David G. Harris II, a partner in Goldberg Segalla’s Global Insurance Services Practice Group, spoke to Legal Newsline about the potential impact of the “Restatement of Law, Liability Insurance” prepared by the American Law Institute (ALI). This restatement of law — a document intended to provide guidance for judges where existing law is unclear — is still in the drafting phase, but it will ultimately influence the outcome of insurance liability cases.
“Generally speaking, I would say that there has been a lot of concern among those in the legal field who handle insurance law matters that many of the rules that have been adopted by ALI in the Restatement of the Law of Liability Insurance are at odds with established precedent in many jurisdictions,” David said. “Given the enormous influence of the ALI’s Restatements in the legal field, the Restatement of the Law of Liability Insurance will certainly impact the development of law in ways that may not be in line with established precedent.”
David noted that the rationale particularly in Section 19, which states that an insurer that breaches the duty to defend “without a reasonable basis” loses the right to contest coverage for the action, disregards judicial findings.
“The ALI fails to recognize that the majority of jurisdictions to have addressed the issue have held that an insurer does not automatically forfeit its coverage defenses if it is found to have wrongfully breached its duty to defend,” he said.