IN A QUESTION OF FIRST IMPRESSION, ALASKA SUPREME COURT FINDS THAT INSURERS CANNOT SEEK REIMBURSEMENT OF DEFENSE COSTS EVEN WHEN POLICY ALLOWS IT AND INSURER RESERVED RIGHTS TO LATER SEEK REIMBURSEMENT

On March 25, 2016, the Alaska Supreme Court weighed in on whether insurers can seek reimbursement of defense costs from its insureds. On certified questions posed by the Ninth Circuit, the Court found that state law prohibits the enforcement of an insurance policy that requires an insured to reimburse its insurer for defense costs if coverage is later denied or if it is later determined that there is no coverage for the claim. The court specifically stated that “[e]ven if coverage is ultimately denied, and even if it were later determined that there was no possibility of coverage, that denial has no retroactive effect on the duty to defend.”

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