Skip to main content

Tom Baker works to define the field of liability insurance law

June 20, 2016

Professor Tom Baker, an expert on insurance law, is Reporter for the American Law Institute's Restatement of the Law, Liability Insurance.
Professor Tom Baker, an expert on insurance law, is Reporter for the American Law Institute's Restatement of the Law, Liability Insurance.
Penn Law professor Tom Baker serves as Reporter for the upcoming American Law Institute’s Restatement of the Law, Liability Insurance.

Penn Law professor Tom Baker is currently serving as Reporter for the upcoming American Law Institute’s Restatement of the Law, Liability Insurance — a major project that is helping to define the field of liability insurance law — along with University of Michigan Law professor Kyle Logue, the project’s Associate Reporter.

Professor Baker took the time to talk with Penn Law to explain the importance of the Restatement projects and how the work he’s doing affects the field of insurance law. Baker is the William Maul Measey Professor of Law and Health Sciences and a preeminent scholar in insurance law.

Penn Law: Can you start by explaining the purpose of the American Law Institute (ALI)? 

Tom Baker: The ALI is a law reform organization that is over a hundred years old. It was started by judges, lawyers, and law professors, including renowned people like Justice Cardozo. The idea of ALI is to simplify and improve the law, which is, in some ways, an old-fashioned idea. But the ALI focus is principally on state law topics.

These are topics where the 50 states might have 50 different approaches, and the idea is to identify the one best approach. The most famous projects of the ALI are called Restatements. They’re efforts to restate the law, which is an effort to mostly synthesize but also to improve.

PL: Tell us a bit the current project. 

TB: The Restatement of the Law, Liability Insurance is the first insurance topic that the ALI has done. They wanted me to be a reporter for an insurance project, and in talking to them about it, we decided that liability insurance was the right place to start because liability insurance is really the meeting ground between tort and contract law.

The most famous, most successful projects the ALI have ever done are its Restatements of Tort Law and Contract Law. Those are two fields that ALI has a very dominant position in. Anyone who goes to law school, in their torts class, will learn about the Restatement of Torts, and in their contracts class they will learn about the Restatement of Contracts. And, now, when they teach — when they learn — in insurance class, they are going to learn about the Restatement of the Law, Liability Insurance. 

PL: What exactly is liability insurance? 

TB: Liability insurance is insurance that protects people from the cost of being sued. The most common kind of liability insurance is automobile insurance. Automobile insurance turns out to be really complicated because it’s got a first party component: if your car gets smashed, you can get if fixed. But it also has a part that covers you if you injure someone else. That’s the most common kind of liability insurance.

Homeowner’s insurance policies include not just property insurance for a person’s house, but it also protects them if they get sued — that’s a liability insurance. And businesses have many different kinds of liability insurance. 

PL: So, what is the scope of this particular project? 

TB:  The challenge about doing any kind of insurance project is that, at bottom, insurance is a contract between the insurance company and who is ever buying the insurance policy. So, the terms of that contract are 99 percent set by what is in the document. But there is a lot of law that has developed around liability insurance, so what we wanted the project to be about is the legal issues that are common across all kinds of liability insurance. The goal, and I think we have mostly succeeded, is that every single section of this project is about something that applies to most or all kinds of liability insurance. 

PL:  How is the Restatement organized?

TB:  We broke it down into four different chapters. The first chapter is basic contract law doctrines that are more important in insurance than other areas. For instance, interpretation of contracts is a big deal everywhere, but there are some special rules that apply to liability insurance just because it is a standard form contract that a lot of people don’t have much control over.

Chapter Two relates to rules of the road when insurance companies have some control over the litigation that they are protecting you from. Chapter Three goes into some general rules about the kinds of risks that are transferred by liability insurance contracts and general parts of liability insurance contracts. Those three chapters are basically done. The fourth chapter is going to have remedies: if the insurance doesn’t do what it’s supposed to do, what can you get from them?

PL: What are some of the innovations that have come out of this project? 

TB: I would say the guiding principle has been to try to make the rules clear and implementable by judges. What is probably the biggest contribution of the project is that it conceptualizes liability insurance law as a field. It’s a big deal to do the first Restatement. You’re setting the framework that other people are going to use. 

PL: So, what happens next?

TB: Any restatement is only a statement of what a bunch of experts think until a court decides to follow it. So the next step is that Kyle and I are going to go out to do judicial education. Lawyers are already finding out about this. I’ve talked to the ABA (American Bar Association) torts and insurance practice section. I’m going to talk to the Defense Research Institute in the fall. We’re going to talk to the litigation section of the ABA. 

PL: So, if a few state judges decide cases using this information in their state, do other judges notice? 

TB: Absolutely. The Restatements, as a genre, are now so recognized that they are always considered a good cite for some proposition. If you’re an intermediate appellate court in Kansas, the best cite is the Supreme Court of Kansas. But, the Supreme Court of Kansas hasn’t answered every single question. So, if you are citing to the ALI Restatement, the Law of Liability Insurance, that’s a very safe, solid cite. Even if a court decides not to follow our rule, they’re going to have to grapple with the reasons we gave for the rule. And that is going to produce a more high-quality decision. 

PL: What are the classroom impacts for this project?

TB: For one thing, it represents a coherent statement of what liability insurance law is. So if I am teaching a liability insurance course at any law school, I am going to be teaching the students about this. And like any other restatement, its rules are stated in a clear, understandable way. There are explanations. There are illustrations of how they work. So it’s hugely beneficial in the classroom. When I teach torts, I use the Torts Restatement all the time. 

This project is concise, it’s got good explanations, it’s coherent, and it argues both sides. So it’s very good for students who want to learn about a complicated area. Last semester, I was teaching insurance and I gave my students pieces of the draft for the project. And it feels real to them — to be there at the creation of a project like this. I think it’s cool.

This is definitely going to be — from a legal profession perspective — the most important thing that Kyle and I do in our careers.