September 2019 Newsletter

President's Message

Dear Fellows:

There was a time in the not too distant past, in a long-gone era before central air conditioning and 24-7 communications, when courts closed for the summer and lawyers could shut their books and go to the shore for the month of August. Ah, but that was yesteryear. While the pace of activity at the ACCC has slowed somewhat since our annual meeting in Chicago last May, work has continued on several projects that you’ll be hearing a lot more about in the months to come.

Registration is now open for the College’s Sixth Annual Insurance Law Symposium at the Shepard Broad College of Law in Fort Lauderdale on November 1. On the heels of successful past programs in Mississippi, Massachusetts, California, Michigan and Washington, DC, we are heading south this year to the sunny beaches of Florida. Doug McIntosh and Hugh Lumpkin have organized a full day program on the theme of “Insurer Bad Faith: Best Practices and Litigation Trends.” In addition to several panels on emerging legal and practice issues in the bad faith arena, this year’s symposium will feature a panel organized by our ADR Committee on tips for mediating bad faith claims. We are also pleased to present a panel on climate change that is a joint production of our College and the American College of Environmental Lawyers. If you haven’t attended a symposium before, this is your chance. It’s a smaller event than our Annual Meeting and a great opportunity to network with ACCC Fellows from around the country as well as leading insurance coverage and bad faith attorneys from the Southeast.

Planning is also underway for our 2020 Annual Meeting. By popular demand, we will be returning to the Chicago Athletic Association, May 6-8, 2020. Angela Elbert and Rob Kole are heading up next year’s effort. If you have any interest in speaking or would like to organize a panel, please reach out to Angela or Rob at [email protected] or contact our Executive Director, Carol Montoya.

Our Strategic Planning Committee is developing a rapid reaction team that our public relations consultant Judy Rakowsky can put in touch with media outlets as soon as major new insurance decisions are decided. Don’t be surprised if we call on you shortly to see if you might be willing to be prepared to offer comments about upcoming rulings in your field!

Have you visited the ACCC web site lately? The Communications Committee is adding new content on a regular basis. There are links to over a dozen law firm blogs that are full of interesting reporting and commentary about insurance law. We recently posted an excellent article by Murchison & Cummings’ Bryan Weiss analyzing the issues presented by bad faith claims against insurance adjusters.

New to the ACCC this summer are our program of “pop up” calls. As part of the College’s stated mission to be a thought leader in the field of insurance coverage and bad faith law, we are scheduling monthly calls where Fellows can join a conference call to discuss major new rulings and legal developments of interest. On July 30, 28 Fellows dialed in for a spirited debate concerning the import of the Ninth Circuit’s war exclusion ruling in Universal Cable Productions v. Atlantic Specialty Insurance Company. In early September, “Tiger” Joyce of the American Tort Reform Association joined Jim Murray of Blank Rome to lead a discussion concerning the impact of loosened statutes of limitation for sexual abuse claims and the insurance coverage implications of an anticipated wave of new claims. We are also planning a “pop up” call on ransomware claims in October and a discussion of the changing contours of independent counsel claims in early November. If you have a topic that you’d like to see scheduled or are interesting in being a discussion leader, give me a call.

Meanwhile, the best way to get involved in the life of the American College of Coverage Counsel is to join one of our substantive committees. Our College looks to the committees to generate topics for our Annual Meeting as well as projects such as compendia and content and articles for the ACCC web site and quarterly newsletter. The ACCC’s committees run the gamut from traditional areas of insurance law to cutting edge areas like blockchain and cyber. If you’re interested, reach out of one of the committee chairs.

In the coming months, our Regional Meetings Committee will be organizing informal social gatherings in the major metropolitan areas where Fellows can socialize and share ideas for future ACCC projects. Do try to attend.

We will shortly be mailing out invitations to insurance law professors across the country, inviting their students to participate in our annual legal writing contest. The contest, which was pioneered by Bruce Celebrezze during his term as President, is intended to encourage insurance scholarship and build ties between our College and the pool of insurance faculty around the country. This year’s contest is entitled “The Trials of Friar Laurence” and explores the unwritten epilogue of Shakespeare’s Romeo and Juliet, in which the hapless monk who advised Juliet to take a sleeping potion that resulted in the death of both lovers is sued for malpractice by the Capulets and Montagues. Were the deaths or Romeo and Juliet one or two “occurrences”? And would the Friar’s pastoral liability insurance coverage fall afoul of a “controlled substance” exclusion.

We have a large mailing list of insurance law professors but if you teach an insurance course at a local law school or are aware of local schools that are including insurance in their curriculum, please let us know so that we can get the word out!

I will say in closing that one of the joys of leading this group is the opportunity to work with creative, brilliant lawyers. While we may differ in our views of insurance law, we are united in our love of the law and our duty as stewards of its future.

Michael F. Aylward

Committee Spotlight: Cyber & Computer Crime Committee

The Cyber & Computer Crime Committee is the College’s newest committee. And it’s not too late to join; all Fellows interested in promoting dialogue and scholarship on novel cyber-related risks are welcome.

Several committee members participated in the recent ACCC Pop Up Call titled “The Fate Of War Exclusions,” discussing the role of the traditional war exclusion in the context of cyber incidents attributed to state actors. Some of the other issues committee members expect to encounter in the near future include the risks presented by the burgeoning Internet of Things, ransomware, phishing/social engineering fraud, Artificial Intelligence and InsurTech, as well as the data breach and privacy risks that have become almost daily news. Views on any cyber-related topics are welcome; let the committee know what you would consider useful or interesting for another ACCC Pop Up Call or for an ACCC webinar.

Following the success of the panel on emerging cyber-related risks at this year’s Annual Meeting, the committee also plans to submit one or more panel proposals for the 2020 Annual Meeting. Ransomware coverage is a suggested topic; additional ideas are welcome. You can contact the committee to discuss potential panel topics or let them know if you’re already planning to submit a cyber-related panel proposal or would like to participate on such a panel.

The committee would like to develop a cyber insurance form bank as a member resource. If you have any policy forms you can share, please send them to the committee.

If you have written articles on cyber-related topics that would be of interest to others, please forward them to the committee for publication on the College’s website.

If you’re not currently a member but would like to get on the committee list—or if you’re already a member and you’d like to get more actively involved—don’t hesitate to let the chairs know. They are always looking for ways to increase Committee activity and the engagement among its members. And don’t hesitate to send suggestions for how the Committee can provide greater value to your practice and clients.

Committee chairs John Buchanan and John Sinnott can be reached at [email protected].

How Far Can You Go In Negotiation?: Puffing vs. Lying

By the ACCC Ethicists (Neil Posner, Much Shelist, P.C. & John Bonnie, Weinberg Wheeler Hudgins Gunn & Dial

At our Annual ACCC Meeting in May, John Bonnie, Neil Posner, and Cliff Shapiro gave a presentation entitled The Art of Negotiation and Mediation: Are There Ethics In Poker? We chose this topic because of its relevance in our daily lives as lawyers, and because it impacts policyholder-side and carrier-side coverage lawyers with equal force.

One of the scenarios we presented was called “Mischaracterization of physical ability/Failure to disclose life expectancy.” This seemed like a good topic to revisit and expand upon because of a past experience of Neil’s, in which claimant’s counsel damaged the client’s case and counsel’s own professional reputation for trustworthiness in negotiation.

In our Annual Meeting presentation, we identified several cases that led to disciplinary charges being brought against lawyers. One was Statewide Grievance Committee v. Gillis, 2004 WL 423905 (Conn. Super. 2004). In that case, the attorney/respondent’s (Gillis’s) client had been in an auto accident in March and was treated for his injuries by a chiropractor to whom Gillis routinely referred cases. The chiropractor diagnosed and treated the client and declared that, as a result of the accident, he had a 5% permanent disability. Then, on December 8th of that same year, the same client was in another accident. The driver of the other car was insured by Progressive. The client consulted with Gillis, who again referred the client to the same chiropractor. One week later, on December 15th, the same client was involved in still another accident, involving the same part of his automobile. The driver of the other car was insured by Liberty. The same chiropractor treated the client for injuries sustained in both of the December accidents.

Gillis sent letters to both insurers. Both letters overstated the amount of medical bills incurred to date. Neither letter made mention of the other December accident, nor of the March accident. Many months later, however, after the insurers received the chiropractor’s reports, they became aware that there had been other accidents, and that Gillis had not been forthcoming with all the facts. A disciplinary complaint by Connecticut’s Statewide Grievance Committee followed.

The Grievance Committee sought to have Gillis disciplined, but the Connecticut trial court determined that Gillis had not “by clear and convincing evidence” established that Gillis violated Connecticut’s Rules of Professional Conduct. The court conducted a thorough and illuminating analysis, and we present verbatim several of the court’s points here.

The court referred to the case of People v. Petsas, 214 Cal. App. 3d 70, 262 Cal. Rptr. 467 (1989), as a way of distinguishing the conduct of Gillis from the more actionable conduct of Petsas. The Petsas case also involved an attorney who failed to disclose the existence of two accidents to the two insurers that insured the individual tortfeasors in two separate accidents, which had occurred hours apart and which caused similar injuries to the same client. Petsas wrote demand letters to each insurer on the same day and argued that the injuries suffered by his client were solely caused by that particular accident. Further, he used misleading chiropractic reports in support of his demands, and he sought payment for the full amount of all of the chiropractic bills from both insurers. The court called this “a classic ‘double dip.’” Gillis, at *6.

The Gillis court proceeded to identify what it considered to be material differences between these two cases, the most important of which was that, in Petsas, the attorney knew of the chiropractor’s inability to allocate the client’s various injuries to one accident or the other, and that the attorney “not only ‘represented separately to each carrier by his correspondence that a single accident caused by its insured alone had been the sole cause of all of [his client’s] injuries,’ but also claimed the full amount of all of his client’s medical expenses from each of the two separate insurers. Whereas Petsas ‘falsely represented these injuries and damages had resulted from a single accident when he knew that such was not the case and that all such injurie and damages were the produce of two separate and sequential traumatic incident,’ 214 Cal. App. 3d at 77. Gillis [on the other hand] claimed different injuries for [his client] arising out of each accident and submitted portions of the total medical cost to each insurer.” Gillis, at *6. The Gillis court quoted the Petsas court further, which observed that: 

respondent affirmatively represented that his client’s injuries were the result of a single accident when in fact he knew they were not. Further, he submitted claims for all damages resulting from two successive accidents on the same day to the carriers of two separate insureds, concealing from each of them the fact that the damages he thus south for his client stemmed from the trauma of both accidents. There is a distinct difference between restricting an attorney from divulging information learned in confidence from a client, and proscribing him from knowingly making affirmative false representations regarding a claim or claims of that client.

 Id., quoting Petsas, 214 Cal. App. 3d at 79 (first emphasis in original; later emphases added).

Guided by the Petsas court’s distinction between restricting a lawyer from disclosing confidential information and barring the lawyer from knowingly making false material statements, the Gillis court analyzed each of the Grievance Committee’s arguments for imposing discipline on Gillis, struck each of them down, and dismissed the petition. In doing so, the court offered the following analysis, which is worth setting forth in full:

Although this court concludes that the Petitioner has not established [by clear and convincing evidence] that the Respondent’s conduct violated any of our Rules of Professional Conduct it also recognizes that the Petitioner has identified important questions that are not readily answered by reference to those Rules. In State v. Marks, 758 So. 2d 1131, 1135-36 (Fla. App. 4th Dist. 2000), the court observed: 

It is customary to attempt settlement of personal injury claims before any suit is actually filed in court. Whether before or after suit is filed, attempts at settlement often involve extensive communications between claimant’s counsel and the insurer providing coverage. These settlement communications are a dance of nuance and strategy, of cajolery and intimidation, of exaggeration and minimization. Counsel for the claimant is at once bound by the attorneys tradition of zeal for the client’s cause, yet also by the constraints of the profession, including the prohibition against misrepresentation … Clearly in settlement discussions between a claimant and the insurer where the parties are dealing at arm’s length, counsel need not disclose information directly contrary to the client’s position, so long as the nondisclosure does not have the effect of affirmatively misrepresenting a material fact. 

It is thus possible to advocate a very close case, one where the issue of negligence is cloudy or injuries are not indisputably related to the injury, yet not misrepresent anything to the insurer. In this circumstance, counsel can lawfully seek to advocate the client’s position to achieve the maximum recovery available. Again we stress, counsel cannot commit a fraud on the insurer by misrepresenting facts counsel knows to be untrue. The problem is locating the demarcation between acceptable advocacy—a tolerable adversarial, hyperbolic presentation of inferences, implications and conclusions about symptoms, causes and effects and unacceptable fraud by outright lying. The point at which advocacy passes from the one to the other may well be exceedingly beclouded in a given case, as where the facts point in both directions.

Rightly or wrongly, in negotiating the settlement of personal injury cases with insurers, attorneys work in an adversarial setting in which the Rules of Professional Conduct “do not contemplate paragons of virtue.” Harduvel v. General Dynamics Corp., 801 F. Supp. 597, 609 (M.D. Fla. 1992). In Brown v. County of Genesee, 872 F.2d 169 (6th Cir. 1989), the court acknowledged that:

An attorney is to be expected to responsibly present his client’s case in the light most favorable to the client, and it is not fraudulent for him to do so … We need only cite the well-settled rule that the mere nondisclosure to an adverse party and to the court of facts pertinent to a controversy before the court does not add up to “fraud upon the court” for purposes of vacating a judgment.

Citing Kerwit Med Prods. v. N. & H. Instruments, Inc., 616 F.2d 833, 837 (5th Cir. 1980).

Gillis, 2004 WL 423905, at *11-12 (ellipses in original; emphasis added).

The Gillis court referred to one more source to elucidate the point, citing the conclusions of Professor Rex R. Perschbacher in Regulating Lawyers’ Negotiations, 27 Ariz. L. Rev. 75 (1985):

[M]ost present Codes of Conduct do not effectively address the activities of lawyers in their role as negotiators. [Perschbacher] points out that ‘[t]he rules of professional ethics simply do not give clear guidance to lawyer-negotiators … Commentators argue that certain deceptions are an accepted convention of negotiation tactics; adherence to the ethical proscriptions may risk prejudicing the client’s interest … In some situations, the lawyer-negotiator is dealing with an equal adversary, trained with the same tactics that might otherwise appear unfair. If the lawyer-negotiator does not recognize this and act accordingly, the client may be disserved. Thus, a lawyer-negotiator should only be liable for misrepresentation when it causes some unfairness in the bargaining situation. The ethical rules provide guidelines for this limitation.

* * *

The critical inquiry becomes whether the injured party justifiably relied on the negotiator’s statement … The ethics cases suggest that lawyers have a responsibility to limit their traditional duty of zealous advocacy when the lawyers know that her statements or other conduct will be acted upon without the usual check of an opposing advocate.”

Gillis, at *12-13, quoting Perschbacher, at 126-27, 128 (ellipses in original; emphases added). Based on these sources and authorities, the Gillis court concluded:

When in the early, pre-litigation stages of negotiation with professional insurance adjusters, it is reasonable for an attorney to conclude that his general statements of the nature of his or her client’s injuries, conclusory opinions on the impact on the client’s lifestyle, and the probable economic damages, are not going to be relied upon by the adjusters without their first having received and reviewed medical reports by treating physicians, documented statements of medical expenses and, in many cases, conducted their own independent verification through investigation, interview, surveillance and the like. “The ethics cases suggest that lawyers have a responsibility to limit their traditional duty of zealous advocacy when the lawyer knows that her statements or other conduct will be acted upon without the usual check of an opposing advocate … Again, the crucial distinction turns on the concept of reliance.” [Perschbacher] at 128. 

Gillis, at *13 (ellipses in original; emphasis added). 

What Gillis purports to teach, then, is that, in a prelitigation context, nearly everything short of an outright lie is acceptable. The “line of demarcation” appears to the Gillis court to be when the lawyer “knows that her statements or other conduct will be acted upon without the usual check of an opposing advocate”; that is, when the lawyer knows that the other side is going to rely on her statements without testing them. Once litigation ensues, Gillis suggests that the “line of demarcation” becomes sharper.

In our view, this advice is unhelpful. The distinction between prelitigation negotiations and negotiations that take place after litigation has commenced is questionable in light of the facts Gillis presented. A mention here of the applicable Model Rules is useful. The first is Model Rule 4.1, Truthfulness in Statements to Others, which provides:

In the course of representing a client a lawyer shall not knowingly:

(a)   make a false statement of material fact or law to a third person; or

(b) fail to disclose a material fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

The second is Model Rule 3.3, Candor Toward The Tribunal, which provides:

(a) A lawyer shall not knowingly:

(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;

(2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or

(3) offer evidence that the lawyer knows to be false. If a lawyer, the lawyer's client, or a witness called by the lawyer, has offered material evidence and the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminal matter, that the lawyer reasonably believes is false.

(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.

(c) The duties stated in paragraphs (a) and (b) continue to the conclusion of the proceeding, and apply even if compliance requires disclosure of information otherwise protected by Rule 1.6. 

(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.

In the case of Rule 4.1, there are two prohibitions. First, that a lawyer shall not knowingly make a false statement of material fact or law to a third person. Second, that the lawyer shall not knowingly fail to disclose a material fact when disclosure is necessary to avoid assisting the client in a criminal or fraudulent act (unless disclosure is prohibited by Rule 1.6, the rule regarding confidentiality). The key word in this rule is “knowingly,” which is defined by Rule 1.0(f) to denote “actual knowledge of the fact in question. A person’s knowledge may be inferred from circumstances.” Accordingly, if the lawyer knows that the statement she is about to make is false, then she should not make that statement. And if the lawyer knows that she is in possession of a material fact, and that failing to disclose it would assist the client in a criminal or fraudulent act, then she may not omit that fact. If Rule 1.6 (Confidentiality) would bar her from making that disclosure (and no exception to Rule 1.6 applies), then Rule 1.2(d) is implicated: “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.” This Rule would almost certainly require the lawyer to remonstrate with her client and, if based on the client’s instructions the lawyer’s representation would require her to violate her ethical duties, then she must withdraw from the representation. Rule 4.1 makes no distinction as between prelitigation conduct and conduct that takes place once litigation has commenced.

It is true that once litigation has commenced, Rule 3.3 “kicks in” and, according to the Comments, application of the Rule is limited to matters before a tribunal. Rule 1.0(m) provides that the term “tribunal” denotes “a court, an arbitrator in a binding arbitration proceeding or a legislative body, administrative agency or other body acting in an adjudicative capacity. A legislative body, administrative agency or other body acts in an adjudicative capacity when a neutral official, after the presentation of evidence or legal argument by a party or parties, will render a binding legal judgment directly affecting a party's interests in a particular matter.” No mention of “negotiation” or “mediation” appears in the comments. Hence the question: How does Rule 3.3 help the practitioner in a negotiation or mediation after litigation has commenced?

In our view, Rule 4.1 is paramount; it applies in both contexts. As to Rule 3.3, however, lawyers should be mindful of the risks associated with statements made, evidence offered, or material facts or law withheld during a negotiation or mediation that would not be protected by the applicable rule of evidence (such as Fed. R. Evid. 408) that otherwise would protect such statements or evidence from being used against the proffering party in the litigation.

Our view, then, is that lawyers should be mindful not just of the ethical rules that apply to our conduct, but to the applicable rules of evidence in the applicable jurisdiction and, where pertinent, the rules of civil procedure (or criminal procedure, if that is the context of the representation). 

This article began with a reference to a past matter in which Neil felt that opposing counsel had damaged the client’s case by making statements that turned out to be untrue. In Neil’s view, it was unnecessary for opposing counsel to do that, for there were enough compelling facts to make plaintiff’s case sufficiently persuasive to a jury as to obtain a favorable verdict and a handsome award. Perhaps the weaknesses in plaintiff’s case would have come out anyway, but it was the excessive “puffing” that led to more-than-the-usual amount of skepticism which, in turn, led to a lower settlement value than might otherwise have been obtained.

But it doesn’t end here. Because it is highly likely that we will see this opposing counsel again in other cases (the legal world really can be small), the damage to opposing counsel’s reputation will follow that lawyer for a long, long time. The Model Rules of Professional Conduct provide lawyers with virtually no advice regarding the value of protecting one’s own reputation. In fact, the word “reputation” appears only in Rule 1.5(a)(7), and there only as an element of guidance as to what constitutes a reasonable fee. Yet, what else do we have other than our reputation? The superb legal skills we have earned by dint of our competence, diligence, and experience will not save us from making our clients’ lives more difficult if we have sullied our reputations by engaging in unsupportable posturing and other sharp practices.

So, if there’s a guidepost out there for us to follow (and where the Model Rules fail to guide us) then it is this: Among our greatest assets is our reputations; and no matter how much malpractice insurance we carry, policyholder and carrier lawyers alike surely can agree that insurance policies don’t cover reputations.

Member Spotlight, Andy Lundberg, LundbergADR, Los Angeles, CA

Compiled by Steve Pate, Cozen O'Connor

The ACCC is known for the many talents of its members. Some of these talents are literary. Recently—and possibly without even thinking about it—an ACCC compendium on defense costs was entitled “Tender is the Right”—a vague reference to F. Scott Fitzgerald. Past President Mary McCutcheon can quote a mean Pascal. And Regent Stephen Pate continually threatens to enter the Hemingway Look-Alike contest in Key West. Yet no other Fellow can hold a candle to member Andy Lundberg, author of truly execrable prose.

You see, Lundberg is a nine-time winner of the Bulwer-Lytton Fiction Contest, held annually since 1982 to reward the composition of the opening sentence of “the worst of all possible novels.” The contest is named after Sir Edward Bulwer-Lytton, the 19th-century British writer who coined the aphorisms “the pen is mightier than the sword,” “the great unwashed,” and “the almighty dollar,” and whose novel Paul Clifford, published in 1830, began with the now-infamous phrase (popularized of course by his fellow author Snoopy), “It was a dark and stormy night …” The competition receives thousands of entries each year, as well as sporadic press coverage prompted by its novelty, iconoclasm, and considerable humor. It has spawned five hard-copy collections of winning entries over the years (all regrettably out of print). Its motto: “Where ‘www’ means ‘wretched writers welcome.’”

Lundberg has been entering the contest since 2016, when he won a Dishonorable Mention for his first-ever submission:

As Swordfish and the ever-loyal Ling Cod Boy surveyed the scene of rampant destruction spread out before them – swamped trawlers, shredded nets, the still-smoldering floating cannery – two things were crystal clear: Avenging Tuna was back, and Turner Bay needed some superheroes.

He won the Adventure and Science Fiction categories in 2017 and three Dishonorable Mentions in 2018. Most recently, he won the Adventure and Dark & Stormy categories of the 2019 contest, and a Dishonorable Mention in the Crime/Detective category, with the following efforts:

Crime/Detective: Eyes bleary from yet another night of fruitlessly staking out the Ritz Motel in West Hollywood’s seedier quarter, hoping to get some usable dirt on Mrs. Hennigan’s wayward hubby Bill, Niles Cranworth, P.I., pushed the start button, cranked the wheel over, and pointed his well-traveled Chrysler 300 southward on La Cienega Boulevard (“La Cienega,” he noted with irony, being Spanish for “the cienega”).

Adventure: Dropping his now-empty Remington .30-06 and tearing across the tundra after two weeks of hunting in the Alaskan wilderness in the company of none other than three-time Olympic sprinter Usain Bolt – the rustic outing being the spoils of his winning bid at the Sun Valley Country Day School live-auction fundraiser – Bart Michaelman realized with dismay that, in this particular instance, he did in fact have to outrun the bear.

Dark & Stormy:It was a dark and stormy night, and since this was Miami in July and everyone had left their convertible tops down, the rain fell in Cadillacs. [The Cadillac reference is a subtle tribute to Edgar Allen Poe’s 1832 use of the dark-and-stormy trope, in which “the rain fell in cataracts.”]

Truly god-awful and hilarious at the same time.

Lundberg, a Seattle native, was inducted into the Hammer & Coffin Society, the national collegiate humor honorary society, in his junior year at Stanford, where he was also a member of the winning team at the 1978 Stanford Trivia Bowl. One of his many collegiate time-wasting efforts, a comic strip for the campus humor magazine based on Friedrich Nietzsche’s “overman,” was later featured in the collection Hellbent on Insanity, a best-of compilation of 1970s college humor (Holt Rinehart, 1982). He also produced (and performed background shouts on) a vinyl punk rock 45, “Picked Off the Litter,” that has become a cult classic prized by collectors. During law school, he penned the well-received (by his section-mates, anyway) short play “Wrongful Death Valley Days,” and edited a tongue-in-cheek book review of Stern & Gressman’s Supreme Court practice treatise for that well-known purveyor of mirth, the Harvard Law Review. 

Now retired from his work as a coverage attorney at Latham Watkins, Lundberg keeps a toe in the legal pond as an AAA arbitrator and Master Mediator. He is also a member of the investment committee of Burford Capital, the world’s largest litigation financier, where he evaluates insurance coverage and other commercial disputes in which parties or their lawyers seek to finance legal expense, monetize expected recoveries, or recover on final judgments.

The Law, Restated: An Interview With Professors Tom Baker and Kyle Logue

Compiled by Mike Aylward, ACCC President; Morrison, Mahoney, LLP

Tom Baker

Kyle Logue

Shortly after it was formed, the ACCC created the designation of Honorary Fellow for professors who had brought distinction to the teaching of insurance law. Among our Honorary Fellows are Professors Thomas Baker of the University of Pennsylvania and Kyle Logue of the University of Michigan. From 2010 to 2018, Tom and Kyle served as the appointed Reporters on the American Law Institute’s Restatement of Law, Liability Insurance which has just been published by Thompson-Reuters. To commemorate the publication of the RLLI, Tom and Kyle sat down with ACCC President Mike Aylward in late August to discuss the process of creating this Restatement and their plans for the future.

ACCC: Let’s begin where this all started in 2010. How was it that the two of you first got involved with the ALI insurance project?

Tom Baker: Around this time, a group of lawyers commissioned by the European Parliament had published the “Principles of European Contract Insurance Law” in an effort to harmonize European insurance law. Ken Abraham (UVA Law) at the ALI asked whether we couldn’t do something similar for the United States. The original idea was to make this a “Principles” project so that we wouldn’t have to figure out, fight about what the law was, and we could just identify what the best rule should be. That seemed like an appealing thing to be able to do, although, of course, that’s not what we ended up doing.

I had a call from Jack Montgomery (Jones Day-Pittsburgh) asking if I’d ever thought about doing a Restatement, and I said, “Heck no.” He said, “Suppose it was a Principles project,” and I said, “I don’t know." The next thing I knew, Ken Abraham called and talked me into it. Ken then suggested that I call Kyle to see if he’d be the associate reporter for the project.

Kyle Logue: Honestly, I got involved as a chance to work with Tom and Ken. Tom and I have been in this field since we started, and this seemed like an opportunity to think through all of the issues that we’ve been teaching and/or writing about since the early 1990s. Of course, at the time we were led to believe that the project would only take a few years to complete.

ACCC: Given how diverse insurance law is among the 50 states, why did the ALI think that it would be an appropriate area for a Restatement or even a Principles project? 

Baker: I didn’t really see that as an issue. I also teach torts, and torts is an area the rules are also pretty different from state to state, and so I also didn’t think that would make this unmanageable. It also made sense for the ALI to do an insurance project because the most famous ALI Restatements are Torts and Contracts, and liability insurance is where those fields come together.

Logue: If you think about it, a Restatement only makes sense if there’s a variety of rules. If the law was the same in every state, you wouldn’t need Restatements. The whole point of Restatements is to look at all these different approaches to the law to come up with the best and most coherent rules. You choose among a variety of available approaches that have been adopted by states and pick the one that you think is best and explain why that’s so. The goal is to help courts and the parties to these contracts, to provide more certainty.

ACCC: Was this project conceived from the start as being limited to liability insurance or was that decision made at some point along the way to limit it to liability insurance?

Baker: Originally, the ALI wanted a broader project, but Kyle, Ken and I agreed early on that the project would be unmanageable unless it was restricted to liability insurance. 

ACCC: Were you surprised by the amount of opposition and controversy that this project inspired?

Logue: At the point that the ALI decided to convert this from a Principles project in 2014, we had lots of discussions about the possibility of resistance to it and how making it a Restatement might increase the opposition, but I was a little surprised by how much opposition we got over time. There were times when it slowed us down and was pretty frustrating. Honestly, however, sometimes it also improved this project by making us revisit sections and clarify them.

ACCC: Has your work on this project changed how you teach insurance law to your students? 

Logue: One nice side benefit for me was that coming up with a coherent set of rules really helped me to explain insurance law to my students. But our hope was also that these rules would help policyholders and insurers as well as well as courts in states that haven’t ruled on some of these issues. 

Baker: I was surprised by how much this experience has impacted my teaching. When you have to put together a Restatement, you really understand how the pieces fit together in a way that I certainly didn’t before. The second thing I would say that was surprising about it to me was how much it deepened my capacity to read cases carefully. It really made me appreciate how rarified that skill is at the highest level.

Logue: I also learned a lot that I hadn’t known about the business of insurance and how these cases get litigated, going to all meetings with the project Advisers and the Members Consultative Group with insurance lawyers on both sides and experts in the field that have been working in it for years. I learned a lot about policies get negotiated and how the litigation process works. Where I would might have glossed over some of those things in the past, I now have a real reservoir of knowledge to work with.

ACCC: Were you surprised by some of the rules that you eventually adopted? 

Baker: I hadn’t fully appreciated the degree to which misrepresentation had been overtaken by statutes. I think that’s unfortunate to some degree, although it’s ironic that the statutes were originally enacted to be pro-consumer to get rid of warranty law. It wasn’t until we received the research that Allstate prepared that we became persuaded that this area really is just statutory. The other area that surprised me, since I come from a Restatement Second of Contracts background, was how state courts and insurance really had shifted pretty decisively in favor of a plain meaning analysis, although I continue to think that what they in fact do is more nuanced than the term “plain meaning” would suggest.

The other area that surprised me was the whole issue of forfeiture as a remedy for failing to defend. The insurance casebooks present forfeiture as a more of a mainstream rule than it turned out to be. 

Logue: The other example that I’d mention is our treatment in Section 12 of when insurers are liable for the acts of defense counsel. We started with a rule of vicarious liability but after digging into the case law over time, it became clear that there was very little decisional law on the subject, and so we found ourselves having to rely on the Restatement of Torts and Agency and threading a needle there in a way. 

Baker: That was an example of the law as it actually is being different from how a law professor would approach it. A professor of torts or contracts or agency law would have started out exactly where we were.

The other area that surprised me was the treatment of the duty to make reasonable settlement decisions in Section 24. That’s an area where I came to the view that, that courts were actually even more kind of marching in concert in what they were doing than I had appreciated. They, they talk about it in different ways but when you really, really drill down on it, you know, this would be a kind of classic example of a Restatement harmonizing what the courts are doing using different language.

Reading all the cases it becomes clear that this was an area that was separate from general bad faith law. The cases all mention the duty of good faith and fair dealing as the origin of settlement duties but they also develop discreet approaches for them. By making clear what the standards are in a settlement context, we hoped to make things much clearer. There’ll be less confusion about what the standards are.

ACCC: Every Restatement seems to become famous for a particular provision, whether its Section 402 of the Restatement of Torts or Section 193 for Conflicts. What do you predict will the stand-out provision from your Restatement? 

Baker: Oh boy. I hesitate to predict. Kyle, what do you think?

Logue: Previous predictions by ALI Reporters shortly after the adoption of their Restatements were almost always wrong, so I’m reluctant to try. I have no idea what will be influential.

ACCC: You’d probably jinx yourself anyway.

Logue: Yes, but whether we jinx ourselves or not, it’s hard to predict. What will be interesting to me is to see how the parties and whether the parties decide to use the Restatement in litigation going forward. There may be cycles where one side decides to use it for certain kinds of cases and the other side decides to use it for other kinds of cases. I would think that a litigation entrepreneur in the coverage field, it, like a young associate who is just starting out as a coverage lawyer and wants to make a name for herself or himself, might study the Restatement carefully and think about ways that they could use it to help their client because there may be some nuggets in there that we don’t even know are there. And one of those will be the most influential. Some clever entrepreneurial lawyer will point that out to a judge who finds it interesting and persuasive and then, and then it’ll be out there, and then, well, we’ll see.

ACCC: Have you been surprised by legislative efforts in some states to disavow this Restatement?

Baker: Not really. Something similar happened a few years ago with the treatment of trespass in the Restatement of Torts. And some of these bills don’t make a lot of sense. For instance, the Ohio statute says that this Restatement doesn’t represent public policy in the state of Ohio, but I would bet that 90% of the rules that we adopted are, in fact, the law that applies in Ohio. I think that this legislation is more a matter of certain interest groups expressing their unhappiness with the Restatement. Whether it will eventually have a real impact, only time will tell. 

ACCC: So after only nine years, you’ve created a Restatement and it’s finally in print. What do you do for a victory lap and what are you doing to do now with all your spare time?

Logue: I’m working a couple of different projects. The thing I’m thinking about this afternoon is products liability exposures arising out of e-commerce. I’m doing a little paper on whether the operators of online marketplaces by Amazon or Ebay should be considered a “seller” as the Third Circuit recently ruled. I’ve got a couple of other irons in the fire, but that, that’s what I’m working on this month.

Baker: I’m working now on an investigative project on cyber insurance, interviewing people in the field and reading the trade literature to better understand the issues and identify the interesting kind of law and action type issues. And I have a paper on the insurance runoff market that needs a little more work, but hopefully will be ready for prime time in a bit.

ACCC: Any closing thoughts?

Baker: I would just end by saying that one of the highlights of this project for me was the chance to get to know and work closely with so many talented lawyers, our Advisers and the members of the Consultative Group. That wasn’t my original motivating factor, but it really made a difference; that and working with Kyle and Ken made this project actually manageable, even if it took two and a half times as long as we originally expected.

Logue: I second that.

ACCC: There are rumors of a property insurance Restatement. If some prospective Reporter called you and asked “Should I do it?”, what would you tell him or her?

Baker: Well someone did call me and ask if he should do it and I said to go for it. But I don’t know that the ALI is going to be ready to do another insurance one right away. 

A Celebration of Leadership: The ACCC’s Past Presidents’ Perspective

On February 20, 2012, Ned Currie convened a breakfast meeting in Phoenix with a group of like-minded friends from the Federation of Defense and Coverage Counsel (FDCC): Tom Segalla, Bruce Celebrezze, Lewis Collins, Jean Lawler, Dan Kohane, and Mike Aylward. At that breakfast, they resolved to form an American College of Coverage and Extracontractual Counsel. Over the course of the summer of 2012, each of them recruited stars from the policyholder side (Mary Craig Calkins, Mary McCutcheon, Lorie Masters, etc.). At a follow up meeting in New Orleans in October 2012, the first Board of Regents was installed and the organization was off and running.

While the ACCC is still a comparatively young organization, it is breathtaking to consider how far it has come in just seven years. To gain some perspective on the evolution of the College, current president Mike Aylward spoke with his six predecessors to get their perspective on the growth of the College and their hopes for its future.

Tom Segalla

Lorie Masters

Q. Where did the idea for a college of insurance lawyers come from?

Bruce Celebrezze (2017-2018): Ned Currie deserves all the credit. He thought of the idea and determined that no organization existed that engaged both insurer and policyholder side lawyers.

Ned Currie (2014-2015): One afternoon in the fall of 2011, I became curious whether there was a “college” for lawyers specializing in insurance coverage and bad faith litigation. When I discovered that there wasn’t, I reached out to Tom Segalla, Dan Kohane, Gail White, Jean Lawler, Bruce Celebrezze, Mike Aylward, and Lewis Collins. They were also enthusiastic about forming a College that would include both insurer and policyholder members.

Celebrezze: Ned gathered a group of us together at an FDCC meeting to tell us about his idea. It seemed like such an incredible idea to me that I jumped at the chance to become a founding member.

Currie: We met several times in 2012, where ideas, goals, and mission were discussed, whereupon we decided to form a Board of Directors and launch the college. A non-profit corporation was formed and bylaws were adopted. To form a Board of Directors, each of us proposed a policyholder lawyer that we thought might share our interest and whose excellence in the field was unquestioned. The response was enthusiastic and by the end of 2012, we had a 12-member Board of Regents and were ready to launch the American College of Coverage and Extracontractual Counsel.

Lorie Masters (2013-2014): I got involved in 2012; Mike Aylward called me one afternoon to ask me if I would like to be part of a founding group of board members of a College of insurance coverage and bad faith lawyers. I immediately recognized the importance of this idea and the opportunity it offered to contribute to our practice area, to the profession, and to collegiality and professionalism in both. But I said to Mike: “This is a great group of lawyers, but they are all on the insurer side and all men.” Mike responded, “Why do you think I am calling you? We need people like you involved!” Seeing the inescapable logic of this argument, I said yes.

Mary Craig Calkins (2016-2017): Jean Lawler, formerly of Murchison Cumming and now a mediator in LA, called me and whispered that something was brewing and that it was very exciting and that I would be excited. And she was right.

Ned Currie

Mary Craig Calkins

Q. What do you think motivates lawyers to become ACCC Fellows?

Tom Segalla (2012-2013): I got involved because I had a desire to better understand where policyholders’ coverage counsel stood on various issues and why. I think that our friends on the policyholder side share the same curiosity.

McCutcheon: I know what motivates me: the camaraderie and connection with other coverage lawyers at the top of their careers from around the country. We learn from each other and candidly discuss insurance issues in a non-adversarial setting. I think this is what motivates my colleagues as well.

Currie: I think that our Fellows share a desire to enjoy fellowship among professionals in our field of practice who are recognized for their excellence, foster collegiality and professionalism with leaders on both sides of the bar, and to educate the bench, bar and public in the subjects encompassing our respective fields of practice.

Celebrezze: Once I joined, I was active from the beginning. Like in all groups, the more you put in, the more you get out.

Calkins: In our area of practice, we typically do not get multiple trials each year like Fellows of the American College of Trial Lawyers. But we do deal with the same core of attorneys focusing on the intricacies of insurance coverage law and the complicated matters in which we deal. And we run into them regularly. The College allows us to exchange ideas and socialize with the best of the best. It is a smaller group, and thus affords us all an opportunity to discuss matters that affect our practices on a regular basis and hear from the real experts who are handling cutting edge issues that make us better lawyers. 

Bruce Celebrezze

Mary McCutcheon

Q. What are you proudest of from your time as President?

Segalla: I’m proudest of the fact that we got the College off the ground and put it forward on such solid footing. These kind of groups don’t come in a box with directions, but our initial organizing group was really committed to this idea and saw it through.

Masters: I was proud to serve as the College’s second President, because I believed in the mission of the College and because of what it signified—the respect and confidence of my peers in the practice area to which I have devoted my career. I also felt fortunate, and I know that the College was fortunate, to have such wise and bold members of the Executive Committee and Board supporting the work of the College. They were always there with sage and steady counsel during the inevitable growing pains that a new organization faces.

Currie: Although this preceded my year as President, it was my idea to begin presenting annual symposia at law schools around the country. We hosted our first symposium at my alma mater Ole Miss in 2014, and the tradition has since taken hold. It’s a great opportunity to reward law schools that are including insurance law in their curricula while at the same time showcasing the talents of our Fellows.

Celebrezze: I was very happy that we were able to get our student writing competition off the ground. I am hoping it will grow and grow into the future. Getting more law students interested in insurance law, is a great way for us to give back to our profession.

Calkins: We started regional meetings or meet-ups during my year, providing an opportunity during the year for Fellows to meet and get to know each other better. The College consists of truly remarkable, capable attorneys and friends, but meeting once a year does not afford the contact from which we all can benefit. We arranged for meetings ranging from New York to San Francisco, Chicago to Los Angeles, and beyond – to the tune of 10-12 different locations.

McCutcheon: Hearing from Fellows how impressed they were by the content of our newsletter. The Communications Committee works hard to put out a quality newsletter every quarter, providing valuable content and letting Fellows know about what’s going on with the College and its Fellows. And selfishly, when Tyler Gerking, one of my coverage partners at Farella Braun + Martel, was inducted into the College at our 2019 Annual Meeting.

Q. Where do you see the ACCC heading in the future?

Segalla: I think that there are real opportunities for expanding our outreach to law schools and encouraging the teaching of insurance law. We are already working with schools that teach insurance law; maybe our College can reach out to law schools that aren’t currently teaching insurance to help them develop course curricula.

Currie: I see our College as continuing to lead the curve in the practice of insurance coverage and bad faith litigation in the United States. I’m also looking forward to expanding our membership beyond the border as we add the presence of our colleagues in the Canadian bar. 

Calkins: We are developing leadership roles for some of our Fellows who are a decade or so behind us. There seemingly are more insurer-side candidates than policyholder counsel, and I would love to increase our diversity generally. However, it is also important for us to be a voice in the legal community, helping direct where the law should be going, and where we as practitioners can make a real difference. Our seminars and our educational efforts will certainly help in expanding our reach in the future.

Celebrezze: It’s vital that we get Fellows actively involved. I am convinced that virtually every Fellow would appreciate the opportunity for active engagement, but I think that happens best when leadership reaches out on an individual basis and talks to each Fellow. That takes a lot of time, and we are all busy, but every day that we do not do it is a wasted opportunity.

I would also like us to ensure that our organization remains exclusive to those with the very best credentials, but open enough that the great insurance lawyers of the future can and will become fellows. I believe that, over time, the reputation and prestige of the College will grow and we will have tremendous influence as the gold standard of the practice of insurance law.

McCutcheon: I look forward to seeing the ACCC growing in stature as a thought leader in coverage issues affecting our clients and our profession.

Editors’ Note: It is a daunting task to follow in the footsteps of these people!

Member News

Huddleston Plays Significant Role in Fifth Circuit Case

On September 9, 2019, a two-judge panel of the Fifth Circuit issued an unpublished Per Curium opinion that certifies a very interesting extrinsic evidence duty to defend case to the Texas Supreme Court. ACCC Regent Mike Huddleston, Munsch Hardt Kopf & Harr, PC, is involved as the lead appellate attorney for the claimants.

A key issue is whether there is a policy-language exception to the 8-corner rule when the policy requires the insurer to provide a defense “[i]f a claim is made or a suit is brought against an insured for damages because of bodily injury … to which this insurance applies;” as opposed to the traditional policy language requiring the insurer to defend “even if the allegations of the suit are groundless, false or fraudulent.”

In this case, the district court allowed State Farm to rely on extrinsic evidence to invoke exclusions to deny a defense. The two-judge panel of the Fifth Circuit in an unpublished Per Curium opinion, which is attached, certified the following question to the Texas Supreme Court: Is the policy-language exception to the eight-corners rule articulated in B. Hall Contracting, Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634 (N.D. Tex.), a permissible exception under Texas law?

Pate Wins Hecker Award

On August 2, 2019, ACCC Regent Stephen Pate, Cozen O’Connor, received the prestigious Andrew C. Hecker Award from the Federation of Defense and Corporate Counsel (FDCC). The award is presented annually to the federation member who authors the year's most outstanding article in a federation publication. Pate received the award as the author of the article “The Incredible Mr. Appleman: A Tribute to John Alan Appleman, 1912-1982.” The article is a biography of John Alan Appleman, of Appleman on Insurance fame, and was published in the July 2019 edition of FDCC Insights.

The award honors the memory of Andrew C. Hecker, a senior partner in the Philadelphia law firm Hecker, Brown, Sherry, and Johnson, who died of cancer at the age of 50. Andrew held many positions of responsibility in the FDCC, including serving on the board of directors and chairing the Publications Committee for many years. What made the award especially poignant for Stephen was that he was a friend of Andrew’s and writes about that friendship in the article “The Hecker Award, Andy Hecker, and Me.,” published in the July 2019 Federation Flyer.

Stephen is the only federation member in history to win the three most important awards given to Federation members. He was previously awarded the John Alan Appleman Award, given for outstanding service as a substantive law section chair, and the Joseph R. Olshan Award, given for outstanding service as a committee chair.