INSURANCE AGENT/BROKER MALPRACTICE & STATUTE OF LIMITATIONS
The Law Firm of Michael Sean Quinn**Author 1300 West Lynn #208 Austin, Texas 78703 (512) 296-2594 (512) 344-9466 - Fax E-mail: mquinn@msquinnlaw.com
This was a malpractice
suit against an agent/broker of the plaintiff in the trial court and appellant in the Supreme Court. Christianson v. Conrad-Houston Insurance, 318 P.3d 390 (Alaska 2014). The key issue in this tangled case
was when did the insured the customer-client of the insurance agent first have
notice of the possible misconduct of his agent.
was when did the insured the customer-client of the insurance agent first have
notice of the possible misconduct of his agent.
Short Summary
The case hinged on an Alaska
statute of limitations. Todd Christianson (“Christianson”) and at least one of
his several companies, Great Alaska Lawn and Landscaping, Inc., sued his
insurance agent-broker after losing two underlying insurance coverage cases and
parts of the bodily injury tort case
brought against Christianson-owned
businesses that underlay the coverage cases companies. In the bodily injury
case, Christianson prevailed in the trial court but the Alaska supreme court
reversed and sent it back. The next two were insurance coverage suits initiated
by insurers pursuing declaratory judgment suits. Christianson lost them both. This case, the fourth one against the
insurance intermediary, Christian also lost.
Longer Summary
Christianson was in the landscaping
business. During the relevant interval
he had three separate companies: (1) Great Alaska Lawn and Landscaping (“GALL”)
formed in 1992 and involuntarily dissolved in 2002. In that same year, (2) Christianson formed a
new company and named it Titan Enterprises, a (3) Titan Topsoil having been
formed earlier by him in 1995. The three
companies did roughly the same type of work.
The court refers to both the Titan companies as “Titan,” and
Christianson owned each of them.
Keith Jones (Jones) suffered an above
the knee amputation of his leg. AIG paid Jones’s worker compensation claim. He
then sued and Christianson, the owner of the businesses and the manufacturer of the equipment that injured
him. His suit against Christianson was based on the allegation that he
negligently altered the equipment making it dangerous, lent it to the injured worker’s actual employer,
one of them owned by Christianson. Consequently, the argument went,
Christianson was a proximate cause of his injuries.
Jones lost that case in the trial court, but
the judgment was reversed in the Supreme Court of Alaska. (Jones v. Christianson, 282 P.3d 316 (Alaska 2012).
Since each of the relevant insurers had denied
coverage, even as to providing a defense, Christianson was left to pay his own
legal fees and exposed to paying the liability judgment. As the court remarks in this case,
Christianson’s accumulated legal fees were substantial.
Insurance Intermediary Case. In 2003, Christianson
contacted Mike Dennis (“Dennis”), an agent with Conrad-Houston Insurance (CHI),
seeking, Christianson said in a deposition, complete coverage for both Titans.
CHI obtained three policies: workers comp from AIG, CGL from Great Divide
Insurance Company (Divide) and auto from Cascade National Insurance
Company)(Cascade).
After losing the two coverage cases, Christianson
filed the fourth suit in the sequence against his agent, Conrad-Hilton (CHI), for
purchasing erroneous and insufficient policies. Christianson
lost his case in the district court, on statute of limitation grounds, and the Supreme Court
affirmed. At the same time, however, the Supreme Court indicated that it
concluded that the person servicing the insurance needs of the Christianson
companies had failed to exercise due care by failing to purchase know policy
requests. This case was decided 4-1, with one justice abating.
In June 2003,
an employee of Titan, Keith Jones (“Jones”) sustained serious bodily injury—an amputation
above the knee on his right leg--from a hydromulcher aka hydroseeder (“seeder”). AIG paid the “comp” claim. On September 2004 Jones sued the manufacturer
of the seeder, Bowie Industries, Inc. (“Bowie”) and Christianson. In the suit, Jones pursued the regular causes
of action against companies that allegedly have manufactured a defective
product, and Christianson was alleged for “negligence in transferring the seeder
to Titan, loaning a defective seeder to Titan, making modifications to the seeder
that contributed to its defects, and failing to warn [him] of the inherent dangers
involved in operating th[at] machinery.”
(The loan of the seeder involved Christianson lending a
truck last registered to GALL. Titan routinely operated its business out of the GALL entity,
such as it was. The reason for the loan,
as
opposed to a sale, was
the apparent existence at the time of a federal tax lien.)
At some point, Christianson had filed
a claim with Divide, and it issued a letter to Christianson. The letter stated that the insurer was
investigating the claim and that in the interim Christianson would have to pay
his own defense costs, but that he would be reimbursed for reasonable fees and
costs if there was coverage, but not otherwise.
The letter also quoted an exclusions applying to bodily injuries to
employees. In addition, the letter
stated that Divide was reserving all its rights.
In March 2006, 18 months later, or
so, Divide formally actually denied coverage and filed an action for
declaratory judgment in federal court seeking a no-coverage judgment. The fact that GALL seems to have owned the
truck to which the seeder was attached was apparently significant. During that
litigation, Divide took the deposition of CHI’s representative. He basically said that he did not make any
effort to determine who owned relevant truck or make sure GALL was an
insured. (Of course, that is a negligent
omission and surely played a background role in the evaluation of CHI’s
conduct.) In July 2007, the federal court declared that Titan and Christianson
had no coverage.
During the same month, Christianson
tendered his claim in Jones’s case to CHI, but it “declined the tender,”
i.e., denied liability for Christianson’s claim.
Shortly thereafter, in October
Cascade, the auto carrier, filed its own “dec” action, and in November, an even
shorter period of time, it obtained a judgment of no coverage.
Jones’s personal injury case was
tried in February-March 2008. Both Christianson
and GALL prevailed. The superior court
directed a verdict for Christianson, and the jury returned a verdict for
GALL. However, this court reversed both
judgments because of several errors by the judge below and sent the case back
for another trial. (With respect to Christianson,
the reasoning of the judge below pertained to the corporate nature of GALL.)
Christianson sued CHI on August 6,
2008. “His complaint alleged that CHI and Dennis breached their professional
duty of care in exposing him to the costs of litigation and the risk of an
uninsured judgment and therefore caused him ‘to spend money in his own defense.”
The allegation was that Christianson had to spend over $100,000 in defending
the personal injury case and the insurers’ declaratory judgment cases.
CHI denied liability and asserted
that the period of limitation had begun
more than three (3) years before this suit was filed. It contended that at the end of October 2004,
in other words, approximately 5 weeks after Divide’s letter of September 23th.
In opposition to CHI’s motion for
summary judgment, Christianson argued that there was a fact issue “as to when
he discovered the elements of his claim against CHI.” (No issue as to equitable
tolling is to be found in the majority opinion, in contrast that of the
dissenter.)
The superior
court focused on the date of the Divide letter, September 24, 2004, and observed that it
contained several important pieces of information. First, that it was necessary for Christianson
to defend himself for awhile, since he likely needed to consult a lawyer.
Divide in effect “disclaimed its duty to defend,” even though its policy
contained the usual relevant language.
Second, the carrier quoted a significant exclusion regarding injury to
employees, and Christianson “was fully aware that [Jones] was Titan’s
employee. Thus, he was aware of the
reasons upon which Divide would base its denial of coverage. At that point, said
CHI “it was evident that there were potential coverage gaps for “Christianson....”
“A reasonable person in [Christianson’s] circumstances would have had enough
information to alert him that he should begin an inquiry to protect his
rights[,]” as the superior court put it.
In addition, there were Dennis’s statements in his deposition. This would have indicated to a reasonable
period that Cascade might well also deny coverage, though it had not happened
yet.
The relevant
statute of limitations (A.S. 09.10.053) is three years for malpractices cases.
It begins to run when the last element in the cause of action was or should
have been discovered by a reasonable person under the circumstances. This time period can be measured from the
point in time when a reasonable person would have commenced a reasonable inquiry,
given the circumstances.
In Alaska, his is called “inquiry
notice.” In effect, Alaska’s laws
governing the limitation period are through-and-through a “discovery rule,” as the
supreme court” recognized in its opinion. See Gudenau v. Sweeney Ins. Inc., 736 P.2d 763 (Alaska 1987)
The supreme
court takes it that in 2004 Christianson was aware that he was beginning to sustain losses for which he very much
might not ever receive reimbursement. Of
course, he knew for certain he might lose more, but did not prevent his cause
of action against CHI from accruing. The
fact that he probably could not then the amount of his future losses is
irrelevant.
After the
supreme court discusses matters leading up to the superior court’s decision, it
affirmed the judgment of that court in short order. It had not erred in any of the following ways,
given the facts in this case, the doctrine of “inquiry notice” and Alaska law
regarding the statute of limitations:
1.
finding that Christianson was put on inquiry
notice,
2.
finding that the September 23th letter alerted
Christianson that Divide would not pay for is defense,
3.
finding facts regarding Christianson’s
good-faith belief that he was covered in the Jones lawsuit,
4.
failing
to resolve the issue as to whether or not Christianson conducted a reasonable
inquiry,
5.
not
considering the bearing of public policy on the case, and
6.
finding
that equitable tolling would not excuse the untimeliness of Christianson’s lawsuit against CHI.
The dissenting opinion does not
appear to dispute the facts set forth in the majority. According to the dissenting Justice he
dissent is about the application of the discovery rule. In the opinion of the dissenting Justice, “the
stature of limitations did not begin to run until Great Divide formally
disclaimed its duty to defend Christianson in March 2096 [at the
earliest].
More particularly, the dissenting
opinion sets forth the following errors in the superior court, citing a variety
of different kinds of Alaska cases and some from other jurisdictions:
The statute of limitations did not begin to run
on September 24, 2004 because: (1) Christianson had not yet suffered a definite
injury attributable to CHI. Hence, that claim was not yet ripe. Jarvill v. Porky’s Equip., 180 P.3. 335,
340-41 (Alaska 2008). (2) Divide’s letter of 9/24 was not a definitive denial
of coverage.(3) Divide’s letter of 9/24, given its language, did not effectively
decline coverage.(4) Divide’s discussion of the employee exclusion in the policy
did not constitute a denial of coverage.
(5) Many people do not have a well-informed
knowledge of what exclusions mean and—in this context—a “murky and
fact-sensitive” inquiry into what a reasonable period might realize and do is
inconsistent with the clarity required for triggering the statute of
limitations.
The doctrine of equitable tolling
applies, said the dissenting justice.
That principle provides that when a defendant has “more than one legal
remedy available to him” the statute is
to be tolled. Its elements are these: “(1) pursuit of the initial remedy given
defendant notice of plaintiff’s claim, (2) defendant’s ability to gather
evidence is not prejudiced by the delay,
and (3) plaintiff acts reasonably and in good-faith.” These conditions
are met, says the dissenting opinion. See
Brannon v. Continental Cas. Co., 137
P.3d 280, 286 (Alaska). Of course, the majority
opinion rejects all of this.
Christianson’s disputes with the
insurance companies satisfy the first element. The presentation of the claim to
the insurers gave CHI notice of Christianson’s claim, and its opportunity to
gather evidence would not harmed by the delay permitted by equitable tolling.
Finally, determinations regarding whether Christianson acted reasonably and in
good-faith are questions of fact and should not be granted without due
empirical inquiry.
Some Observations
When considered as a constellation or
as a concatenation, these cases are an insurance litigation nightmare.
The supreme court’s opinion is a lengthy one. It involves a considerable amount of the
three forms of underlying litigation—a personal injury tort case, two coverage declaratory judgment cases, and
the cases against the insurance intermediary, two of which involved appeals. A printed copy of the WestLawNext opinion and
the dissent, double column pages, is 44, including 6 pages of 133
footnotes—some quite lengthy and most listing and/or discussing precedent--and
21 headnotes.
The opinion of the supreme court in the underlying tort case
was nearly as long and just as complicated as this case. This is true even though it had 102 footnotes;
the two opinions evened out since the underlying case had 36 headnotes and many
more issues. Here is a list of the issues: admission of evidence errors, problematic
expert testimony, problems arising out of compliance with regulations of the
Occupational Safety and Health Administration, the post-sale duties of a
manufacturer regarding informing customers of life-threatening dangers that
exist in defective products, and the Alaska statute of repose. Jones
v. Bowie Industries & Christianson, 282 P.3d 316 (Alaska 2012).
The approach of the majority in this,
the insurance intermediary case, is erroneous.
For one thing, it makes a number of decisions about Christianson’s
knowledge and conduct that are factual matters, even though there had been
little discovery about those relevant matters.
What did Christianson believe about the letter of September 24th, when
did he believe it and why?
This is not a coverage case where the
rule requiring an insured to understand a policy as it may apply to the ostensible
facts of a case. It is only about the
meaning of language in what is in effect a reservation of rights letter. The
rule regarding insureds understanding their policies may not apply to
reservation rights letters, even if they as quote from the contract of
insurance. The context of a quote is
significant.
Finally, Divide deferred any obligation
to provide a defense until coverage as to its duty to indemnity. Doing this is
insurer error, and the kind of error that imposes huge to impossible costs of
most insureds. If so, one wonders why
that fundament principle appeared, at least, to have played no role in the deciding
at least one of the dec actions. In any case, Divide was making coverage
decisions in the wrong order, failing to recognize that the duty defend is not
established in the same way the duty to indemnify is, or both. Why should
anything an insurer conveys to an insured be given the slightest attention, if
the communiqué occurs within a time frame during which the insurer is making a
hopeless error?
By the way, there is no indication in
this case, or on the internet, as to the disposition of the underlying case. Nor is there any, I have found, that Todd Christianson
is or has been in bankruptcy.
It may or may not be worth noticing
that here was a fifth suit against a lender bank arising during the time of the
Jones suits. It was after add not a suit underlying this case. In fact, they
had nothing to do with each other See Christianson
v. First National Bank of Alaska, 2012 WL 6062124 (Alaska 2012). Then again, it is entertaining to wonder how the members
of the supreme court feel about Christianson after his herd of cases were all gone,
if indeed they really are.
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