Academic journal article Journal of Risk and Insurance

ALASKA HIGH COURT HOLDS THAT SALARIED CLAIMS ADJUSTER OWES GOOD FAITH DUTY TO POLICYHOLDER AND THAT CHILD MOLESTATION RESULTING FROM NEGLIGENT SUPERVISION CLAIM Is WITHIN COVERAGE UNLESS CLEARLY EXCLUDED BY POLICY LANGUAGE

Academic journal article Journal of Risk and Insurance

ALASKA HIGH COURT HOLDS THAT SALARIED CLAIMS ADJUSTER OWES GOOD FAITH DUTY TO POLICYHOLDER AND THAT CHILD MOLESTATION RESULTING FROM NEGLIGENT SUPERVISION CLAIM Is WITHIN COVERAGE UNLESS CLEARLY EXCLUDED BY POLICY LANGUAGE

Article excerpt

C.P. v. Allstate Insurance Co. (Alaska Supreme Court--March 3, 2000)

Dolan and Eleanor Lancaster were homeowners with an adult son, Harold, and his daughter living in the home. When the daughter's friend C.P. was staying overnight, C.R was assaulted by Harold. C.R and her parents sued the perpetrator and the Lancasters, alleging "that the elder Lancasters were negligent (in failing to disclose Harold's presence or his alleged propensity to assault children and in failing to watch over C.P.)" and that this negligence was a contributing cause to C.P.'s injuries. When the Lancasters tendered the suit to Allstate under their homeowners policy, the insurer denied coverage, contending that C.P.'s injuries resulted from an intentional act by a member of the household.

The underlying litigation was settled, with the C.P. family accepting an assignment of the Lancasters' rights under the insurance policy as part of the settlement. C.P. then sued Allstate in the United States District Court for the District of Alaska. The federal court certified to the Alaska Supreme Court three questions for review. Under its rules of procedure, Alaska, like many other states, will under appropriate circumstances provide federal courts with rulings on questions of state law when presented with certified questions by a federal court.

Question One asked whether a salaried employee in an insurance company claims department owed the company's insureds any duties and whether the insured could name a company adjuster as a tort defendant. The court answered the question "yes," ruling that even though the adjuster was an employee, he was required to act in good faith toward the policyholder and was a proper individual defendant if the policyholder properly alleged a claim of failure to investigate (the allegation in the C.P case) or other bad faith conduct.

Question Two asked whether under Alaska law the policyholder could obtain coverage even when another insured committed an intentional tort in cases when the innocent policyholders were accused of mere negligence by the third party victim. The C.P. court answered "yes" to this question as well. Using the "reasonable expectations" approach, the C.P. court held that the adhesive nature of the standardized homeowners insurance policy required that it be interpreted in accordance with the objectively reasonable expectations of the policyholder, even where there is clear language to the contrary. …

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