Academic journal article Defense Counsel Journal

A "Principled" Approach to Coverage? the American Law Institute and Its Principles of the Law of Liability Insurance

Academic journal article Defense Counsel Journal

A "Principled" Approach to Coverage? the American Law Institute and Its Principles of the Law of Liability Insurance

Article excerpt

THIS Spring, the American Law Institute ("ALI") will meet in Washington, D.C., to consider the latest sections of a far-reaching project entitled Principles of the Law of Liability Insurance. Although the Principles project has been in the works for nearly four years and addresses issues of profound importance to the insurance industry, policyholders, and insurance practitioners regarding the interpretation and scope of liability insurance, many insurance claims professionals, policyholders, and outside counsel know little of it.

The idea for this project appears to have begun with a suggestion by Professor Kenneth Abraham, an active and influential member of ALI's Council. The ALI's Council approved the proposal for the Principles project in May 2010. Professors Thomas Baker of the University of Pennsylvania Law School and Kyle Logue of the University of Michigan Law School were appointed as the Reporters, and a team of 36 lawyers chosen from the judiciary, academia, industry (on both the insurer and policyholder sides), and active law-firm practitioners were invited to serve as the Principles project's Advisors. The group of Advisors is fixed. As with other ALI Restatement and Principles projects, the effort also includes a large "Members Consultative Group" that also has offered comments and advice as the project has progressed. Any member of the ALI can participate in the Members Consultative Group ("MCG"). The Advisors and Members Consultative Group include representatives of insurers and policyholders.

The ALI creates its Restatement and Principles projects through a dialectic, involving input from Advisors and Members Consultative Group members and discussions in the ALI Council and yearly meetings of the ALI general membership, a process that takes place over (often many) years. The objective is to produce a product of broad usefulness and applicability that reflects a consensus from constituencies representing different perspectives on the subject matter in question.

Unlike the more familiar ALI Restatements, which seek to summarize principles of the law where there is a general consensus, a Principles project seeks to declare what the ALI, through its deliberative process, thinks the law ought to be. As one of the Reporters has said, a Principles project seeks to set forth "best practices."

In 2003, the ALI published a Handbook setting out four types of projects: Restatements, Legislative Recommendations, Principles, and Studies. It discussed both Restatements and Principles. Restatements were "clear formulations of common law and its statutory elements or variations," reflecting the law as it presently stands or as it might plausibly be stated by a court. Then there was the Principles category. This had not previously been used in ALI terminology, and had clearly been created in connection with the Corporate Governance project and its ramifications. Principles, the Handbook announced, "may be addressed to courts, legislatures, or governmental agencies. They assume the stance of expressing the law as it should be, which may or may not reflect the law as it is."1 The Reporters for the Principles project observed in the Memorandum introducing Tentative Draft No. 1 that:

Although this is a Principles project rather than a Restatement, we support many existing rules. We have attempted to provide clear articulations of and to set forth the primary justifications for those rules. In a few Sections, our statement of a rule is a bit more direct than that of the courts in at least some jurisdictions, but in each of those instances we believe that the rule we propose describes what courts actually do in a substantial number of jurisdictions. In a number of instances, however, we propose adjustments to existing rules that we believe are superior. That, of course, is the point of a Principles project.2

At the ALI's May 2013 meeting, some members raised the issue of whether the Law of Liability Insurance project should be transformed into a Restatement. …

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