The trial court granted summary judgment in favor of the insurer on that claim, concluding as a matter of law that the insurer could not owe the cabin owner an actionable duty.

The cabin owner appealed to the Alaska Supreme Court.

The cabin owner contended that GEICO had undertaken an independent duty to him to reasonably perform the cleanup – a duty that did not conflict with GEICO's duty to its insured because proper cleanup “would have benefitted both … [the cabin owner] and [its insured]” – and that, as a result, the cabin owner's claim was actionable against GEICO.

For its part, GEICO contended that it could not owe the cabin owner any duty because “a liability insurer cannot owe simultaneous duties of good faith and fair dealing to both its insured and a third-party claimant.” GEICO urged that any damages that the cabin owner may have incurred as a result of GEICO's actions were attributable to its insured and, therefore, any cognizable claim that the cabin owner had were against its insured, not GEICO.

The GEICO Policy

Under its policy, GEICO agreed to:

pay damages which an insured becomes obligated to pay 

due to property damage. GEICO also had agreed to defend:

any suit for damages payable under the terms of the policy 

and reserved the right to:

settle any claim or suit. 

The Alaska Supreme Court reversed, ruling that an insurer's duty to its insured did not prevent it from having – or taking on – a tort duty to a third party claimant during the claims handling process.

In its decision, the court explained that, as a “general matter,” there was “no reason an insurer's contractual duties to an insured necessarily should negate completely different common law tort duties it may have to a third party claimant.” The court added that there was:

no reason an insurer should be protected from the consequences of affirmatively undertaking a new and independent duty to a third party claimant as a part of its claims handling process – and then wrongfully repudiating or improperly performing that independent duty – or be allowed to foist onto its insured the entire legal responsibility for its actions when the liability does not stem from the insured's acts.

Here, the court explained, GEICO may have affirmatively taken control of the cleanup to ensure that it was performed in the most economical manner protecting its insured from liability in excess of the policy limit. If it did so, the court said, GEICO necessarily would have been exposed “to all of the liability risk associated with managing an environmental cleanup project.”

The court declared that summary judgment establishing as a matter of law that GEICO did not owe the cabin owner a duty of care was not appropriate in this case. On the record, it concluded, GEICO may have owed the cabin owner an independent duty, and he should have an opportunity to try to establish that independent duty at an evidentiary hearing or trial.

The case is Burnett v. Government Employees Ins. Co., No. S-15715 (Alaska Jan. 27, 2017). Attorneys involved include: Kenneth P. Jacobus, Kenneth P. Jacobus, P.C., Anchorage, for Appellant. Michael J. Hanson, Call & Hanson, P.C., and Barry J. Kell, Kell & Associates, P.C., Anchorage for Appellee.