ALI'S RESTATEMENT OF LIABILITY INSURANCE LAW AND THE JURY SYSTEM.

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The American Law Institute's Restatement of Liability Insurance Law is up for approval at the ALI's Annual Meeting this year.  I believe the vote will come up on Tuesday, May 22nd.

Controversy, and may I say confusion, have been generated by some insurance industry interpreters on the issue of liability carriers' exposure for liability beyond their policy limits in a very narrow set of circumstances.  You might not know that the area of controversy is limited unless you were paying pretty close attention.

The issue that is controversial to these people is simply whether  bad-faith-in-settlement cases can go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits.

The draft Restatement up for approval reflects simply that, yes, a bad-faith-in-settlement case can go to the jury when the facts include a liability insurance carrier's failure to initiate settlement negotiations, but there was no settlement demand from the claimant within policy limits.  It depends on all the circumstances.

It does not require that any such case ever go to the jury.  Whether a given bad-faith-in-settlement case actually goes to the jury depends on other factors under the Restatement and under the prevailing case law, including such factors as the strength of the underlying liability case against the policyholder and the size of a damages verdict if any against the policyholder.

But you would not necessarily know this from the confusion and the controversy generated around this small set of cases from a large set of corporations and their lawyers.

So, read all the articles that have been written about this narrow issue, and all the blogs, and definitely read the cases.  Then vote your conscience.  And if you are at the ALI Annual Meeting, approve the ALI's Restatement of the Law of Liability Insurance.

This article was previously published on Claims and Issues Blog on Monday, May 21, 2018.

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