Betty Jean Bertschinger, Administratrix of the Estate of Rene Bertschinger v. National Surety Corporation

This diversity action presents a question about the scope that Alaska law gives to an insurer’s undertaking in its policy to defend a personal injury suit against its insured.

Rene Bertschinger and David Cleaver died from carbon monoxide inhalation while working for Kenneth Arndt as seamen aboard the vessel “Little Toot.” Their personal representatives brought Jones Act suits against Arndt. He tendered defense of the suits to the National Surety Corporation, which had issued a comprehensive personal liability policy to him.

Under the policy National Surety promised to pay on behalf of Arndt all damages for which he became legally obligated because of bodily injury, including death, sustained by “any person.” The insurer also promised to defend Arndt in any suit “alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent * * * ”

National Surety rejected the tender of defense, claiming that the decedents’ status as Arndt’s employees brought them within Exclusion (g) of the policy. It provided that the policy does not apply “to bodily injury to or sickness, disease or death of any employee of…