The Changing Shape of Bad Faith under the Restatement: What Are the Consequences When an Insurer Breaches Its Duty to Settle or Defend?

If you’re a coverage geek, or just someone who enjoys a good academic brawl, you already know that the ALI’s draft Restatement of the Law of Liability Insurance has come under fire from insurance industry lawyers who see many of the proposed rules as stating what the reporters believe the law ought to be, rather than a distillation of the common law into a set of rules that accurately states what the law is. Policyholder lawyers have fired back, reminding their brothers and sisters at the insurance bar that a restatement is not limited simply to identifying the majority rule, but also considers many other factors: “the nature of the majority rule,” what specific rule will best fit with the other rules, trends in the law, and the “relative desirability” of competing rules.