In a previous law review article, this author analyzed the seemingly arbitrary and contradictory decisional patterns in American insurance law cases. The article concluded that these contradictory judicial patterns could be understood and appreciated if one recognized the fundamental impact-and clash-of two competing theories of American jurisprudence: Legal Formalism and Legal Functionalism in an insurance law context.

Broadly speaking, Legal Formalism is based upon the traditional view that correct legal decisions are determined by pre-existing legal rules, and that the courts must reach their decisions in a logical, socially neutral manner. Formalist judges therefore apply the philosophy of judicial restraint in favor of established legislative and administrative authority. In an insurance law context, Legal Formalism is exemplified by the writings of Professor Samuel Williston and others who believe that insurance contracts ought to be judicially interpreted under the same legal principles as contracts in general, with the exception of various insurance forms, laws, and procedures that are regulated by statute.
Legal Functionalism, on the other hand, is based upon the view that the paramount concern of the courts should not be logical consistency, as the Formalists believe, but socially desirable consequences. Functionalist judges therefore apply the philosophy of judicial activism, co-equal to legislative and administrative authority. In an insurance law context, Legal Functionalism is exemplified by the writings of Professor Robert Keeton and others who believe that the reasonable expectations of the insured ought to be honored, even though a careful examination of the insurance policy contractually would have negated those expectations.

The article concluded that although Legal Functionalism is widely recognized as the dominant theory of legal jurisprudence in many other areas of American law today, Legal Formalism nevertheless has maintained continuing theoretical credibility with many courts in the field of insurance law, while Legal Functionalism-as exemplified by the Keeton insurance law doctrine of reasonable expectations-has experienced a more limited judicial application than various commentators initially had predicted.

The reaction to this article from a number of academic colleagues, practitioners, and judges has been supportive and encouraging. Indeed, I was asked if I might expand upon my original article and answer two additional questions:

(1)Why do many courts, which seemingly apply a more Functionalist judicial approach to other areas of the law, still retain a more Formalistic judicial approach in cases involving insurance contract disputes?

(2) Is there any viable way to reconcile these two competing doctrines of Legal Formalism and Legal Functionalism in an insurance law context?

The answer to the first question necessarily leads to some speculation and alternative possibilities. However, law professors are seldom shy about rushing in where others fear to tread,Wo so I shall offer a number of possible answers to this first question.

In answering the second-and the most important-question, I will argue that the best elements of Legal Formalist and Legal Functionalist judicial interpretations of insurance coverage disputes may indeed be reconciled and incorporated into a viable, contractually based, and eminently realistic judicial approach to insurance contract interpretation that a number of courts are already applying on an informal basis. It is a common sense "middle ground" judicial approach to the interpretation of insurance contract disputes that is both legally sound and socially expedient. Accordingly, I call this synthesis of judicial Formalism and judicial Functionalism in an insurance law context the realistic middle ground approach to insurance contract interpretation.

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