May 22nd was the two-year anniversary of the American Law Institute’s vote to approve the organization’s Restatement of the Law, Liability Insurance.  The road to that day was a long and contentious one.  For eight years, those with interests aligned with the insurance industry did battle with policyholder-side advocates, over what would be the Institute’s position on various lability coverage issues. 

The ALI is headquartered in The City of Brotherly Love.  But there wasn’t much evidence of that during the drafting process.  At times, it resembled The Thrilla in Phila.

Throughout its drafting, there were numerous concerns raised by insurers and their counsel that the ALI was seeking to adopt positions in the RLLI that would be detrimental to insurers’ interests.  Prognostications about the impact of the RLLI are one thing.  Judicial decisions, evidencing its impact, are another.  The RLLI is now a toddler.  It is beginning to speak.   

By my count, the RLLI has been cited in about 40 decisions, give or take – both pre- and post-approval.  Overall, the insurer-side concerns, that the RLLI could prove costly to them, have not come to pass.  At least not yet.  

In many cases, the court’s use of the RLLI has been benign, simply citing it for a general principle of coverage law and it played no part in the decision.  Insurers have also prevailed in cases where the RLLI was included in the discussion.  There have been a few cases that an insurer lost and the RLLI was included in the court’s analysis.  But, in some of those cases, it is clear that the court would have found against the insurer anyway – for other reasons.  Importantly for insurers, courts have not undone any pro-insurer precedent in favor of adopting a different rule pronounced in the RLLI.  In general, of the thousands of coverage decisions handed down in the past two years, there are a few where insurers can pin a loss on the RLLI.  The reality of the RLLI for insurers -- so far at least -- has not equated with the dire predictions.          

None of this is to say that insurers are out of the woods on the RLLI.  For sure, there are some places in the RLLI that offer courts an opportunity to adopt a novel approach on an issue that could be very detrimental to insurers.  [I’ve previously written about four potential landmines in the RLLI that I see for insurers.]  And then that approach could take hold and be adopted widely.  It is too soon for such a scenario to have played out.  But, at some point, insurers can expect to see it.   

My take on the RLLI has not changed since the beginning.  Liability insurance coverage is an extremely well-developed body of law.  On many of the RLLI subjects, the vast majority of states have already spoken.  I do not believe that courts will eschew their own precedent in favor of adopting a contrary rule contained in the RLLI. 

Rather, as I see it, the RLLI’s impact will be felt by courts using it to fill voids and crevices in their own state’s law.  Faced with an issue on which there is no home-state law (or the law is not clear), and there is a divergence of positions nationally, the court, looking for a place to land, may be inclined to adopt the RLLI’s position.  In this situation, insurers have more to fear than policyholders.