1. The Restatement of Liability Insurance
Presented By:
C. Scott Rybny, Esq
Partner

2. The restatement of the law of liability insurance (RLLI)
Trick or Treat?

3. AGENDA
What is the American Law Institute and why the organization matters?
Why insurers should be concerned?

4. What is the American law institute (ALI)

5. The ali
Founded in 1923
Stated mission: “To promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice, and to encourage and carry on scholarly and scientific legal work.”

6. The ali
Today it’s a 4,300- member private organization comprised predominantly of academics, judges and lawyers
245 members include U.S. Supreme Court justices, federal court of appeal judges, chief justices of each state supreme court and dean of every accredited law school

7. The ali Restatements historically considered neutral.
Prior Restatements include:
Law of Agency;
Conflict of Laws;
Contracts;
Judgments;
Property;
Restitution;
Torts
Trusts.
Restatements historically considered neutral.
U.S. Supreme Court cited ALI’s work in 1/6 of its cases.
State & federal courts cited to the ALI roughly 200,000 times since the ALI was founded.

8. WHY INSURERS SHOULD BE CONCERNED
THE RLLI
WHY INSURERS SHOULD BE CONCERNED

9. THE RESTATEMENT AFFECTS
Policy Interpretation
Reservations of Rights
Duty to Defend
Settlement Offers

10. RLLI’s view on insurance policy interpretation
RLLI changes the way policies are interpreted
Pennsylvania : A Policy must be construed according to their plain terms when the policy is unambiguous.
RLLI: Adopts the “Plain Meaning Presumption Rule”
A policy is interpreted according to its plain meaning unless extrinsic evidence shows that a reasonable person in the insured’s position would give the term a different meaning.
Pennsylvania follows the majority rule

11. RLLI on reservations of rights

12. RLLI’s consequences for the failure to defend
Pennsylvania (Majority Rule): No “automatic forfeiture of coverage defenses.
Minority Rule: “Automatic forfeiture” of coverage defenses.
RLLI: An insurer who breaches the duty to defend, without a reasonable basis for its conduct, forfeits its coverage defenses.
This DOES NOT require a finding of bad faith
Pennsylvania follows the majority rule

13. RLLI’s Consequences of Breach of the Duty to Defend
Section 19 – Consequences of Breach of the Duty to Defend
An insurer that breaches the duty to defend a legal action loses the right to assert any control over the defense or settlement…
An insurer that breaches the duty to defend without a reasonable basis for its conduct must provide coverage for the legal action for which the defense was sought, notwithstanding any grounds for contesting coverage that the insurer could have preserved by providing a proper defense under a reservation of rights pursuant to Section 15.
Pennsylvania follows the majority rule

14. Rlli –settlement offers
RLLI § 24, comment f: Where a claimant has not made a settlement demand, the insurer may be obligated to make a settlement demand.
This is based on the ALI’s observation that a number of legal scholars argued in favor of imposing an affirmative obligation to seek settlement on insurers.

15. Justice Scalia’s take on the Ali - 2015
“Over time, the Restatements’ authors have abandoned the mission of describing the law, and have chosen instead to set forth their aspirations for what the law ought to be.”

16. Justice Scalia’s take on the Ali - 2015
“Restatements should be given no weight whatsoever as to the current state of the law, and no more weight regarding what the law ought to be than the recommendations of any respected lawyer or scholar.”

17. Not all judges agree
Hon. Frank Sullivan Jr. (Ret) – Indiana Supreme Court
“I was always willing to consider an argument to overrule precedent that was grounded in a restatement…”

18. questions