Lutz

MEMORANDUM *

Plaintiff Eric Lutz, assignee of Dean Bruington, who purchased a general commercial liability insurance policy from Defendant First Financial Insurance Company (“FFIC”), sued FFIC in Alaska Superior Court alleging that it breached its duties to defend and indemnify Bruington, as well as its duty of good faith and fair dealing. FFIC removed the action to federal court based on diversity of citizenship, and the district court granted summary judgment to FFIC. We have jurisdiction pursuant to 28 U.S.C. § 1291 , and we reverse and remand to the district court for further proceedings.

Under Alaska law, which governs this diversity action, see Erie Railroad v. Tompkins, 304 U.S. 64 , 58 S.Ct. 817 , 82 L.Ed. 1188 (1938), “[a]n insurer’s duty to defend and its obligation to indemnify are separate and distinct contractual elements.” Sauer v. Home Indem. Co., 841 P.2d 176, 180 (Alaska 1992). One “aspect of the insurer’s broader duty to defend its insured” is its obligation to provide “prompt and adequate notice” of its intention to deny liability. Lloyd’s & Institute of London Underwriting Cos. v. Fulton, 2 P.3d 1199, 1204-05 (Alaska 2000) (emphasis added). This notice must…

dissenting:

I would affirm the district court’s summary judgment in favor of FFIC. Because FFIC sent prompt and adequate notice of denial, Lutz’s estoppel argument fails.

While it may be true that the FFIC notice letter was somewhat confusing and perhaps in part misleading, Alaska courts have not found denial notices legally insufficient for those reasons alone. The purpose of the notice of denial is to “give the insured a reasonable time to protect himself’ and to “avoid prejudice to the insured which may result from delays in the insured under-taking its own defense or from delays in gathering evidence essential to successfully challenge the denial of coverage or a defense.” Sauer v. Home Indent. Co., 841 P.2d 176, 182 (Alaska 1992); see *914 also Jones v. Horace Mann Ins. Co., 987 P.2d 1360 , 1365 (Alaska 1997).

FFIC’s notice of denial served these purposes. Bruington was timely notified of FFIC’s intent to deny coverage and a defense. Bruington was free to investigate the claim or request additional information from the insurance company. The notice did nothing to stop him from promptly undertaking his own defense and gathering the necessary evidence to challenge the denial…