We must struggle to free ourselves of bias. This is not easy, particularly in scholarship. But without the struggle, there can be no progress.
There has been an ongoing controversy over what a liability insurance company's exposure to "bad faith" looks like. With regard to settlement behavior in particular, my support of the American Law Institute Restatement's Section 24 has come under attack. I too have come under attack.
I have not responded to the attack before now because it is beneath me. I will not respond in kind now. However, the ALI's Restatement comes up for a vote at the ALI Annual Meeting which runs from May 21 through May 23 this year in Washington, D.C. I believe the Restatement is scheduled for consideration by the ALI Membership on Tuesday, May 22. Therefore I write here to again express my support for the Restatement before the vote.
In succeeding articles to be posted here and on Claims and Issues Blog, I will republish my article that occasioned a challenge both to the Restatement and to me personally. I broke down the cases and jurisdictions into three camps on the issue of settlement conduct when there is no settlement demand, more or less: Pro, Maybe, and Con. The issue will be understood all the better if I briefly display the depth of the research in their article here. If you have the time, read their article for yourself.[1]
How the Courts line up on a liability carrier's exposure to extracontractual liability for not initiating settlement negotiations in the absence of a settlement demand.
1. Pro.
In my article, I wrote about ten (10) jurisdictions from which cases have been reported and found in which the Courts have recognized that bad-faith-in-settlement cases usually 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.
I went on to analyze three (3) other cases, which for reasons I stated I would not include in the "Pro" camp, but if they were included then there would be not less than thirteen (13) cases in the Pro camp based on these decisions alone.
Of these ten to thirteen (10 to 13) cases from jurisdictions as diverse as Arizona, Florida, Kansas, Michigan, New Jersey, New Mexico, Oklahoma, Oregon, Tennessee, and Washington, and perhaps including also Louisiana, West Virginia, and Wisconsin, their article challenged only one (1).
That leaves nine to 12 (9 to 12) cases they did not address, even if theoretically they could have. Which they did not.
2. "Maybe, but not in this case".
I continue to put what I call "iffy cases" in this category. These are six cases and States for certain in which the Courts in a given jurisdiction -- California, Idaho, Illinois, Ohio, Pennsylvania, and Texas, with the possible addition of a seventh, Georgia, as I wrote -- have acknowledged that liability insurance companies at least might have a legal duty to initiate settlement negotiations in the absence of a settlement demand. Because these cases are all iffy (in each one, the Courts went on to say basically, "maybe, but not in this case"), I expressly declined to include them in the "Pro" column.
I do not say that their article took my words out of context. I say that I did not say those words. Their article charged for example that I made "the claim that [California, Idaho, Illinois, Pennsylvania, fill in the blank in the word processor] offers support for the possibility of imposing an affirmative duty." So, let me say again, in boldfaced italics as I did before, but now putting my words into a bigger pitch so that they more easily see the words: Because these cases are all iffy (in each one, the Courts went on to say basically, "maybe, but not in this case"), I expressly decline to include them in the "Pro" column.
3. Con.
They did not challenge a single one of the cases in this category.
Before concluding, I point out that they claim to be misquoted. The difference is that they said what they said. To say again, read their article for yourself. Then vote your conscience. And vote as I will in favor of the ALI Restatement of the Law of Liability Insurance.
Now on to the further articles in this series this coming week, ending on Friday on Claims and Issues Blog with "The ALI Liability Insurance Restatement Reporters Get the Last Word."
Next: The Beginning, opening up on Claims and Issues Blog.
Please Read the Disclaimer. This article © 2018 Dennis J. Wall. All Rights Reserved.
[1] My article was originally published as Dennis J. Wall, "Section 24 of the Law of Liability Insurance Restatement Draft No. 4 (August 4, 2017), Reporter's Notes F And H, And The Decided Cases," 39 Ins. Lit. Rptr. 473 (October 5, 2017). Their article was William T. Barker, Dentons US LLP, "Insurers Ought Not to Be Required to Initiate Settlement Negotiations, Redux," 39 Ins. Lit. Rptr. 597 (December 15, 2017).
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