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Insurance Coverage For Rule 82 Attorney’s Fees

In recent blog posts, I’ve described Alaska’s unique rule that a prevailing party is entitled to an award of partial reasonable attorney fees.  Liability insurers writing in Alaska are generally required to provide supplementary payments coverage for Civil Rule 82 attorney’s fees.  Limits on that coverage must be clearly stated in the insurance policy, using terms prescribed by the Alaska Division of Insurance.

A policy limiting coverage of Rule 82 fees – such as a policy that limits such coverage to an amount based on the policy limits (e.g., $50,000) rather that the full amount of a jury award – must comply with the requirements of 3 AAC 26.550 regarding fair notice to the insured.  For policies that provide a defense in addition to indemnity limits, notice to the insured must either conform to Notice A, published by the Division of Insurance, or be approved in writing by the director of the Division of Insurance.

The Alaska Supreme Court considered a liability insurer’s endorsement that purported to limit Rule 82 coverage in Therchik v. Grant Aviation, Inc., 74 P.3d 191 (Alaska 2003).  The court found that the endorsement had not been approved by the Division of Insurance and did not strictly “conform with” the model form (Notice A), thus violating 3 AAC 26.550.  The court held that a post-accident judicial determination of whether a particular Rule 82 endorsement is “substantially equivalent” to the Division of Insurance requirements is not sufficient to meet the requirements of the regulation.  The case was remanded for an award of attorney fees based on the full amount of the judgment rather than the $500,000 (per seat) limits of the aircraft liability policy.[1]

Insurers writing policies in Alaska should amend their Rule 82 endorsements as needed to ensure that they are identical to Notice A, or seek approval of varying terms from the director of the Division of Insurance before issuing such policies.

The foregoing presentation is not exhaustive, and the issues are complex and evolving.  For further information or discussion of this issue, please contact JAMES B. WRIGHT & ASSOCIATES, P.C., 500 L Street, Suite 101, Anchorage, Alaska  99501.  Telephone: (907) 277-6175; Facsimile: (907) 277-6181; E-mail: [email protected].

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[1] Had the endorsement been properly drafted, the insurer’s liability for attorney’s fees would have been limited to $52,500 per seat.  The opinion does not discuss the total amount of the judgment awarded at trial.  Therchik, 74 P.3d at 192.

 

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