To those in the know (e.g., readers of The Brief), insurance is never a dull topic. But neither is it typically the object of great attention or controversy. And so it was with the American Law Institute’s (ALI’s) Restatement of the Law, Liability Insurance (RLLI)—at least at the beginning of the project.1 At the outset in 2010, the project was labeled Principles of the Law of Liability Insurance (PLLI), a designation that did “not purport to restate but rather [to] pull together the fundamentals underlying statutory, judicial, and administrative law in a particular legal field and point the way to a coherent (a principled, if you will) future.”2
The change to a restatement in 2014 proved significant in transforming a quiet, cooperative endeavor reminiscent of a law school symposium into a more contentious process. Increased scrutiny of the project by particularly active insurance industry observers also played a key role in converting the RLLI from a low-profile compilation of insurance law into a pitched battleground.
For the most part, restatements have been well regarded and influential (perhaps even highly influential) but uncontroversial. They have been cited frequently by courts, commentators, and legislators as either authoritative statements of the law or correct analyses of the law. But in recent years, restatements and other ALI projects have been subjected to some criticism for allegedly departing too much from settled law or having been shaped too much by special interest influences.3 Even prior to that, there were a few ALI efforts—such as the Principles of Corporate Governance in the 1980s and the Restatement of the Law Governing Lawyers in the late 1990s and early 2000s—that had raised controversy.4
The RLLI has become the most recent example of this phenomenon. Despite a quiet start as a “principles” project in 2010, its final years before approval saw substantial lobbying by insurers and their allies to shape the RLLI in ways favorable to insurers. Notwithstanding considerable success by insurers in affecting the content of the RLLI, many insurers and their representatives continue to contend that the document—which was approved by the ALI in May 2018 and published in final form in 2019—unduly favors policyholders. Some opponents have opposed the RLLI through state legislation, some of which passed even prior to the formal publication of the document.5 It appears that the attacks on the RLLI may have convinced many in the industry that the document is unacceptably flawed.
This article seeks to report the history of the development of the RLLI to allow readers to make their own judgment about the appropriateness of the process that was followed.
The ALI Process
The ALI Council (Council) appointed Professor Tom Baker from the University of Pennsylvania as reporter and Professor Kyle Logue from the University of Michigan as associate reporter to draft the PLLI, and Baker and Logue continued to serve as the reporters when the project was changed to a restatement. Over the course of a principles or restatement project, the reporters present drafts to four groups—the advisers, the members consultative group (MCG), the Council, and the general members of the ALI—at annual meetings.6 By the summer of 2017, the RLLI reporters had “produced 26 drafts [of the project] presented formally in ALI meetings,” with “many Sections rewritten multiple times.”7
The Council, with input from the reporters, selected the advisers, a group of approximately 40 people chosen because of their insurance law expertise. This group was composed of roughly equal numbers of judges, law professors, policyholder attorneys, and insurer attorneys or executives.8 After preparing a draft that was circulated to the advisers (and the MCG), the reporters would meet with the advisers as a group and spend the day reviewing and discussing the draft. The advisers also submitted written comments and suggestions to the reporters before and after the meetings to discuss the drafts.
The MCG also met with the reporters to review and discuss the drafts, but this group differs in composition across all ALI projects or restatements: whereas advisers are appointed by the Council, any ALI member can volunteer to be part of the MCG. The initial draft of the PLLI listed more than 75 members of the MCG.9 By the time the RLLI draft was being finalized, the size of the MCG had more than doubled, to more than 150 people.10
Typically, the advisers discuss a draft over the course of a full day at ALI headquarters in Philadelphia, followed by a discussion with the MCG on the ensuing day. Nine such sessions were held in connection with the project (including both the PLLI and the RLLI).
In addition to the formal process of distributing and discussing drafts within the institute, the ALI maintains a record of the restatement and principles projects on its website, to which both ALI members and nonmembers may post comments. The RLLI was no exception and as of May 2018 (just prior to the final annual meeting vote) had been subject to more than 250 comments. In addition, in anticipation of the annual meeting—where ALI members can make, argue, and vote on motions to amend the draft—motions can be posted on the website. More than 36 motions regarding portions of the drafts were submitted in advance.
After meeting with the advisers and the MCG, restatement reporters revise the then current draft and present a “Council Draft” to the Council, the governing body of the ALI. The Council is composed of 42 to 65 members who are elected by the ALI membership for five-year terms.11 The Council reviews, discusses, and then votes on the restatement sections before it. The liability insurance project (both the PLLI and the RLLI) was discussed at five different Council meetings between 2012 and 2018.
After approval by the Council, the relevant portions of a restatement are presented to the ALI membership at its annual meeting. Members are judges, lawyers, and law professors who are “selected on the basis of professional achievement and demonstrated interest in improving the law.”12 Restatement provisions are discussed seriatim before those on the floor, with members permitted to offer amendments and commentary. Votes are taken on the proposed amendments, while reporters generally consider commentary for potential editorial changes after the meeting. The ALI transcribes and publishes the proceedings, which provide something of a legislative history regarding review of a restatement.13 The PLLI/RLLI was subject to discussion at each annual meeting between 2012 and 2018, with final approval secured at the May 2018 annual meeting.
The Shift from Uncontroversial to Contentious
The first three years of the project, while in the principles stage, were generally not controversial. Those with policyholder and insurer perspectives collaborated with the reporters in applying the ALI process.
This changed in 2014 when the project was converted to a restatement, which triggered an almost immediate reaction. In March 2014, on the eve of an advisers/MCG meeting, all advisers received via FedEx a letter from 10 insurers accompanied by hundreds of pages of enclosures attacking the RLLI sections as drafted.14 The insurer package was distinguished by its strong tone, opposing many aspects of the RLLI and suggesting that the current draft was greatly at odds with American law and was not legitimate if it varied from the majority rule on any insurance issue that it addressed. It was the first major shot across the bows of the RLLI (and the ALI) and presaged greater politicization surrounding the project.15
From that date onward, the RLLI saw many more comments posted to its website, the vast majority submitted by insurer allies. During the comment period, there were roughly 30 comments from policyholder-affiliated sources, 25 from attorneys appearing to be unaffiliated, 15 from academics, and 1 from a judge—and more than 150 from insurer-affiliated sources.16 Since then, the RLLI endured significant attacks by substantial portions of the U.S. insurance industry.17 Insurers criticized portions of the RLLI as unduly pro-policyholder,18 and some argued for terminating the RLLI project.19
Insurers and their allies increased their efforts approaching the May 2017 ALI annual meeting. In January 2017, insurer counsel submitted an extensive attack on the RLLI, arguing that it was unrepresentative and should not be approved unless amended.20 Additionally, several insurance groups—including the National Council of Insurance Legislators (NCOIL),21 the Defense Research Institute (DRI),22 and others23—attacked the RLLI. Some state insurance regulators also urged that the project be rejected.24 In addition, there was a relatively pointed clash between a prominent insurance law professor and the RLLI reporters.25
Lobbying efforts included seeking to enlist the aid of state legislators, state courts, and governors, with some success. For example, in April 2018, the governors of six states wrote to the ALI opposing adoption of the RLLI unless it was revised in favor of insurers. They contended not only that the RLLI was bad insurance law but also that it would hurt commerce in their respective states.26
The Change from a Principles Project to a Restatement
One of the primary themes of the insurers’ attack on the RLLI was that it was a principles project masquerading as a restatement. In other words, they objected that the aspirational aspect of a principles project continued even when the project was changed to a restatement, which all can agree is more grounded in case law and precedent than a principles project.27
Although it is correct that a principles project is less tethered to precedent than a restatement, most portions of a principles document are not particularly creative endeavors extending the law but rather are restatement-like summations of existing law and practice.28 Principles projects follow the same development and approval process of restatements, including substantial vetting not only by the reporters chosen for the project but also by the project’s advisers and MCG prior to being discussed and voted upon by the ALI membership at annual meetings.
However, principles projects do appear to have a lower profile and may have less impact on case law, which may account for the insurance industry’s relatively benign view of the PLLI during its first years while it was a principles project. The reduced impact (at least as measured by judicial citation counts) of ALI principles29 probably results from the lack of emphasis placed on these projects by the practicing bar, which is the conduit through which the bench is normally apprised (through briefs and oral argument) in an adversary system.
By changing the project to a restatement, the ALI moved closer to the common law but did not create a requirement that only positions embraced by the majority of courts would be endorsed. Rather, as discussed quite eloquently in the ALI’s Style Manual (which is excerpted at the beginning of the draft RLLI),30 the institute notes that “Restatements are primarily addressed to courts. They aim at clear formulations of common law and its statutory elements or variations and reflect the law as it presently stands or might appropriately be stated by a court.”31 Thus, a restatement rule should have at least some support in case law but need not be the majority rule.
In examining the legal landscape, the ALI may embrace the judicial approach viewed as superior even if it is the minority rule—and even a distinct minority:
A Restatement thus assumes the perspective of a common-law court, attentive to and respectful of precedent, but not bound by precedent that is inappropriate or inconsistent with the law as a whole. Faced with such precedent, an Institute Reporter is not compelled to adhere to what [former ALI director and Columbia University law professor] Herbert Wechsler called “a preponderating balance of authority” but is instead expected to propose the better rule and provide the rationale for choosing it. A significant contribution of the Restatements has also been anticipation of the direction in which the law is tending and expression of that development in a manner consistent with previously established principles.
The Restatement process contains four principal elements. The first is to ascertain the nature of the majority rule. If most courts faced with an issue have resolved it in a particular way, that is obviously important to the inquiry. The second step is to ascertain trends in the law. If 30 jurisdictions have gone one way, but the 20 jurisdictions to look at the issue most recently went the other way, or refined their prior adherence to the majority rule, that is obviously important as well. Perhaps the majority rule is now widely regarded as outmoded or undesirable. If Restatements were not to pay attention to trends, the ALI would be a roadblock to change, rather than a “law reform” organization. A third step is to determine what specific rule fits best with the broader body of law and therefore leads to more coherence in the law. And the fourth step is to ascertain the relative desirability of competing rules. Here social-science evidence and empirical analysis can be helpful.32
According to the ALI, a restatement that adopts a minority rule (or modified or hybrid rule) in attempting to improve the law, as well as to synthesize it, is not disregarding the law; rather, “in the quest to determine the best rule,” it is doing “what a Restatement can do that a busy common-law judge, however distinguished, cannot”—that is, to “engage the best minds in the profession over an extended period of time, with access to extensive research, testing rules against disparate fact patterns in many jurisdictions.”33
Insurers Successfully Influenced the Outcome
The attacks on the RLLI, particularly those of early 2017, were effective in that the draft scheduled for final, full ALI approval at the May 2017 annual meeting was recommitted for further study and review in light of negative comments. The RLLI reporters produced a revised draft that was submitted to the Council in January 2018.34 The Council made several revisions, which were incorporated into Proposed Final Draft No. 2,35 which was reviewed and approved at the May 2018 annual meeting. As is customary for restatements, after approval the reporters subjected the approved draft to additional editorial scrutiny and proofreading, making modest revisions that did not change the substance of the approved draft. The official hard-copy RLLI was published in September 2019.36
The RLLI: Pro-Policyholder or Pro-Insurer?
The RLLI has 50 sections of black-letter pronouncements.37 Trying to be evenhanded, this author considers more than 40 of the sections to be free of controversy.
Perhaps as many as a half dozen sections can be said to lean toward policyholders—but only in modest ways such as using nomenclature disliked by some insurers. For example, section 24 states that an insurer has a duty “to make reasonable settlement decisions.”38 Although this language has been criticized because it does not require “bad faith” as a prerequisite to insurer liability in excess of policy limits, it seems more charitable toward insurers than a “duty to settle.”39 Under the restatement characterization, the insurer only has a duty to make reasonable settlement decisions, not a duty to settle per se.
Only a few sections reject a clear “majority” rule favoring insurers.40 Further, given the 50-state and territorial dispersion of insurance decisions, with perhaps more decisions rendered by federal courts than state courts (due to insurer preference for removing cases to federal court) in spite of the McCarran-Ferguson Act and the Erie doctrine, it can be difficult to ascertain the “majority” rule on a given topic.41 In such situations, restatements are generally considered free to adopt the “better” rule of law.42 While insurers and policyholders may quarrel as to what constitutes “better,” it is not accurate to suggest that by choosing what it regards as the better rule where there is perceived uncertainty, the RLLI has disregarded or rejected judicial precedent.
An example of perhaps the greatest departure from precedent by the RLLI is section 27 comment e, which provides:
If a liability insurer’s unreasonable failure to settle a legal action against the policyholder results in a compensatory-damages award in excess of the policy limits and a punitive-damages award against the policyholder in that action, the amount of that punitive-damages award is included in the consequential damages owed for breach of the insurer’s duty.43
This comment endorses the view that an insurer that unreasonably fails to settle an action resulting in punitive damages is responsible for those damages even if punitive damages would otherwise be considered outside coverage or considered uninsurable on public policy grounds.44
The decisions of three major courts addressing the issues are to the contrary, but in two of the cases, the courts were closely divided.45 The RLLI reporters (with input from the advisers and the Council) concluded that the dissents were better reasoned because they promoted the public policy of encouraging reasonable settlement decisions, because the incentive argument based on the availability of punitive damages against the policyholder was implausible, and because not permitting punitive damages to be included in compensatory damages could create more conflicts of interest resulting in greater use of independent counsel.46 Critics complain that this portion of the RLLI fails to “restate” the law, but its approach—choosing the “better” rule of law that has at least some significant judicial support—is consistent with the ground rules of an ALI restatement.47
The RLLI has some significant provisions that favor insurers. For example, section 41 provides that “when indivisible harm occurs over multiple policy periods, the amount of any judgment entered in or settlement of any liability action arising out of that harm is subject to pro rata allocation.”48 This is the allocation favored by insurers because it reduces the ability of a policyholder to choose a different allocation. Policyholders prefer the “all sums,” “vertical,” or “pick-and-spike” approaches that tend to maximize the amount of coverage available for long-tail claims49 (because they allow policyholders to maximize coverage by preventing reduction of available limits in a given year due to amortization across time). Applying section 41 to mega-coverage cases such as asbestos, pollution, or pharmaceutical liability could reduce insurer payments by billions of dollars because of periods of insurer insolvency, policy exhaustion, self-insurance, or lack of insurance that are commonplace over the 20- or 30-year operating period that may be implicated in a long-tail coverage dispute.
Likewise, RLLI section 39 includes a rule that favors insurers regarding exhaustion of underlying insurance. It provides that where “the underlying insurer is unable to perform, whether because of insolvency or otherwise, the excess insurer is not obligated to provide coverage in place of the underlying insurer.”50 This protects the excess insurer from having to “drop down” to fill the place of a nonperforming primary insurer. (Incidentally, this is an example of where the RLLI follows the majority rule.51) The effect of this provision prevents a policyholder from accessing potentially millions of dollars of excess coverage if the primary insurer is unable to perform. In addition, this section of the RLLI gives effect to excess insurance language that requires the underlying limit be paid and the attachment point be reached only through payments made by an underlying insurer—an approach that can eliminate excess coverage where the underlying insurer is insolvent or pays less than full underlying limits due to settlement with the policyholder.
RLLI section 3, a major focus for insurers during 2014–2017, was substantially revised, first by the reporters in 2017 in the aftermath of the ALI decision to defer consideration of the RLLI52 and then by the Council prior to the final version of the RLLI.53 That final, published version adopted a “plain meaning” rule of insurance policy interpretation that emphasizes policy text and takes a considerably more restrictive approach to extrinsic evidence than earlier drafts of the RLLI.54 Many insurers continue to complain that section 3 remains too receptive to extrinsic and contextual evidence.55 Courts may eventually agree. But with the explicit endorsement of the plain meaning rule, it is unlikely that courts will view section 3 as radical and unmoored from precedent.
This trend toward revisions making the RLLI less favorable to policyholders can be seen with other changes. For example, a draft of the PLLI (during the principles project stage) would have altered the traditional rule that applicant material misrepresentation permits the insurer to declare a policy void ab initio where the misrepresentation was neither reckless nor intentional; under those circumstances, the insurer would be required to cover the claim but could make a retroactive premium adjustment.56 The final RLLI adopts the traditional rule (in section 7) that material misrepresentation allows the insurer to rescind the entire policy.57
An earlier RLLI draft supported requiring insurers to pay the prevailing rates of policyholder-retained independent counsel rather than limiting compensation to the insurers’ panel counsel rates.58 The position was dropped and is not in the final RLLI, although section 17 requires that the insurer pay “the reasonable fees of the defense counsel and related service providers on an ongoing basis in a timely manner.”59
An earlier RLLI draft also would have barred an insurer in breach of its duty to defend from contesting coverage.60 The final RLLI (in section 19) no longer advances this approach but states only that an insurer breaching the duty to defend “forfeits the right to assert any control over the defense or settlement of the action.”61
In short, while the RLLI as published may be a moderate or centrist compilation of liability insurance law that may “lean” toward policyholders in some areas, it does not promote a sea change of insurance law and favors insurers on several important points. Insurers are correct that some provisions of earlier drafts were more favorable to policyholders, but these provisions have been deleted or revised in response to insurer concerns.
The Continuing Conflict
Notwithstanding the success of insurer efforts in modifying the final content of the RLLI to be more favorable to insurers, many insurers and allies continue to insist that the RLLI is sufficiently defective that it should not be available for judicial consideration.
One response to the RLLI has been in the legislative arena. For example, in Ohio, a 2018 bill enacting a seemingly simple highway-funding/naming law was amended to state that the RLLI “does not represent the public policy of Ohio.”62 This appears to be the first time that a state has ever passed legislation against a restatement in its entirety.63 These legislative efforts appear to stem from a misunderstanding of the nature of a restatement (and the ALI), as well as a possible misunderstanding of separation of powers (something one would expect legislatures to understand).
The RLLI, like all restatements, is “soft law” in that it has no binding precedential value. It is persuasive only if found persuasive by a reviewing court, and it is never binding unless adopted as controlling precedent by a court. In that sense, restatements are much like the recommendations of the National Association of Insurance Commissioners, proposed uniform state laws, or the ABA Model Rules of Professional Conduct. While the RLLI sets forth preferred positions on various legal matters, it is not in any way binding unless those positions are adopted by authorized government actors.
If anything, restatements (including the RLLI) are even softer law than model acts, laws, or rules that are designed to be placed before a legislature or court (in the case of professional conduct rules) and enacted or adopted. The RLLI and other restatements are not designed to be adopted en masse as designated state policy. Rather, the RLLI and its counterparts are available for courts to use as judges see fit. The existence of the RLLI does not compel even a single judge to do anything the judge is not persuaded to do. Judicial decisions that merely cite or expressly approve a restatement do not equate to official court adoption of the restatement. Even in states with a tradition of respect for restatements, it cannot be said that restatements are the “law” of the jurisdiction.
Thus, the RLLI does not, by itself, change the law. Consequently, concern about the inordinate influence of the RLLI may come from a misunderstanding of the role that restatements play in litigation.
Since inception of the project, the RLLI (or its PLLI predecessor) has been cited in roughly 30 judicial opinions,64 usually with favor but often also with what might be described as “boilerplate” pronouncements of basic, uncontroversial law.65 In the handful of cases where the court focused on an RLLI issue with divided case law, the RLLI was rejected or followed in roughly equal measure.66
A decision-by-decision description of RLLI impact is beyond the scope of this article. But the early returns suggest that the RLLI’s influence, although likely to be more significant than any individual treatise, will not be the game changer feared by insurers, particularly where states already have developed law on an issue, unless the RLLI reflects the majority rule or a trend in the law.67 Where a legal question is open, restatements (like law review articles and amicus briefs) are likely to receive greater attention. But even in these circumstances, courts often decline to follow restatements—a phenomenon that may be more prevalent for the RLLI in light of the criticisms leveled at it by insurers.
1. The ALI, a law reform group comprised of judges, professors, and practicing attorneys, was formed in 1923 and published its first restatement (Restatement of the Law of Contracts) in 1931. Current restatements are considered the “third” round or edition of restatements.
2. Am. Law Inst., Capturing the Voice of the American Law Institute: A Handbook for ALI Reporters and Those Who Review Their Work, at ix (rev. ed. 2015) [hereinafter ALI Style Manual].
3. Exhibit A in this line of commentary is the late Justice Antonin Scalia’s concurring and dissenting opinion in Kansas v. Nebraska, 135 S. Ct. 1042, 1064 (2015), which argued that
modern Restatements—such as the Restatement (Third) of Restitution and Unjust Enrichment (2010), which both opinions address in their discussions of the discouragement remedy—are of questionable value, and must be used with caution. The object of the original Restatements was “to present an orderly statement of the general common law.” Restatement of Conflict of Laws, Introduction, p. viii (1934). 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. [W. Noel] Keyes, The Restatement (Second): Its Misleading Quality and a Proposal for Its Amelioration, 13 Pepp. L. Rev. 23, 24–25 (1985). Section 39 of the Third Restatement of Restitution and Unjust Enrichment is illustrative; as Justice Thomas [in his partial concurrence and dissent notes], it constitutes a “novel extension” of the law that finds little if any support in case law. Restatement sections such as that should be given no weight whatever 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. And it cannot safely be assumed, without further inquiry, that a Restatement provision describes rather than revises current law.
4. The less obviously political Restatement (Second) of Torts was also the subject of significant lobbying. See Elizabeth Laposata et al., Tobacco Industry Influence on the American Law Institute’s Restatements of Torts and Implications for Its Conflict of Interest Policies, 98 Iowa L. Rev. 1 (2012). But see Roberta Cooper Ramo & Lance Liebman, The ALI’s Response to the Center for Tobacco Control Research & Education, 98 Iowa L. Rev. Bull. 1, 1 (2013) (defending the Restatement (Second) of Torts against charge of undue tobacco industry influence).
5. See, e.g., Ariz. H.R. 2644, 54th Leg. (passed House Feb. 27, 2020; pending in Senate); Ark. S. 565, 92d Gen. Assemb. (enacted Apr. 5, 2019; codified at Ark. Code Ann. § 23-60-112); Idaho S. 1176, 2019 Leg. (introduced Mar. 6, 2019); Ind. H.R. Con. Res. 62, 2019 Gen. Assemb. (approved Apr. 23, 2019); Ky. H.R. Res. 222, 2018 Gen. Assemb. (adopted Mar. 27, 2018); La. S. Res. 149, 2019 Leg. (adopted May 30, 2019); Mich. Comp. Laws § 500.3032 (effective Jan. 1, 2020); N.D. H.R. 1142, 2019 Leg. (enacted Mar. 21, 2019; codified at N.D. Cent. Code § 26.1-02-34); Ohio Rev. Code Ann. § 3901.82 (effective Oct. 29, 2018); Tex. H.R. 2757, 86th Leg. (enacted June 10, 2019; effective Sept. 1, 2019; codified at Tex. Civ. Prac. & Rem. Code Ann. § 5.001); Tex. H.R. Con. Res. 58, 86th Leg. (committee report distributed May 2, 2019); see also Tenn. Code Ann. § 56-7-102 (effective Apr. 9, 2019) (codifying traditional state rules regarding insurance policy status as contract, traditional rules of construction, and four corners rule on duty to defend—legislation that appears to have been prompted by the RLLI in spite of not directly attacking the RLLI).
7. Restatement of the Law, Liability Insurance, at xiv (Am. Law Inst., Revised Proposed Final Draft No. 2, Sept. 7, 2018).
8. The advisers’ group changed as the project progressed. Each draft of the PLLI and the RLLI, as well as the final, published version of the RLLI, contains a list of the members of the advisers’ group at the time of that draft. See, e.g., Principles of the Law of Liability Insurance, at v–vi (Am. Law Inst., Preliminary Draft No. 1, Feb. 17, 2011). Advisers are identified by their institutional affiliation and included lawyers for State Farm, ACE Group, Allstate, and Aon Risk Services Inc.; as well as lawyers from law firms that primarily represent insurers, including William T. Barker, Dentons; and Richard Neumeier and Michael Aylward, Morrison Mahoney. Id. Craig Berrington met with the advisers’ group and served as the liaison for the American Insurance Association. He was replaced by Laura Foggan in 2015. See Restatement of the Law, Liability Insurance, at vi (Am. Law Inst., Discussion Draft, Apr. 30, 2015).
9. See Principles of the Law of Liability Insurance, at vii (Am. Law Inst., Preliminary Draft No. 1, Feb. 17, 2011).
10. See Restatement of the Law, Liability Insurance, at vii–viii (Am. Law Inst., Revised Proposed Final Draft No. 2, Sept. 7, 2018).
11. Officers and Council, Am. L. Inst., https://www.ali.org/about-ali/governance/officers-council (last visited Oct. 12, 2020).
13. See Annual Meeting Proceedings, Am. L. Inst., https://www.ali.org/publications/show/annual-meeting-proceedings (last visited Oct. 12, 2020).
14. Letter from Gen. Counsel and Corp. Officers of ACE, AIG, Allstate, Chub, Hartford, Liberty Mutual, State Farm, Travelers, USAA, and Zurich to ALI Reporters and Advisers (Mar. 24, 2014).
15. See also Randy Maniloff, ALI Principles of Insurance Should Concern Industry, Law360 (Apr. 16, 2014).
16. During the multiyear drafting process, comments on the RLLI that were submitted to the ALI were posted on the project website, which was available to ALI members. In May 2018 when the RLLI was approved at the ALI annual meeting, this author reviewed every single comment posted on the website. Because some commentary was mixed (e.g., praising one section of the RLLI while criticizing another) or technical (e.g., pointing out a typographical error or citation mistake), not all comments fell neatly into pro- or anti-RLLI categories. In addition, the occupation of a commentator was not always clear. However, where commentators could be identified and comments categorized, commentary by “insurer advocates” outnumbered that of policyholder advocates by roughly 4:1. See, e.g., infra note 17; Jeffrey W. Stempel, Hard Battles over Soft Law: The Troubling Implications of Insurance Industry Attacks on the American Law Institute Restatement of the Law of Liability Insurance, 69 Clev. St. L. Rev. nn.142–46 (forthcoming 2021) (citing insurer criticisms).
17. See, e.g., R. Mark Mifflin & Donald Patrick Eckler, When “Reasonable” Is Unreasonable: ALI’s Proposed Final Draft of the Restatement of Law Liability Insurance, 27 IDC Q. 12 (Nov. 2017); Phil Graham & Cody Hagan, ALI Insurance Restatement Oversteps Its Boundaries, Law360 (Feb. 21, 2018); Letter from Prop. Cas. Insurers Ass’n to ALI (May 1, 2017); see also Letter from John E. Cuttino, President, DRI, to ALI (May 5, 2017); Letter from Louis C. Long, President, Pa. Def. Inst., to ALI (May 24, 2017); Letter from R. Mark Mifflin, President, Ill. Ass’n of Def. Trial Counsel, to ALI (May 12, 2017); Letter from N.Y. Ins. Ass’n to ALI (May 15, 2017).
18. See, e.g., Letter from Malcolm E. Wheeler, Wheeler Trigg O’Donnell LLP, to Tom Baker and Kyle Logue, RLLI Reporters (Jan. 6, 2018) (criticizing settlement provisions of Dec. 2017 RLLI); Letter from Malcom E. Wheeler, Wheeler Trigg O’Donnell LLP, to Tom Baker and Kyle Logue, RLLI Reporters (June 19, 2017) (criticizing RLLI provisions regarding settlement without insurer consent); Letter from Kim V. Marrkand, Mintz Levin, to Tom Baker and Kyle Logue, RLLI Reporters (June 14, 2017) (criticizing RLLI sections regarding misrepresentation); Letters from Kim V. Marrkand, Mintz Levin (June 28, July 14, Aug. 4, Oct. 16, Oct. 20 & Dec. 27, 2017); Letters or Memoranda from Laura Foggan, Wiley Rein LLP and Crowell & Moring LLP (July 19, Aug. 28, Sept. 8, Sept. 26, Nov. 12, Nov. 13, Dec. 21, Dec. 28 & Dec. 29, 2017); Letters from Jackson & Campbell, P.C. (Aug. 31, Sept. 1, Sept. 6 & Dec. 29, 2017); Memoranda from William Barker (Fall 2017; Dec. 22, 2017; Apr. 14, 2018). Comments have since been removed from the project website but are on file with the author. In addition to comments sent directly to the ALI, insurer advocates criticized the RLLI in the public domain. See, e.g., Maniloff, supra note 15 (insurer attorney expressing concerns regarding RLLI provisions); A. Hugh Scott, Why Criticism of ALI’s Insurance Restatement Is Valid, Law360 (May 10, 2017) (insurer attorney attacking what is now section 24 (and other provisions of the RLLI)).
19. See Letter from Governors Henry McMaster (S.C.), Kim Reynolds (Iowa), Paul R. LePage (Me.), Pete Ricketts (Neb.), Greg Abbott (Tex.), and Gary R. Herbert (Utah), to David F. Levi, President, ALI (Apr. 6, 2018) (recommending halt to project if significant concessions are not made in response to insurer objections).
20. See Letter from Peter Solmssen to ALI Council (Jan. 4, 2018) (cosigned by 20 lawyers from firms generally representing insurers and in-house counsel for State Farm Insurance and Liberty Mutual Insurance).
21. See Press Release Accompanying Letter from Thomas B. Considine, CEO, NCOIL, to Richard Revesz, Dir., ALI, and Stephanie Middleton, Deputy Dir., ALI (May 5, 2017).
22. See Letter from John Cuttino, President, DRI, to Richard Revesz, Dir., ALI (May 5, 2017). The letter attacks RLLI section 12 as “creat[ing] new direct liability on the part of the insurer to the insured for the acts of defense counsel” without apt support in the case law. Id. RLLI section 12 states that an insurer may be “subject to liability for the negligence or other breach of professional obligation of defense counsel” if the defense attorney is “an employee of the insurer acting within the scope of employment” or the insurer “negligently selects or supervises defense counsel, including by retaining counsel with inadequate liability insurance.” Restatement of the Law, Liability Insurance § 12 (Am. Law Inst., Proposed Final Draft, Mar. 28, 2017). RLLI section 12 does not endorse strict or even very broad liability for insurers. Rather, the insurer is liable for counsel’s malpractice only if the insurer has engaged in what might be termed “active” negligence by improperly micromanaging counsel or negligently selecting an unqualified attorney without the means to compensate a policyholder client injured by malpractice. Vicarious liability is expressly rejected by comment e.
23. See, e.g., Letter from Harold Kim, U.S. Chamber of Commerce Inst. for Legal Reform, to ALI Council (Apr. 6, 2018) (criticizing RLLI sections 3, 4, and 12); Letter from J. Stephen (Stef) Zielezienski, Am. Ins. Ass’n, and Tom Karol, Nat’l Ass’n of Mut. Ins. Cos., to David Levi, President, ALI (undated; approx. Sept. 2017) (criticizing Aug. 2017 RLLI draft as not having moved sufficiently in the direction of insurers in the wake of the May 2017 annual meeting, accusing RLLI section 12 of “eviscerating” attorney rules of professional conduct, creating a “judicial watchdog” over the insurance industry, and creating new remedies for breach of contract).
24. See, e.g., Comment of Dean L. Cameron, Dir., Idaho Dep’t of Ins. (Apr. 5, 2017) (“The Idaho Department of Insurance respectfully requests that the finalization of the Restatement, Liability Insurance project be delayed to a date later than May 2017.”); Letter from Eric J. Dinallo and Keith J. Slattery, Debevoise & Plimpton LLP, to ALI Leadership and RLLI Reporters (Jan. 17, 2017) (criticizing the RLLI as an improper invasion of state regulatory prerogatives). But see Letter from Peter Kochenburger, Daniel Schwarcz, and Jeffrey Thomas (joined by Professors Jay Feinman and Jeffrey W. Stempel as well as Amy Bach, Exec. Dir., United Policyholders), to Richard L. Revesz, Dir., ALI, and Stephanie A. Middleton, Deputy Dir., ALI (May 18, 2017) (disputing that the RLLI intrudes upon state regulatory authority). Even if one is persuaded that the scope of the RLLI trespasses on state regulation, it is important to remember that the RLLI has no legal force of its own and does not compel action by state regulators.
25. Compare George L. Priest, A Principled Approach Toward Insurance Law: The Economics of Insurance and the Current Restatement Project, 24 Geo. Mason L. Rev. 635 (2017) (criticizing the RLLI), with Tom Baker & Kyle D. Logue, In Defense of the Restatement of Liability Insurance Law, 24 Geo. Mason L. Rev. 767, 768 (2017) (responding to Priest).
26. See Letter from Governors, supra note 19.
27. See ALI Style Manual, supra note 2. While all involved seem to agree that a restatement is more grounded in common law than a principles project, how closely connected a restatement must be to the common law or majority rules is a matter of some dispute.
28. See id. at 13–15. For example, the “Corporate Governance Project was conceived as a hybrid, combining traditional Restatement in areas governed by the common law, such as duty of care and duty of fair dealing, with statutory recommendations in areas primarily governed by statute.” Id. at 13.
30. See Restatement of the Law, Liability Insurance, at x–xi (Am. Law Inst., Proposed Final Draft No. 2, Apr. 13, 2018).
31. Id. at x (boldface removed).
32. Id. at x–xi (“Nature of a Restatement,” reprinted from ALI Style Manual, supra note 2, at 5).
33. Id. at xi.
34. See Restatement of the Law, Liability Insurance (Am. Law Inst., Council Draft No. 4, Dec. 4, 2017).
35. Restatement of the Law, Liability Insurance (Am. Law Inst., Proposed Final Draft No. 2, Apr. 13, 2018).
36. Restatement of the Law, Liability Insurance (Am. Law Inst. 2019).
38. Id. § 24.
39. See, e.g., Kent D. Syverud, The Duty to Settle, 76 Va. L. Rev. 1113, 1116 (1990) (“For [a century] courts have invoked a doctrine known as ‘the duty to settle’ to impose liability on insurance companies who fail to settle lawsuits against people they insure.”).
40. See, e.g., Restatement of the Law, Liability Insurance § 3 (Am. Law Inst. 2019) (endorsing “plain meaning,” text-centered approach rather than instrumental approach more receptive to extrinsic evidence as reflected in cases such as Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641 (Cal. 1968), and arguably cutting back upon the Restatement (Second) of Contracts §§ 200–223 (1981), which adopts a more contextual, rather than textual, approach to contract construction) (readers will note that in viewing section 3 as consistent with majority rules of contract construction, this author disagrees with the characterization set forth in the article by Foggan and Padgett, infra note 55, in this issue of The Brief); id. §§ 7–9 (following majority rule that material misrepresentation allows insurer to rescind entire policy ab initio after loss even if loss is unrelated to misrepresentation); id. § 19 (insurer breach of duty to defend does not prevent insurer from contesting coverage; earlier draft had endorsed this approach, which is used in Illinois and nearly a dozen other states; see Jeffrey W. Stempel, Enhancing the Socially Instrumental Role of Insurance: The Opportunity and Challenge Presented by the ALI Restatement Position on Breach of the Duty to Defend, 5 U.C. Irvine L. Rev. 587 (2015) (approving Illinois and earlier RLLI approach)); id. § 41 (adopting majority “pro rata” approach to allocation of long-tail claims rather than “all sums” approach taken by significant minority of courts).
41. See, e.g., Jeffrey E. Thomas, The Standard for Breach of a Liability Insurer’s Duty to Make Reasonable Settlement Decisions: Exploring the Alternatives, 68 Rutgers U. L. Rev. 229 (2015) (analyzing the rules for reasonable settlement decisions in all 50 states).
42. See ALI Style Manual, supra note 2, at 7 (“When decisions among state courts conflict, a Reporter should report the conflict but is not bound to adhere to the majority view. Reporters are expected to recommend to the Institute what they believe to be the better rule or the better formulation of a rule.”).
43. Restatement of the Law, Liability Insurance § 27 cmt. e (Am. Law Inst. 2019).
44. Id. (explaining the rationale for taking the position of dissenting judges that would award underlying punitive damages as part of consequential damages for unreasonable failure to settle).
45. See id. reporters’ note e (describing the case law on this issue, including the 4–3 decisions in PPG Industries, Inc. v. Transamerica Insurance Co., 975 P.2d 652 (Cal. 1999), and Lira v. Shelter Insurance Co., 913 P.2d 514 (Colo. 1996), with dissents relied upon by the reporters, as well as the unanimous decision favoring insurers in Soto v. State Farm Insurance Co., 635 N.E.2d 1222 (N.Y. 1994)).
46. Id. cmt. e.
47. See supra note 40.
48. Restatement of the Law, Liability Insurance § 41 (Am. Law Inst. 2019).
49. See generally 2 Michael A. Kotula & Anne M. Murray, New Appleman Law of Liability Insurance § 14.12 (2020).
50. Restatement of the Law, Liability Insurance § 39(3) (Am. Law Inst. 2019).
51. See id. cmt. e (“[T]he no-drop-down rule . . . is consistent with the rule that has been adopted in the substantial majority of jurisdictions.”); see also 4 Douglas R. Richmond, New Appleman on Insurance Law Library Edition § 24.06[a] (2020).
52. See Restatement of the Law, Liability Insurance, at xv (Am. Law Inst., Revised Proposed Final Draft No. 2, Sept. 7, 2018) (reporting extensive revisions to comments and reporters’ notes “to better explain how the new plain-meaning presumption rule reconciles the results reached through those three traditional [insurance policy interpretation] approaches”).
53. See Restatement of the Law, Liability Insurance, at xxi (Am. Law Inst., Proposed Final Draft No. 2, Apr. 13, 2018) (“We extensively revised this Section  to reflect the decision to adopt a plain meaning rule. This is one of the most significant revisions to the PFD1 [presented to the 2017 ALI annual meeting].”).
54. Compare Restatement of the Law, Liability Insurance § 3 (Am. Law Inst. 2019) (“Plain-Meaning Rule”), with Restatement of the Law, Liability Insurance § 3 (Am. Law Inst., Proposed Final Draft, Mar. 28, 2017), and Restatement of the Law, Liability Insurance § 3 (Am. Law Inst., Council Draft No. 4, Dec. 4, 2017) (“The Presumption in Favor of the Plain Meaning of Standard-Form Insurance Policy Terms”). The evolution of section 3 is traced in the article by Foggan and Padgett, infra note 55, in this issue of The Brief.
55. See, e.g., Laura A. Foggan & Rachael Padgett, Rules of Policy Interpretation Reflect Lingering Policyholder Bias in the ALI’s Restatement of the Law, Liability Insurance, 50 Brief 26 (Fall 2020) (insurer perspective).
56. See, e.g., Principles of the Law of Liability Insurance § 12 (Am. Law Inst., Discussion Draft, Apr. 16, 2012).
57. Restatement of the Law, Liability Insurance § 7 (Am. Law Inst. 2019).
58. See, e.g., Maniloff, supra note 15 (criticizing prior draft of what is now RLLI section 17, which in final form states only that “[t]he insurer is obligated to pay the reasonable fees of the defense counsel and related service providers on an ongoing basis in a timely manner” in cases where the policyholder has a right to select independent counsel rather than an obligation to use panel counsel). Comment b recognizes that “the insured should have the option of paying the difference between a reasonable fee and the independent defense counsel’s regular fees in order to obtain a defense from that counsel.” Although this does not guarantee that insurers will be able to hold independent counsel to panel counsel rates (a decision for the court in the absence of agreement), it provides considerable leverage for insurers in negotiating rates with policyholders. See also Cal. Ins. Code § 2860 (providing for insurer payment of independent counsel at rates payable to panel counsel).
59. Restatement of the Law, Liability Insurance § 17 (Am. Law Inst. 2019).
60. See, e.g., Restatement of the Law, Liability Insurance § 19(1) (Am. Law Inst., Discussion Draft, Apr. 30, 2015) (“An insurer that breaches the duty to defend a claim loses the right to assert any control over the defense or settlement of the claim and the right to contest coverage for the claim.”).
61. Restatement of the Law, Liability Insurance § 19 (Am. Law Inst. 2019).
62. See Nicholas Malfitano, Ohio Lawmakers Send First-of-Its-Kind Rejection to Powerful Legal Group, Forbes (Aug. 2, 2018), https://www.forbes.com/sites/legalnewsline/2018/08/02/ohio-lawmakers-send-first-of-its-kind-rejection-to-powerful-legal-group.
64. Different databases give slightly different results, but the approximate number of cases citing the RLLI in major databases is 30. A Lexis+ search of “restatement w/6 liability insurance” yields 73 cases, but only 32 actually cite the RLLI. The rest are false positives (easily discerned for cases predating the RLLI). Using the same formula for a Westlaw search yields 29 RLLI citations after removing false positives from the initial 73 cases listed. Using Bloomberg Law produces 31 actual RLLI citations, with an equal number of false positives. All searches were conducted on August 17, 2020. The earliest citation appears to be Wisconsin Pharmacal Co., LLC v. Nebraska Cultures of California, Inc., 876 N.W.2d 72 (Wis. Mar. 1, 2016) (applying Wisconsin and California law), in which the court majority rejected a policyholder argument that incorporation of a defective component constitutes “property damage” under the standard-form CGL policy. A dissent criticized the majority’s application of the economic loss doctrine as inapt and noted that the RLLI does not mention the doctrine. The most recent case (as of August 15, 2020) to cite the RLLI appears to be Progressive Northwestern Insurance Co. v. Gant, 957 F.3d 1144 (10th Cir. Apr. 30, 2020) (applying Kansas law and citing with apparent approval RLLI section 12, which provides for insurer liability for failing to exercise reasonable care in selection of defense counsel but finding no such lack of reasonable care in the instant case). The PLLI was cited in Hanover American Insurance Co. v. Balfour, No. 13-6226, 2015 U.S. App. LEXIS 874 (10th Cir. Jan. 21, 2015) (applying Oklahoma law), for the unobjectionable proposition that the duty to defend is broader than the duty to indemnify.
65. See, e.g., Evanston Ins. Co. v. Desert State Life Mgmt., No. 18-0654, 2020 U.S. Dist. LEXIS 7652, at *82–83 (D.N.M. Jan. 16, 2020) (citing RLLI treatment of exclusion as in accord with case law); Scottsdale Ins. Co. v. Darke, 424 F. Supp. 3d 638, 642–43 (N.D. Cal. 2019) (citing RLLI provisions on duty to defend in addition to consistent state law precedent); Conway v. Northfield Ins. Co., 399 F. Supp. 3d 950, 959 (N.D. Cal. 2019) (same); Mesa Underwriters Specialty Ins. Co. v. Blackboard Ins. Specialty Co., 400 F. Supp. 3d 928, 936 (N.D. Cal. 2019) (same).
66. See, e.g., Catlin Specialty Ins. Co. v. CBL & Assocs. Props., Inc., No. N16C-07-166, 2018 Del. Super. LEXIS 342 (Aug. 9, 2018) (finding RLLI section 24 insufficient to persuade court to bar insurer claim for recoupment of defense costs devoted to uncovered claims); Century Sur. Co. v. Andrew, 432 P.3d 180, 186 (Nev. 2018) (influenced by RLLI section 48 in holding that damages for breach of duty to defend are not confined to policy limits).
67. See, e.g., Olson v. Etheridge, 686 N.E.2d 563 (Ill. 1997) (revising law regarding vesting of third-party beneficiary rights based on 1884 precedent to accord with the Restatement (Second) of Contracts § 311 (1981), where the restatement reflects the modern majority rule).