Nathan Bass Jan. 29, 2013, 6:20pm

ANCHORAGE, Alaska (Legal Newsline) - The Alaska Supreme Court rejected an appeal by the estate of a man who had turned down GEICO's offer to pay the policy limits, and it affirmed the trial court's decision denying insurance coverage to the deceased while awarding attorneys fees to the insurance company.

Chief Justice Walter L. Carpeneti authored the Jan. 25 opinion of the unanimous five member court.

"The underlying tort action resulted from a car accident in which the insured, while driving a rental truck, hit a person who was lying in the middle of the road. Both the driver and the person struck were intoxicated, as was a passenger in the truck. The person who was struck died from his injuries," the opinion states.

"The victim's estate and the survivors sued. The insurance company several times offered to settle the case against both the driver and the passenger (who may have faced liability for his actions after the accident) for policy limits. These offers were rejected. The estate offered to settle for the release of the named insured only, but the insurer rejected that offer."

On the morning of Sept. 3, 2000, Alya Landt and Innocent Dushkin were traveling in a rented truck. Landt had a blood alcohol content of between 0.16 and 0.27, and Dushkin had a 0.17 BAC, according to the opinion.

Although there initially was confusion about who the driver of the vehicle was, all parties appeared to finally agree Landt was driving the vehicle when it struck an intoxicated Robert Shapsnikoff who was lying the in the middle of the road.

After stopping the truck they found Snapsnikoff unresponsive. They loaded him in the truck and took him to his apartment complex where after attempting CPR, they eventually called for assistance. The parties knew each other, according to the opinion.

Landt was convicted for tampering with evidence and driving while intoxicated but was not convicted of criminally negligent homicide or manslaughter.

Landt had a vehicle insurance policy with GEICO Casualty Co and the policy had a liability limit of $50,000 per person and $100,000 per occurrence. The policy also allowed add-ons for costs, attorney's fees, and interest.

There was also an uninsured/underinsured coverage limit on the policy with the same limits as the liability limits.

GEICO defended Landt as the named insured but also agreed to provide Dushkin with a defense under a reservation of rights in the event that Dushkin was not an insured under the policy or that intentional acts led to the deceased's injury. At the time that GEICO agreed to defend Dushkin, there was uncertainty as to which of the two was driving at the time of the accident.

Prior to the tort suit being filed and throughout the tort proceedings, GEICO made several attempts to settle the case for the $50,000 policy limit, according to the opinion. On July 1, 2004 there was an unsuccessful mediation in which the Shapsnikoffs demanded $100,000, plus add-ons, plus $500,000 from both Landt and Dushkin.

In October 2006, Landt and Dushkin each confessed judgment for over $4 million. Upon becoming aware this confessed judgment was in the works, GEICO amended its declaratory action complaint to request a ruling that if Landt and Dushkin confessed judgment it would constitute a breach of the insurance contract and there would be no insurance coverage.

GEICO's declaratory action sought numerous rulings related to its liability to pay under the circumstances of the case and in light of Landt and Dushkin's confessed judgment. The Superior Court resolved most of GEICO's request in its favor on summary judgment.

The trial court found that Landt and Dushkin were in "unexcused breach of the insurance contract" when they confessed judgment and GEICO was awarded attorney's fees.

The Shapsnikoffs appealed the award of attorney's fees and several other alleged errors of the superior court to the state's high court. The Court ruled for GEICO on all claims.

First, the Court found that GEICO did not breach its duties when it offered to settle for one policy limit for the release of both Landt and Dushkin. Next it found that the superior court had not erred when it decided that the movement of Shapsnikoff after the accident was not a "second occurrence" that triggered GEICO's duty to offer a second $50,000 policy limit settlement.

Related to the Court's finding that there was not a "second occurrence," it found that it was unlikely GEICO was acting in bad faith for not tendering a "full policy limits settlement" because, counter to the Shapsnikoff's argument, there was "no substantial likelihood of an excess verdict for the alleged second occurrence."

Important to the award of attorney's fees as well as the denial of coverage, the Court then found that it was clear that Landt and Dushkin had breached the contract by confessing judgment. The Shapsnikoffs claimed that this breach should be excused because GEICO was acting in bad faith.

"An insurer does not breach its duty to settle when it rejects offers that are based on unreasonable policy interpretations. GEICO refused to settle for more than the policy limits it deemed were required under the contract of insurance. In this case, that meant settling for $50,000 plus add-ons for the release of both insureds.

"Because GEICO acted properly throughout this case, Landt and Dushkin were in material breach when they confessed judgment."

Finally, the Court ruled the trial court had properly awarded attorney's fees to GEICO.

"GEICO consistently offered a settlement at the policy limits as it understood them to be and its offers were consistently rejected, even though these offers were proper under the policy. In the face of the plaintiffs' changing legal theories and the uncertainty about coverage, GEICO sought clarification via a declaratory action.

"The Shapsnikoffs continued to demand two policy limits and counterclaimed against GEICO, alleging bad faith in an effort to collect from GEICO an amount in excess of policy limits achieved by negotiating a confession of judgment for over $8 million. On these facts, it was not an abuse of discretion to award attorney's fees to GEICO."

The Court affirmed the award of $112,390 in attorney's fees and costs to GEICO as the prevailing party and affirmed the decision of the superior court "in all respects."

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