What Is The Time for Responding to a Defense Tender?
The insurer has 10 days to acknowledge the receipt of a claim notice, and 15 days from the receipt of a properly executed proof of loss to either accept or deny claim. Alaska Admin. Code tit. 3, §§ 26.040 and 26.070.
Does Reserving Rights Create a Conflict of Interest?
Yes. CHI of Alaska, Inc. v. Employers Reinsurance Corp., 844 P.2d 1113 (Alaska 1993).
Does a Reservation of Rights Create Additional Duties?
None found.
What Must Be Done If A Conflict of Interest Exists?
If an insurer has a duty to defend an insured under a policy of insurance and a conflict of interest arises that imposes a duty on the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to the insured unless the insured in writing waives the right to independent counsel. Alaska Stat. § 21.89.100; Sauer v. The Home Indemnity Co., 841 P.2d 176, 180 (Alaska 1992).
Who Is Responsible for Fees of Independent Counsel?
Insurer is responsible to pay for fees of independent counsel. Alaska Stat. § 21.96.100 (d). Unless otherwise specified in the insurance contract, the rate paid to independent counsel is that rate actually paid by the insurer in defense of similar civil actions in the community. Alaska Stat. § 21.96.100(d).
What Are Independent Counsel’s Obligations?
Independent counsel and the insured must continue to consult and cooperate with the insurer. Alaska Stat. §§ 21.96.100 (e) and (g). Independent counsel must keep detailed billing records of costs covered by insurer. Alaska Stat. § 21.96.100(d).
What Settlement Duties Exist?
When insured had independent counsel, insurer may settle directly with the plaintiff if the settlement includes all claims which the insurer reserved its rights or accepted coverage, regardless of whether settlement extinguishes all claims against the insured. Alaska Stat. § 21.96.100(h).
What Actions May Result in a Claim for Bad Faith?
A cause of action in tort for bad faith claims handling has been recognized against both property and liability insurers. State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d 1152 (Alaska 1989).
First party insurers may only be held liable for bad faith if they (1) have no reasonable basis for disputing coverage and (2) knew that there no reasonable basis or acted with reckless disregard for the lack of support for their coverage position. Hillman v. Nationwide Mut. Ins. Co., 855 P.2d 1321 (1993).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Alaska P. Civ. P. 82 permits a prevailing party to recover attorney’s fees. Although insureds did not recover on their bad faith claim for compensatory and punitive damages, they prevailed on their coverage claim and therefore were prevailing parties under Alaska P. Civ. P. 82 and entitled to attorneys fees. Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321 (Alaska 1993).
Where the allegations in a complaint include grounds for relief both within and beyond policy coverage, an insurance company which withdraws its defense in breach of its obligation to defend is liable for the reasonable costs and attorney’s fees incurred by the insured in the defense of the claim, but it is not barred from attempting to show in a subsequent action the loss is not within policy coverage. Afcan v. Mutual Fire, Marine and Inland Ins. Co., 595 P.2d 638, 645 (Alaska 1979).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Yes, but only where the wrongdoer’s conduct could fairly be categorized as “outrageous, such as acts done malice or bad motives or reckless indifference to the interests of another.” State Farm Fire & Casualty Co. v. Nicholson, 777 P.2d 1152, 1158 (Alaska 1989).
Alternative Coverage Options
Where there is a dispute over coverage, the tort litigation will not determine any relevant fact, and the parties, unless they settle their dispute, will always be required to litigate in a separate proceeding, i.e., a declaratory judgment proceeding. See Chi of Alaska v. Employers Reinsurance, 844 P.2d 1113, 1119 (Alaska 1993).
Relevant Statutes
Declaratory Judgment – Alaska Stat. § 22.10.020 (g)
“In case of an actual controversy in the state, the superior court, upon the filing of an appropriate pleading, may declare the rights and legal relations of an interested party seeking the declaration, whether or not further relief is or could be sought. The declaration has the force and effect of a final judgment or decree and is reviewable as such. Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against an adverse party whose rights have been determined by the judgment.” Alaska Stat. § 22.10.020 (g)
Unfair Claims Settlement Statute – Alaska Stat. § 21.36.125.
Unfair claims handling by insurers is regulated under Alaska Stat. § 21.36.125 (1962). Unfair or deceptive consumer practices are proscribed by Alaska Stat. § 45.50.471 (1980). These statutes do not create a private right of action for policyholders. O.K. Lumber Co. v. Providence Washington Ins. Co., 759 P.2d 523 (Alaska 1988).