Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C.

[INSURANCE LAW]

In Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C.,[1] the supreme court held Alaska law prohibits insurance policies that reimburse insurers for attorneys fees and costs of defense claims they are obligated to defend, even when the insured accepts the insurer’s explicit reservation of rights, and the claim is later determined to be outside the policy.[2] Attorneys Liability Protection Society, Inc. (ALPS) insured the law firm Ingaldson Fitzgerlad under a policy that excluded fee disputes from coverage,[3] but reserved the right to be reimbursed for fees incurred defending claims outside of the policy.[4] In a bankruptcy dispute, ALPS initially accepted Ingaldson’s tender of defense.[5] Ingaldson retained, and ALPS paid, independent counsel during the representation.[6] Eventually determining these claims were outside the policy, ALPS sued Ingaldson to recover reimbursements.[7] The district court denied ALPS’ recovery because the reimbursement provision did not comply with Alaska law.[8] After ALPS filed an appeal to the Ninth Circuit, the supreme court undertook to answer the questions certified to it.[9] The court began its analysis by finding state case law confirmed that insurers are obligated to pay all necessary expenses of independent counsel even while reserving rights to assert subsequent coverage defenses.[10] The court then determined that the omission of statutory language regarding reimbursement indicated that reimbursement was precluded under Alaska law.[11] The court also noted that Alaskan statutes only absolve insurers for the financial responsibility of allegations resulting in denied claims, and that the insured are entitled to independent counsel when reservation of rights letters are submitted.[12] Answering the Ninth Circuit’s certification questions, the supreme court held Alaska law prohibits insurance policies that reimburse insurers for fees and costs of defense claims they are obligated to defend, even when the insured accepts the insurer’s explicit reservation of rights, and the claim is later determined to be outside the policy.[13]

[1] 370 P.3d 1101 (Alaska 2016).

[2] Id. at 1111.

[3] Id. at 1104.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id. at 1104-05.

[9] Id. at 1105.

[10] Id. at 1106-07.

[11] Id. at 1108.

[12] Id. at 1110.

[13] Id. at 1111.

Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C.

[INSURANCE LAW]

In Attorneys Liability Protection Society, Inc. v. Ingaldson Fitzgerald, P.C.,[1] the supreme court held Alaska law prohibits insurance policies that reimburse insurers for attorneys fees and costs of defense claims they are obligated to defend, even when the insured accepts the insurer’s explicit reservation of rights, and the claim is later determined to be outside the policy.[2] Attorneys Liability Protection Society, Inc. (ALPS) insured the law firm Ingaldson Fitzgerlad under a policy that excluded fee disputes from coverage,[3] but reserved the right to be reimbursed for fees incurred defending claims outside of the policy.[4] In a bankruptcy dispute, ALPS initially accepted Ingaldson’s tender of defense.[5] Ingaldson retained, and ALPS paid, independent counsel during the representation.[6] Eventually determining these claims were outside the policy, ALPS sued Ingaldson to recover reimbursements.[7] The district court denied ALPS’ recovery because the reimbursement provision did not comply with Alaska law.[8] After ALPS filed an appeal to the Ninth Circuit, the supreme court undertook to answer the questions certified to it.[9] The court began its analysis by finding state case law confirmed that insurers are obligated to pay all necessary expenses of independent counsel even while reserving rights to assert subsequent coverage defenses.[10] The court then determined that the omission of statutory language regarding reimbursement indicated that reimbursement was precluded under Alaska law.[11] The court also noted that Alaskan statutes only absolve insurers for the financial responsibility of allegations resulting in denied claims, and that the insured are entitled to independent counsel when reservation of rights letters are submitted.[12] Answering the Ninth Circuit’s certification questions, the supreme court held Alaska law prohibits insurance policies that reimburse insurers for fees and costs of defense claims they are obligated to defend, even when the insured accepts the insurer’s explicit reservation of rights, and the claim is later determined to be outside the policy.[13]

[1] 370 P.3d 1101 (Alaska 2016).

[2] Id. at 1111.

[3] Id. at 1104.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id. at 1104-05.

[9] Id. at 1105.

[10] Id. at 1106-07.

[11] Id. at 1108.

[12] Id. at 1110.

[13] Id. at 1111.