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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Brannon v. Continental Casualty Company (06/09/2006) sp-6016
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| RANCE BRANNON and PAUL | ) |
| BRANNON, | ) Supreme Court No. S- 11505 |
| ) | |
| Appellants, | ) Superior Court No. 3AN-02-05553 CI |
| ) | |
| v. | ) O P I N I O N |
| ) | |
| CONTINENTAL CASUALTY | ) No. 6016 - June 9, 2006 |
| COMPANY, A Stock Insurance | ) |
| Company and CNA INSURANCE | ) |
| COMPANIES, | ) |
| ) | |
| Appellees. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sharon L. Gleason, Judge.
Appearances: Peter J. Maassen, Ingaldson,
Maassen & Fitzgerald, P.C., Anchorage, for
Appellants. Jahna M. Lindemuth and John A.
Treptow, Dorsey & Whitney LLP, Anchorage, for
Appellees.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
Paul and Rance Brannon sued Terry Pfleiger. When his
insurer, Continental Casualty Company, failed to defend him,
Pfleiger assigned to the Brannons his rights arising from
Continentals failure to defend. The Brannons then sued
Continental. Pfleiger later confessed judgment to the Brannons
in the underlying lawsuit. Reasoning that the statute of
limitations began running on Pfleigers claims against Continental
when Continental denied Pfleiger a defense, the superior court
dismissed the Brannons suit against Continental as untimely. We
hold that the claim that Continental breached its duty to defend
accrued when Continental notified Pfleiger it would not defend
him, but that the running of the limitations statute was
equitably tolled until the underlying litigation was complete.
We therefore vacate the judgment of dismissal and remand.
II. FACTS AND PROCEEDINGS
A. The Underlying Lawsuit
Paul and Rance Brannon purchased California restaurant
franchising assets from California investors in 1992. The assets
included a Johnny Rockets restaurant in Huntington Beach, a
Johnny Rockets restaurant in Newport Beach, and Johnny Rockets
franchising rights for Orange County. Terry Pfleiger, an
associate at Jack White Real Estate (JWC) in Anchorage, acted as
the Brannons real-estate broker during this transaction.1 For
his assistance with the transaction, Pfleiger was given a ten
percent share in JROC, Inc., the corporation formed to manage the
restaurant franchises.
The asset purchase agreement was secured by a $750,000
note executed by JROC, Inc. and was jointly and severally
guaranteed by Rance and Clara Brannon, Paul Brannon, Terry and
Nancy Pfleiger, and Mr. and Mrs. Ronald Paradis.
JROC defaulted on the note in 1994. In December 1994
the California investors filed an Alaska superior court complaint
captioned JROC Fashion Island v. Brannon, Case No. 3AN-94-10728
CI, against Rance Brannon, Clara Brannon, Paul Brannon, Terry
Pfleiger, and Nancy Pfleiger. Paul and Rance Brannon then filed
a cross-claim (the Brannon cross-claim) against Terry Pfleiger
and JWC, alleging that [a]s broker and agent for the Brannons,
Pfleiger and JWC owed fiduciary duties to the Brannons. The
Brannons requested damages exceeding $1,000,000.
Through his personal attorney, Pfleiger answered the
Brannon cross-claim on July 11, 1997. Continental Casualty
Company was JWCs professional liability insurance carrier. It
was promptly notified of the Brannon cross-claim. On July 16,
1997 Continental sent Pfleiger a Reservation of Rights letter
which stated the insurance companys intent to preserve the rights
of all concerned without waiving our right to continue our
coverage investigation. Pfleigers attorney wrote Continental,
arguing that allegations in the Brannon cross-claim triggered
Continentals duty to defend Pfleiger under JWCs insurance policy.
On August 13, 1997 Continental sent Pfleigers attorney a letter
citing nine policy exclusions to show that the Brannon cross-
claim was not covered by the insurance policy. The letter also
stated:
Based on the documentation we have received
to-date we must respectfully disclaim
coverage to your client for this loss. We
base our disclaimer on the fact that your
client was not working within the scope of
his duties as an agent for Jack White Real
Estate at the time he entered into the
franchise purchase agreement with the
[Brannons]. In addition, the above quoted
exclusions would apply to this loss.
Finally, the original complaint was filed
prior to the policys inception date.
On the same day, in a separate letter, Continental notified JWC
that it would continue to defend JWC against the Brannon cross-
claim under a reservation of rights. (JWC settled with the
Brannons for $60,000 in 1998.)
Facing both the original JROC Fashion Island lawsuit
and the Brannon cross-claim, Pfleiger filed for bankruptcy in
September 1997. Pfleigers bankruptcy petition automatically
stayed all claims against him.2 The trustee of Pfleigers
bankruptcy estate moved in 1998 for authority to sell and assign
to the Brannons any claims Pfleiger had against Continental
arising out of the Brannon cross-claim. The bankruptcy court
issued an order on November 5, 1998 authorizing the trustee to
sell to the Brannons Pfleigers claims that arise from the refusal
of Continental Casualty Company to defend and provide coverage
for the Brannons claims against [Pfleiger] related to the two
Johnny Rocket franchise restaurant operations in California. The
trustee executed the assignment of these claims on November 18,
1998.
On July 15, 1999 the Brannons, invoking Pfleigers
assigned rights against Continental, filed a superior court
complaint against Continental alleging breach of contractual
duties under the insurance policy, negligence, and breach of the
covenant of good faith and fair dealing. This 1999 complaint was
never served on Continental and was dismissed without prejudice
in March 2001 for failure to prosecute.
In 2000 the Brannons sought bankruptcy court relief
from the stay of proceedings against Pfleiger; they did so to
establish Pfleigers liability to them on their cross-claim,
obtain a liability judgment in their favor against Pfleiger, and
pursue that judgment against Continental for breach of its duty
to defend Pfleiger. The bankruptcy court granted relief from the
stay on October 6, 2000 solely for the purpose of allowing the
Brannons to liquidate their claim against [Pfleiger] . . . and
then to pursue collection of any judgment which may be entered in
their favor against [Continental]. Four days later, on October
10, 2000, the bankruptcy court discharged all of Pfleigers
dischargeable debts.
In August 2003 Pfleiger confessed judgment to the
Brannons for $2,889,863.34. This amount included a principal
award of $1,713,444 plus pre-judgment interest and attorneys
fees. Pfleigers confession of judgment was filed in the JROC
Fashion Island case on August 28, 2003.
B. The Current Lawsuit
On March 15, 2002 the Brannons filed a superior court
complaint against Continental that was nearly identical to their
unserved 1999 complaint. Continental moved for summary judgment,
asserting the statute of limitations, the doctrine of unclean
hands, and policy exclusions; it also moved for partial summary
judgment on damages. The Brannons moved for partial summary
judgment on their claim that Continental had breached its duty to
defend Pfleiger.
After oral argument on the summary judgment motions,
the superior court held that [t]he statute of limitations for the
breach of the duty to defend, when the insurance contract
excludes coverage, should begin to run on the date the insurance
company refuses to defend. It concluded that because Continental
had denied Pfleiger a defense on August 13, 1997, the three-year
statute of limitations began to run on that day.3 Because the
Brannons did not file their complaint until March 15, 2002, more
than three years later, the superior court granted Continentals
motion for summary judgment on statute of limitations grounds.
The superior court also held that Continental did not
have a duty to indemnify Pfleiger under the terms of the
insurance contract. The superior court stated that it is
uncontroverted that Pfleiger had a direct 10% interest in the
profits and losses of the Johnny Rockets investment . . . .
Accordingly, Exclusion N of the policy applies and there was no
coverage for the alleged loss under the terms of the policy. But
the court left open the possibility that Continental could be
estopped to deny coverage if it was found to have breached the
duty to defend.
The superior court expressly stated that it was not
ruling on the other pending motions, including the parties
motions for summary judgment on the question whether there was a
breach of the duty to defend, Continentals motion for summary
judgment on damages, and Continentals motion for summary judgment
on the issue of unclean hands.
The Brannons appeal the ruling that their complaint
against Continental was untimely.
III. DISCUSSION
A. Standard of Review
We review summary judgment decisions de novo, affirming
if there are no genuine issues of material fact and the moving
party is entitled to judgment as a matter of law.4 In reviewing
the grant of a summary judgment motion, all factual inferences
must be drawn in favor of the party against whom summary judgment
was entered.5 Whether a claim is barred by the statute of
limitations is a question of law that we review de novo.6
B. A Cause of Action for Breach of the Duty To Defend
Accrues when the Insurance Company Denies a Defense, but
Is Equitably Tolled Until Entry of Final Judgment.
Continentals obligation to defend its insureds against
a third-party claim is contractual.7 Generally, a cause of
action for breach of contract accrues, and the statute of
limitations begins to run, at the time of the breach of the
agreement, rather than the time that actual damages are sustained
as a consequence of the breach. 8 A cause of action for denial
of coverage under an insurance policy accrues when coverage is
disclaimed9 and the insured is notified.10
Continental argued below that, per this precedent, the
statute of limitations for the claim of breach of the duty to
defend began to run on August 13, 1997 when Continental notified
Pfleiger that it would not defend him in JROC Fashion Island.
The superior court stated that the cases that defendant
cites on this issue appear dispositive and held that the statute
of limitations on the breach of the duty to defend claim began
running on August 13, 1997. The superior court also stated:
Where, as here, there is no contractual duty to indemnify, but at
most only a duty to defend, the statute of limitations should
begin to accrue at the time the defendant first refused to defend
Pfleiger.11
When an action for breach of the duty to defend accrues
is an issue of first impression for this court. The Brannons
argue that we should hold that the duty to defend does not accrue
until the underlying litigation is resolved here, on August 28,
2003, when Pfleigers confession of judgment was entered. A
majority of the courts examining this issue have determined that
a cause of action for breach of the duty to defend accrues with
the termination of the underlying litigation which the insurer
refused to defend.12 Although insurance companies normally argue
that breach of the duty to defend should be treated like any
other breach of contract,13 numerous courts have reasoned that the
duty to defend cause of action is distinguishable from other
breach of contract causes of action because the duty to defend is
ongoing.14 For example, the United States Court of Appeals for
the Ninth Circuit has stated: The insurers duty to defend is a
continuing duty that may be assumed at any time before final
judgment. The insured may therefore elect to wait until a final
judgment is entered before filing [its] action against the
insurer.15
The California Supreme Court has taken a slightly
different approach. In Lambert v. Commonwealth Land Title
Insurance Co., it held that the cause of action for refusal to
defend accrues upon discovery of loss or harm, i.e., when the
insurer refuses to defend.16 But the court noted a problem with
this accrual date: [T]he underlying litigation may take over two
years . . . and would allow expiration of the statute of
limitations on a lawsuit to vindicate the duty to defend even
before the duty itself expires. This grim result is untenable.17
It therefore held that [a]lthough the statutory period [for
breach of the duty to defend] commences upon the refusal to
defend, it is equitably tolled until the underlying action is
terminated by final judgment.18
We adopt the Lambert rule. It achieves the same result
as the majority rule but is more consistent with our existing
contract case law. We have repeatedly observed that a cause of
action for breach of contract usually accrues when the agreement
is breached.19 An insurance company therefore breaches the duty
to defend when it refuses to defend the insured and the insured
is notified of the refusal.
The Lambert rule is also more closely aligned with
general Alaska statute of limitations principles than the
majority rule. One justification for the majority rule is that
the extent of the injury is unknown until the entry of final
judgment.20 But in Alaska it is irrelevant if the full scope of
the injury is known;21 the cause of action accrues when the breach
occurs.22
The doctrine of equitable tolling is also well-rooted
in Alaska law.23 Three conditions must be met before a statute of
limitations may be equitably tolled: (1) pursuit of the initial
remedy gives defendant notice of plaintiffs claim, (2) defendants
ability to gather evidence is not prejudiced by the delay, and
(3) plaintiff acted reasonably and in good faith.24 An insurance
company has notice of a potential duty to defend when the insured
tenders the defense.25 Once the defense is tendered, the
insurance company has the ability and motivation to gather
evidence; any prejudice that thereafter results likely arises
from the insurance companys refusal to defend and should not be
held against the insured. Whether an insured has acted
reasonably and in good faith is a question of fact for the
superior court to determine on a case-by-case basis.
The California approach also aligns more closely with
Alaska law in that it allows (but does not force) an insured to
file suit for breach immediately after the insurance company
denies the defense.26 The majority rule implies that the insured
should wait until final judgment is entered.27 If the cause of
action does not accrue until entry of final judgment in the
underlying litigation,28 an insured who files an action before
entry of final judgment would be doing so prematurely. In Alaska
a party can, during the pendency of the underlying litigation,
seek a declaratory judgment on whether the insurance policy
requires the insurer to defend the insured in the underlying
litigation.29 But tolling the statute of limitations during the
pendency of the underlying litigation avoids requiring the
insured to participate in two lawsuits at once. After the
insurance company has denied the insured a defense, it would be
potentially unfair to require the insured to file a lawsuit
against the insurance company while simultaneously defending
himself in the underlying lawsuit.30
The Brannons correctly point out that the holding in
Lambert is similar to the way we handle the statute of
limitations in some legal malpractice cases. In Shaw v. State we
held that the statute of limitations for legal malpractice claims
arising out of a criminal case should be tolled during the
pendency of a claim for post-conviction relief.31 We determined
that tolling the statute of limitations would promote judicial
economy, lead to certainty of damages, and assist courts by
establishing a bright-line rule.32 Our holding here addresses
these same issues. It establishes a bright-line rule by tolling
the statute of limitations until final judgment in the underlying
litigation. Waiting until after entry of final judgment to file
against the insurer ensures that the full extent of the insureds
damages is known, promoting judicial economy and reducing
speculation.
We therefore hold that although a cause of action for
breach of the duty to defend accrues when the insured is notified
of the insurance companys refusal to defend, the statute of
limitations is equitably tolled until entry of final judgment in
the underlying lawsuit.
C. The Brannons Claim that Continental Breached Its Duty
To Defend Pfleiger Is Not Time-Barred.
The superior court did not err by determining that the
accrual date for the duty-to-defend claim was August 13, 1997.
But, as we held above, the statute of limitations should have
been equitably tolled while the JROC Fashion Island litigation
was pending. That litigation was ongoing until at least August
28, 2003, when Pfleigers confession of judgment was entered. The
Brannons March 15, 2002 complaint was therefore not untimely.
Continental contends that Pfleigers confession of
judgment could not start the statute of limitations running as a
matter of law. It argues that the confession of judgment was
void from the beginning because it was entered after Pfleigers
bankruptcy discharge. Continental points to Standifer v. State,
in which we held that the district court will be deprived of
subject matter jurisdiction to act on the judgment if the debt is
discharged.33 We there instructed the district court to set aside
a default judgment as void if the court determined that the
underlying debt had been previously discharged by Standifers
bankruptcy.34
Our review of the bankruptcy courts actions in this
case convinces us that the bankruptcy court did not discharge,
and did not intend to discharge, the Brannons claims against
Pfleiger. All claims against Pfleiger were automatically stayed
when he filed for bankruptcy protection.35 The trustee of
Pfleigers bankruptcy estate moved for authority to sell the
Brannons all of Pfleigers claims against Continental arising out
of the Brannon cross-claim. The bankruptcy court then entered an
order authorizing the trustee to sell to the Brannons Pfleigers
claims that arise from the refusal of Continental . . . to defend
and provide coverage for the Brannons claims against [Pfleiger]
related to the two Johnny Rocket franchise restaurant operations.
Per that order, the bankruptcy trustee assigned those claims to
the Brannons in 1998.
In 2000 the Brannons moved in bankruptcy court for
relief from the stay of claims against Pfleiger in order to
establish [Pfleigers] liability for the Brannon Crossclaims and
obtain a judgment for damages in the State Court Lawsuit, and in
turn, attempt to recover these damages from [Pfleigers] insurance
carrier by pursuing the claims and rights purchased from
[Pfleigers] bankruptcy estate. On October 6, 2000 the bankruptcy
court granted the Brannons relief from the stay solely for the
purpose of allowing the Brannons to liquidate their claim against
[Pfleiger] in the state court proceeding and then to pursue
collection of any judgment which may be entered in their favor
against the debtors insurance carrier. On October 10, 2000 the
bankruptcy court released Pfleiger from all dischargeable debts.
The October 10 discharge also ordered: Any judgment heretofore or
hereafter obtained in any court other than this court is null and
void as a determination of the personal liability of the debtor .
. . . Given the bankruptcy courts entry of the 1998 order
authorizing the sale of Pfleigers claims to the Brannons and its
entry of the October 6, 2000 order lifting the stay and allowing
the Brannons to liquidate their claim against Pfleiger and pursue
enforcement of the judgment against Continental, it would be
nonsensical to read the bankruptcy courts October 10, 2000 order
entered four days later as discharging Pfleiger from the Brannons
claim against him.
Moreover, we have previously held that an insurance
company, in order to reduce its liability, cannot force an
insured to declare bankruptcy.36 Holding that the bankruptcy
courts discharge removed Pfleigers ability to confess judgment on
the Brannons claims would allow Continental to benefit from
forcing its insured into bankruptcy. Our reading of the
bankruptcy courts orders avoids this inequitable result.37
Continental also argues that Pfleigers confession of
judgment has no legal effect because [t]his Court has approved
the use of confessions of judgments . . . only when the defendant
confessing judgment faces personal risk of liability that
justifies him entering into such arrangement. But when an
insurance company refuses to defend its insured, the insured can
take reasonable steps to protect its interests.38 Continental
misreads Great Divide Insurance Co. v. Carpenter, the case on
which it relies in making this argument. We there observed that
an insured whose insurer has committed a material breach of one
of its defense obligations is permitted to enter into a
settlement agreement with the injured claimant.39 Even settlement
agreements that contain a covenant not to enforce against the
insured are allowed because an insured that has been placed at
economic risk by its insurers breach should be allowed to protect
itself by shifting the risk to the breaching insurer without
first subjecting itself to potential financial ruin.40
But we also noted in Great Divide that [c]ovenant
settlements can be abused;41 because of the potential for abuse,
we stated that we have been careful to hold that an insurance
company that has materially breached its defense obligations
whose insured has made such an agreement is not automatically
bound by the agreement.42 The check on this potential abuse is a
reasonableness review to be conducted by the trier of fact.43
In short, the bankruptcy courts October 10, 2000 order
did not discharge the Brannons claim against Pfleiger. Pfleigers
subsequent confession of judgment was therefore not void.
We assume that the entry of Pfleigers confession of
judgment ended the JROC Fashion Island litigation. Although the
cause of action for breach of the duty to defend accrued when
Continental notified Pfleiger of its refusal to defend, the
statute of limitations was equitably tolled at least until
Pfleigers confession of judgment was entered on August 28, 2003.
The Brannons March 15, 2002 complaint was therefore timely.
D. We Decline To Affirm on Alternative Grounds.
Continental argues that, regardless of the limitations
issue, we should affirm the superior courts decision because
Continental had no duty to defend Pfleiger.44 It claims that
Continentals policy excluded coverage for any transaction in
which Pfleiger was an investor or had a financial interest and
that it is undisputed that Pfleiger was an investor in the JROC
deal. Continental had also moved for summary judgment based on
unclean hands and for partial summary judgment on damages.
The superior court stated that, having resolved the
case on the statute of limitations issue, it was not reaching the
many other issues presented by the parties. We decline to affirm
the judgment on the basis of any issue the superior court did not
reach. Continentals alternative grounds for summary judgment
potentially raise questions about whether there are genuine,
material factual disputes. The superior court is in the best
position to consider those threshold questions for the first
time.45 We remand for further proceedings on the remaining
motions.
IV. CONCLUSION
For the reasons discussed above, we VACATE the judgment
of dismissal and REMAND.
_______________________________
1 Continental Casualty Company contends that Pfleiger was
an investor in the franchising deal, not a real-estate broker.
The Brannons argue that Pfleiger acted as their real-estate
broker and advisor. On appeal from a summary judgment, we review
the facts in a light most favorable to the party against whom
summary judgment was entered. Zok v. Collins, 18 P.3d 39, 40 n.2
(Alaska 2001). Because Pfleigers role is disputed and summary
judgment was entered against the Brannons, we view the facts in
the light most favorable to the Brannons. We assume here that
Pfleiger was acting as a real-estate broker, and do not assume
that he was an investor.
Our discussion of facts is meant to give context to the
legal issues arising out of the summary judgment; it is not meant
to preclude the parties from litigating genuine issues of
material fact on remand.
2 11 U.S.C. 362(a).
3 The applicable statute of limitations, AS 09.10.053,
requires that a contract action be commenced within three years.
4 Makarka v. Great Am. Ins. Co., 14 P.3d 964, 966 (Alaska
2000).
5 Morgan v. Fortis Benefits Ins. Co., 107 P.3d 267, 269
(Alaska 2005).
6 Alderman v. Iditarod Props., Inc., 104 P.3d 136, 140
(Alaska 2004).
7 Tush v. Pharr, 68 P.3d 1239, 1249 (Alaska 2003)
(holding duty to defend is contractual obligation); see also
Afcan v. Mutual Fire, Marine & Inland Ins. Co., 595 P.2d 638, 645
(Alaska 1979) (An insurers duty to defend and its obligation to
indemnify are separate and distinct contractual elements.).
8 K&K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702,
725 (Alaska 2003) (quoting Howarth v. First Natl Bank of
Anchorage, 540 P.2d 486, 490-91 (Alaska 1975)).
9 Howarth, 540 P.2d at 490 (holding that statute of
limitations began to run when insured suffered loss and insurance
company denied insureds claim).
10 Firemans Fund Ins. Co. v. Sand Lake Lounge, Inc., 514
P.2d 223, 227 (Alaska 1973) (holding in context of first-party
insurance that cause of action for denial of insurance coverage
does not accrue until insurer notifies insured of denial of
coverage).
11 We have repeatedly observed that the duty to defend is
separate from and broader than the duty to indemnify. E.g.,
Stephan & Sons, Inc. v. Municipality of Anchorage, 629 P.2d 71,
73 (Alaska 1981) (We have already held in two contexts that there
may be a duty to defend even if there is no duty to indemnify:
insurance cases and implied indemnity cases.); Afcan, 595 P.2d at
645 (Depending upon the nature of the claim against the insured,
the insurer may have an obligation to defend although it has no
ultimate liability under the policy.).
12 Jane Massey Draper, Annotation, Limitation of Action
Against Insurer for Breach of the Contract to Defend, 96 A.L.R.3d
1193, 2(a) (2004); see also 2 Allan D. Windt, Insurance Claims
and Disputes 9.2, at 48 (4th ed. 2001) (The majority view . . .
is that the insureds cause of action does not accrue until the
termination of the third-party action brought against the
insured.).
13 Draper, supra note 12 at 2(a).
14 See, e.g., Vigilant Ins. Co. v. Luppino, 723 A.2d 14,
19 (Md. 1999); Colpan Realty Corp. v. Great Am. Ins. Co., 373
N.Y.S.2d 802, 804 (N.Y. Sup. 1975); Bush v. Safeco Ins. Co. of
Am., 596 P.2d 1357, 1358 (Wash. App. 1979).
15 Tibbs v. Great Am. Ins. Co., 755 F.2d 1370, 1375-76
(9th Cir. 1985) (citation omitted). See also 17 George J. Couch,
Couch on Insurance 236.102 (2004) (Unlike a duty to pay, which
becomes fixed upon rendition of a judgment[,] . . . the duty to
defend is necessarily a continuing one that commences upon notice
of the claim and extends at least until judgment is entered and
all appeals from it have been resolved.); Vigilant, 723 A.2d at
19 ([A]n insured should be allowed to expect the insurer to step
in and cure its breach so long as the underlying action is
continuing.).
16 Lambert v. Commonwealth Land Title Ins. Co., 811 P.2d
737, 739 (Cal. 1991).
17 Id.
18 Id.
19 E.g., Kaiser v. Umialik, 108 P.3d 876, 880 (Alaska
2005); K&K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 724-
25 (Alaska 2003); Bauman v. Day, 892 P.2d 817, 827 (Alaska 1995);
Howarth v. First Natl Bank of Anchorage, 540 P.2d 486, 490-91
(Alaska 1975). See also 14 George J. Couch, Couch on Insurance
205.62 (2004).
20 2 Allan D. Windt, Insurance Claims and Disputes 9.2,
at 49 (4th ed. 2001) (stating that best rationale for majority
rule is that it is not until [the underlying action is completed]
that the totality of the insureds claim against the company is
ascertainable and the right of action is complete).
21 Sopko v. Dowell Schlumberger, Inc., 21 P.3d 1265, 1272
(Alaska 2001) (noting that injured party need not know full
extent of injuries before statute of limitations begins to run
under discovery rule).
22 Howarth, 540 P.2d at 491.
23 Dayhoff v. Temsco Helicopters, Inc., 772 P.2d 1085,
1087 (Alaska 1989). See also Kaiser, 108 P.3d at 881-82; Fred
Meyer of Alaska, Inc. v. Bailey, 100 P.3d 881, 886 (Alaska 2004);
Smith v. Thompson, 923 P.2d 101, 105 (Alaska 1996).
24 Dayhoff, 772 P.2d at 1087.
25 Lambert v. Commonwealth Land Title Ins. Co., 811 P.2d
737, 741 (Cal. 1991).
26 Id.
27 Windt, supra note 12 at 49 ([I]t is not until [the
underlying action is complete] that the totality of the insureds
claim against the company is ascertainable and the right of
action is complete.).
28 See, e.g., Bush v. Safeco Ins. Co. of Am., 596 P.2d
1357, 1358 (Wash. App. 1979) (holding that the cause of action
[for breach of the duty to defend] does not accrue until the
third party litigation involving the insured has ended in final
judgment).
29 State, Dept of Transp. & Pub. Facilities v. State Farm
Fire & Cas. Co., 939 P.2d 788, 790 (Alaska 1997) (reviewing
superior courts declaratory judgment that insurance company had
no duty to defend). A party can also seek a declaratory judgment
on the scope of the duty to defend during pendency of the
underlying litigation. See ONeill Investigations, Inc. v.
Illinois Employers Ins. of Wausau, 636 P.2d 1170, 1172 (Alaska
1981).
30 Cf. Shaw v. State, Dept of Admin., Pub. Defender
Agency, 816 P.2d 1358, 1361 (Alaska 1991) ([W]e note the
desirability of allowing a criminal defendant with a valid post-
conviction relief claim to pursue that remedy without the
distraction of also filing a legal malpractice claim.).
31 Id. at 1361.
32 Id.
33 Standifer v. State, 3 P.3d 925, 928 (Alaska 2000).
34 Id. at 929 (Thus, all judgments purporting to establish
personal liability of a debtor on a discharged debt, including
judgments obtained after bankruptcy, are void to that extent.
They are not voidable, they are void ab initio as a matter of
federal statute.).
35 11 U.S.C. 362(a).
36 Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin,
828 P.2d 745, 754-55 (Alaska 1992).
37 Other courts have similarly refused to allow an
insurers liability to be excused by the insureds bankruptcy. See
In re Jet Florida Sys., Inc., 883 F.2d 970, 975 (11th Cir. 1989)
(The fresh-start policy [of 11 U.S.C. 524] is not intended to
provide a method by which an insurer can escape its obligations
based simply on the financial misfortunes of the insured.); In re
Beeney, 142 B.R. 360, 363 (B.A.P. 9th Cir. 1992) (That through
bankruptcy he can divest himself of his personal obligation to
compensate them for injuries suffered due to his negligence,
should not wipe out the carriers commitment which permitted him
to drive a car.); In re Jason Pharm., Inc., 224 B.R. 315, 321
(Bankr. D. Md. 1998) (However, the discharge in bankruptcy, along
with the coextensive permanent injunction and fresh start, are
exclusive to the debtor, and do not otherwise affect the
enforcement of any underlying debt, or any nondebtor liability
thereon.); Levantino v. Ins. Co. of N. Am., 422 N.Y.S.2d 995,
1002 (Sup. 1979) (Nor should a plaintiff be required to undergo a
bankruptcy in order to benefit the wrongdoer who has caused his
financial distress in the first place.) (citation omitted).
38 Theodore v. Zurich Gen. Accident & Liab. Ins. Co., 364
P.2d 51, 55 (Alaska 1961) (holding that after insurer had denied
defense insured was justified in doing what it considered best to
protect its interests). See also Grace v. Ins. Co. of N. Am.,
944 P.2d 460, 464-65 (Alaska 1997) (noting that if insurance
company wrongfully denies coverage, insured is excused from
complying with policy obligations); Davis v. Criterion Ins. Co.,
754 P.2d 1331, 1332 (Alaska 1988) (holding that if insurer
wrongfully denied coverage, insurer could not raise insureds
failure to provide notice of a suit under a cooperation clause as
a defense to liability).
39 Great Divide Ins. Co. v. Carpenter ex rel. Reed, 79
P.3d 599, 608 (Alaska 2003).
40 Id. at 608-09.
41 Id. at 609.
42 Id.
43 Id.
44 We can affirm a decision on grounds other than that on
which the superior court relied so long as the record supports
our resolution. Zaverl v. Hanley, 64 P.3d 809, 819 n.25 (Alaska
2003).
45 See, e.g., Fyffe v. Wright, 93 P.3d 444, 453 (Alaska
2004) (holding that superior court is better-equipped to decide
fact-intensive issue).
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