adopt its provisions,” they conclude. “For that reason, and given the RLLI’s length and complexity, it is important for insurance law practitioners and other stakeholders to understand how the Restatement departs from existing law. Understanding these nuances is critical to blunting attempts by attorneys and others to use the RLLI as support for novel and unsound expansions of liability insurance law.”