BY: Garth Gersten
SHAPIRO BIEGING BARBER OTTESON
After eight years of contentious development, the American Law Institute recently approved publication of the Restatement of the Law of Liability Insurance. The only Colorado attorney on the Members Consultative Group was Malcolm Wheeler, so direct complaints or praise to him.
As lawyers know, the restatement is not law. It purports to state what the majority rule of law is or where the law is going. In some respects, a restatement is an aspirational document — designed to influence the law in a certain direction. Regardless of whether Colorado has addressed a subject, expect to see the restatement cited and argued either as support for current law, to fill a gap in the law or as a basis for a change in existing law. While this restatement is purportedly limited to liability insurance, some principles will be equally applicable to other types of insurance.
The restatement has 50 rules over its 488 pages. This article cannot address all 50, but here are a few provisions of particular interest for insurance practitioners.
Section 4 addresses resolution of ambiguity in an insurance policy. Colorado has a fairly mechanical application of the contra proferentum rule, interpreting any ambiguity against the insurer. The restatement rejects that approach, suggesting ambiguity is interpreted against the party that “supplied” the policy language. Under comment j, however, an insured does not “supply” the language either by choosing among an insurer’s options or by providing language from another insurer — which sometimes happens with directors and officers liability policies or with London market policies. Only in the rare instance where the insured drafts the policy language would ambiguities be interpreted against the insured.