The Home Indemnity Company, Plaintiff-Appellee-Cross-Appellant v. Lane Powell Moss and Miller, Defendants-Appellants-Cross-Appellees

FACTUAL BACKGROUND

In 1981, the fishing vessel, F/V St. Patrick, foundered near Kodiak Island. The two survivors and the estates of the ten deceased crewmembers (“plaintiffs”) sued the owners of the vessel (“defendants”). The defendants were insured by a $500,000 protection and indemnity policy issued by the Home Indemnity Company (“Home”). Home hired Lane Powell Moss and Miller (“Lane Powell”) to defend its insureds against the plaintiffs’ injury and death claims. Recognizing that the insureds’ liability exceeded the $500,000 policy limits, Home gave Lane Powell authority to negotiate for settlement of the case for the policy limits.

In October, 1982, an attorney from Lane Powell telephoned the plaintiffs’ attorneys. Lane Powell claimed that during this conversation, its attorney made a policy limits offer which was rejected. The plaintiffs’ attorneys maintained, however, that no such offer was made. Lane Powell did not make any written confirmation of the alleged oral offer.

In October, 1983, the trial court attempted to facilitate settlement by ordering Home and Lane Powell to make a written settlement offer. Home offered $387,221, the amount it considered to remain in the,…