Insurance expert Tom Baker discusses progress on ALI’s Restatement of Law Liability Insurance

Professor Tom Baker, a nationally known expert in insurance law, discusses progress on ALI’s Restatement of Law Liability Insurance.

Penn Law’s Tom Baker serves as the Reporter for the American Law Institute’s Restatement of the Law Liability Insurance. The ALI membership met on May 23 and discussed the Restatement, which would help to define insurance law as a field. Professor Baker is an expert in insurance law, and he took the time to explain where the project currently stands.

(Professor Baker participated in a June 2016 Q&A explaining what the Restatement is and how the work he’s doing impacts the field of insurance law.)

Penn Law (PL): Can you summarize the recent ALI vote?

Tom Baker (TB): To step back, ALI doesn’t approve anything unless it goes through two steps. First is approval by the council, which is a group of about 75 judges, law professors, and senior lawyers. You can think of them as the Senate of the ALI. They approved the Restatement this past January.

Then, the Restatement has to be voted on by all ALI members at an annual meeting, and this year’s meeting was held on May 23. The ALI has about 2,800 members from all over the country. The organization tries to keep a balance between these same three groups: law professors, judges, and practicing lawyers. Roughly speaking, each group is around one-third of the ALI’s membership.

At the meeting that was just held, we discussed the remaining sections of the Restatement of the Law Liability Insurance, and the membership approved all of the new sections — plus two sections we had revised.

The status now is that all of the sections are approved, but the project is not yet approved as a whole. The final vote has been delayed until next year’s annual meeting, in May 2018, to allow additional time to consider the Restatement as a whole now that all of the pieces have been approved.

PL: Insurance industry groups seem to have concerns with the Restatement. Could you explain those concerns?

TB: People who have been involved all along from the insurer side aren’t happy with some of the choices that we’ve made. A Restatement is an effort to codify and harmonize the law of the 50 states. Each of the states might have its own approach to a particular aspect of insurance law. We pick rules from among the ones that are out there, sometimes crafting an intermediate position, and sometimes filling in gaps in the common law. We haven’t always picked the rules and filled in the gaps in the way that people from the insurance industry would have liked.

The guiding principle is to provide a coherent set of rules that clarifies and improves the law, in our case so that liability insurance serves its intended functions and the common law helps insurance markets function.

PL: How would consumers be impacted by the Restatement? Are there consumer groups that are looking into this Restatement?

TB: Whenever the ALI prepares a restatement, they put together a group of advisors. The aim is for those advisors to be a balanced group from across the spectrum of the relevant interests at issue. We have around 40 advisors, and they include people from all different perspectives: people who represent policyholders; people from insurance companies; people who represent plaintiffs and defendants in the tort litigation that is the subject of liability insurance; and also judges. There are also some ALI council members who are there to make sure the process goes well.

There’s been a lot of input over the course the seven years since the project started. There have been 25 drafts and many changes in the drafts in what is a highly iterative, inclusive process involving people who are very good at what they do. I should say that just because most of the motions came from people who are identified as being from the insurance side of things doesn’t mean that there aren’t things that policyholders or plaintiffs’ lawyers also wished would have gone the other way. It’s just that there hasn’t been the same kind of organized effort by those groups to object to the choices that we’ve made.

PL: So, what happens next?

TB: My Associate Reporter and I go on a listening tour — speaking metaphorically since most of the input comes electronically these days. There will be a meeting of the advisors and something called the members’ consultative group — a group that any member of the ALI can sign up for. We’ll have a meeting with the members’ consultative group and the advisors this fall here in Philadelphia.

Then we’re going to take the input we get at the meeting and from the various motions and from the comments we receive from people outside the ALI, and we’ll probably make some changes to further clarify and improve the law. If we make any changes that are substantive — not just clarifying — the Restatement will go back to the council in January to consider those changes.

Then, a year from now, in May of 2018, the expectation is there’ll be a final vote by the members of the ALI to approve the Restatement as a whole. We have the strong support of the membership, I think because we have been so open to constructive criticism throughout the project.

PL: Can you talk about this project in your capacity as an insurance expert?

TB: This is a very meaningful thing to do as a law professor. It’s a chance to take this subject that I research and write and teach about and put it in a coherent package that will be used by judges, lawyers, and the people involved in administering the liability insurance claims process outside of courts. That’s why people care about it. Restatements are influential. The reasoning that’s in the Restatement is something that people have to respond to, even if they don’t necessarily agree with a particular rule adopted in the Restatement.

PL: How would you address criticism that your role as an academic separates you what’s going on, as opposed to people who practice insurance law or work in the field?

TB: That’s why we have the advisors. Also, I used to practice in the area, I pay attention to the practice in the field, including through qualitative research, and my students go out and practice insurance law. So I have a very good understanding of the liability insurance field, and especially the litigation aspects of it.

One important observation: In insurance practice, you tend to develop the worldview of your clients. If you consistently represent policyholders, you may develop a certain worldview, and if you consistently represent insurers, you may develop a certain worldview. One reason that the ALI asks law professors to take on the role of Reporter is that we don’t represent one side or the other. Also, we have the luxury of time and we have the broad perspective that comes from many years of teaching the subject to very bright, motivated law students — who tend not to have any preconceptions about how legal questions should come out.

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