Todd CHRISTIANSON, individually and d/b/a Great Alaska Lawn and Landscaping, Inc., Appellant,
CONRAD-HOUSTON INSURANCE, Appellee.
[Copyrighted Material Omitted]
Kevin T. Fitzgerald, Ingaldson, Maassen & Fitzgerald, P.C., Anchorage, for Appellant.
Thomas A. Matthews and Kenneth G. Schoolcraft, Jr., Matthews & Zahare, P.C., Anchorage, for Appellee.
Before: FABE, WINFREE, and STOWERS, Justices, and EASTAUGH, Senior Justice.[*]
EASTAUGH, Senior Justice.
When Keith Jones sued Todd Christianson for severe personal injuries Jones suffered while working for Christianson's landscaping business, Christianson tendered his defense to his general liability insurer. It did not accept his tender. It instead sent him a letter that told him he should defend himself and that discussed an exclusion for claims of employees. Christianson then began to incur
defense expenses. No insurer on the policies obtained by Christianson's insurance broker, Conrad-Houston Insurance (CHI), ever defended him in Jones's lawsuit. Nearly four years after receiving the insurer's letter, Christianson sued CHI for malpractice. After conducting an evidentiary hearing, the superior court applied the discovery rule and dismissed the malpractice lawsuit because it was filed after the applicable three-year statute of limitations had run. The superior court ruled that because the insurer's letter put Christianson on inquiry notice he might have a claim against CHI, the statute of limitations had begun to run more than three years before Christianson sued CHI. Because the superior court did not clearly err and committed no legal error, we affirm.
II. FACTS AND PROCEEDINGS
Todd Christianson owns and has owned a number of past and current Alaska businesses. He incorporated Great Alaska Lawn and Landscaping (GALL) in 1992, but it was involuntarily dissolved in 2002. He started Titan Topsoil, Inc. in 1995, and started Titan Enterprises LLC in 2002. Titan Enterprises performed many of the same services GALL had performed. At all times, Christianson was the sole owner of both Titan entities. We refer to the two Titan entities collectively as " Titan."
In 2003 Christianson approached Mike Dennis, an agent at CHI, and sought insurance. A different brokerage firm had obtained insurance for Christianson's businesses in 2002. Christianson later testified that when he talked to Dennis, he " was looking for complete insurance on all my commercial entities that needed insurance." He testified that he expected the broker to " get the information, find out about my business and make sure I'm covered." He asserts in his appellate reply brief that he expected CHI to obtain insurance covering " all liabilities and potential liabilities" for his landscaping business. It appears that CHI understood that it was primarily responsible for obtaining insurance covering Titan. Christianson admitted when his deposition was taken that he owned entities that he did not insure through CHI. But he also testified that he provided Dennis with information about GALL, titles and registration on his vehicles, and " all [his] past [commercial insurance] policies," including GALL's. CHI's Titan file included a list of vehicle registrations; the file listed at least two vehicles registered to GALL, including the truck pertinent here. CHI knew when the insurance was placed that Christianson's business used a piece of equipment known as a hydroseeder or hydromulcher. We refer to it here as a " hydroseeder" for consistency with the superior court decision we are reviewing.
CHI obtained three policies insuring Titan: a workers' compensation policy from AIG, a general liability policy from Great Divide Insurance Company, and an auto policy from Cascade National Insurance Company. The three policies took effect in April and May of 2003. Christianson was an insured under the two liability policies.
Keith Jones was an employee of Titan. In June 2003 Jones was severely injured in a work-related accident with the hydroseeder being used by Titan. The hydroseeder was owned by GALL, but was " on loan" to Titan. It was mounted on a truck most recently registered to GALL. Because GALL's assets were subject to a federal tax lien at the time, Christianson had not transferred them to Titan. Titan reported the accident to CHI, and Titan's workers' compensation insurer, AIG, was notified. AIG then provided workers' compensation benefits to Jones.
On September 14, 2004 Jones filed a personal liability lawsuit against the manufacturer of the hydroseeder (Bowie Industries, Inc.) and Christianson individually and doing business as GALL. Titan was not a defendant. As to Christianson, the lawsuit alleged
negligence in transferring the hydroseeder to Titan, loaning a defective hydroseeder to Titan, making modifications to the hydroseeder that contributed to its defects, and failing to warn Jones of the inherent dangers involved in operating the machinery. Christianson contacted his lawyer, and Christianson's defense in Jones's personal injury claim was tendered to Titan's general liability insurer, Great Divide.
Great Divide replied to the tender by letter dated September 24, 2004. The letter was addressed to Christianson and Titan; it stated that Great Divide was investigating the claim and that, in the interim, Christianson would have to file an appropriate response to Jones's lawsuit and pay for his own defense. The letter stated that should Great Divide determine that it did have a duty to provide coverage or a defense, Christianson would be reimbursed for the reasonable fees and costs of his defense. The letter then referred to and quoted the policy's exclusion of coverage for claims of bodily injury to an employee of the insured. The letter stated that " [s]hould it be determined or confirmed through the investigation ... that Keith Jones was an employee of Titan Enterprises, LLC ... at the time of the incident, Great Divide Insurance Company may refuse to defend or indemnify you for this matter." Although Great Divide did not then, or ever, agree to defend Christianson or reimburse his defense costs with respect to the Jones lawsuit, the letter asserted that Great Divide was reserving all its rights under its policy.
Christianson soon began personally incurring legal fees in defending himself in the Jones lawsuit.
In March 2006, about 18 months later, Great Divide sent Christianson a letter denying coverage and filed a complaint in federal court seeking a judgment declaring that its policy did not cover Christianson for Jones's claims. In November 2006 Dennis's deposition was taken in Great Divide's declaratory judgment action. Dennis took CHI's Titan file to the deposition and agreed that it contained a list of vehicle registrations that Dennis would use " to create an application with." Dennis also testified that if Christianson was using GALL vehicles in his Titan business, CHI should have told Christianson to register them to Titan. He agreed that auto coverage listing only Titan as an owner might well exclude liability coverage for GALL. Asked whether, because some of the vehicles appeared to be owned by GALL, CHI attempted to make sure GALL was an insured, he answered, " no."
The Jones personal injury trial was scheduled to begin in August 2007. In March 2007 Christianson tendered defense of the Jones lawsuit to Titan's auto insurer, Cascade National. In July 2007 the federal court declared that Great Divide's policy did not cover Jones's claims against Christianson. That same month, Christianson tendered his defense in Jones's personal injury lawsuit to CHI. CHI declined the tender. In October Cascade National, the auto insurer, filed a declaratory judgment complaint against Christianson; in November Cascade National obtained a declaration of no coverage.
The Jones personal injury trial eventually commenced in February 2008. Christianson and GALL prevailed at trial. The superior court entered a directed verdict for Christianson and the jury returned a verdict for GALL. This court later reversed the defendants' judgments.
B. Malpractice Lawsuit Against CHI
Christianson sued CHI on August 6, 2008. His complaint alleged that CHI and Dennis breached their professional duty of care in exposing him to the costs of litigation and the risk of an uninsured judgment, and therefore caused him " to spend money in his own defense." It also alleged that Christianson had incurred over $100,000 in attorney's fees in defending against Jones's claims and the insurers' declaratory judgment actions. CHI's answer denied liability. In 2010 CHI
moved for summary judgment, arguing that Christianson's malpractice action was barred by AS 09.10.053 because the statute of limitations began to run more than three years before Christianson sued CHI in August 2008. CHI argued that the statute had begun to run no later than October 2004, after Christianson was sued, was informed that it was questionable whether the insurance policies CHI had obtained for Titan would cover the Jones lawsuit, and began incurring attorney's fees. Christianson's opposition argued that a genuine issue of material fact existed as to when he discovered the elements of his claim against CHI. Christianson did not contend that the doctrine of equitable tolling applied.
Before deciding CHI's summary judgment motion, Superior Court Judge Frank A. Pfiffner held an evidentiary hearing to determine when the statute of limitations began to run. The court heard the testimony of Christianson and his lawyer, reviewed exhibits that included passages from Dennis's deposition, and read Christianson's deposition. The court granted CHI's summary judgment motion after making findings of fact about the contents and effect of the September 24, 2004 letter and what information Christianson would have learned had he then made an inquiry. The court made the following findings about the letter and its effect:
On [September 24, 2004], Great Divide sent Mr. Christianson a letter with several critical pieces of information. First, Great Divide informed Mr. Christianson that it would be " necessary for [him] to protect [his] own interest in regard to the Complaint." And that he " should consider consulting with an attorney to file the appropriate response to the Complaint." This is critical because Great Divide was effectively disclaiming its duty to defend Mr. Christianson. Under Titan's general liability policy with Great Divide, it had a " duty to defend the insured against ‘ any’ suit seeking [personal injury] damages." ... The September 24th letter disclosed Great Divide's preliminary determination that the hydroseeder incident did not trigger even the duty to defend. At least for the time being, Mr. Christianson was on his own and began incurring actual damages in the form of litigation costs.
Second, Great Divide noted that [Christianson's] policy " specifically excludes coverage for ‘ bodily injury’ to an ‘ employee’ of the insured arising out of the course and scope of employment." The letter identifies the policy at issue as the " Commercial General Liability policy issued to Titan ..." and informed Mr. Christianson that " [s]hould it be determined or confirmed through the investigation of the above referenced incident that Keith Jones was an employee of Titan Enterprises, LLC dba: Titan Top Soil at the time of the incident, Great Divide Insurance Company may refuse to defend or indemnify you for this matter." Although Great Divide had not confirmed Mr. Jones's employment status, Mr. Christianson was fully aware that Mr. Jones was Titan's employee. He was on notice of the precise reason Great Divide eventually declined to indemnify his loss or reimburse legal costs. At that point it was evident that there were potential coverage gaps for Mr. Christianson and his non-Titan entities. The September 24, 2004, letter is a reasonably clear indication that the Great Divide policy did not cover entities other than Titan and did not cover Titan employees injured in the scope of employment. A reasonable person in Mr. Christianson's circumstances would have had enough information to alert him that he should begin an inquiry to protect his rights.
... The letter was, in effect, a disclaimer of Great Divide's duty to defend. The letter also drew [Mr. Christianson's] attention to gaps in his coverage. Specifically, the letter informed Mr. Christianson of the possibility that Great Divide would deny both defense and indemnification if it confirmed that Mr. Jones was a Titan employee. Mr. Christianson knew that Mr. Jones was a Titan employee and was on notice of the potential coverage gaps....
... At that point [upon receipt of the September 24, 2004 letter], Mr. Christianson was aware of potential coverage gaps,
despite the fact he had asked his broker to purchase all-inclusive insurance.
(Emphasis in original.)
The court then made these findings about what an inquiry " at that point" would have revealed:
[A]n inquiry at that point would have revealed what Mike Dennis allegedly conceded at his deposition: that CHI failed to advise Mr. Christianson of the need to obtain coverage for the continued operation of GALL's hydroseeder. The inquiry would also have revealed that Cascade National was unwilling to cover the loss.
The superior court consequently ruled that the applicable three-year statute of limitations had begun running on September 24, 2004, the date of Great Divide's initial letter to Christianson, and that the limitations period had expired before Christianson commenced suit in August 2008. It therefore dismissed Christianson's complaint.
III. STANDARD OF REVIEW
When the superior court holds an evidentiary hearing to resolve factual disputes about when a statute of limitations began to run, we review the resulting findings of fact for clear error. A factual finding is clearly erroneous if, after reviewing the entire record in the light most favorable to the party prevailing below, we are left with a definite and firm conviction a mistake has been made. We reverse a trial court's factual findings only when we are left with a definite and firm conviction a mistake has been made. " [I]t is a legal question whether undisputed facts establish that a plaintiff is on inquiry notice."  We give de novo review to rulings on legal questions.  We review for clear error fact findings regarding the reasonableness of an inquiry. It is a legal question whether a court has failed to make necessary findings regarding the reasonableness of a claimant's inquiry. 
The ultimate issue here is whether the superior court correctly decided that Great Divide's initial letter put Christianson on inquiry notice and that the statute of limitations on Christianson's malpractice claim against CHI therefore began to run when Great Divide sent him that letter. Christianson agrees that " the application of the discovery rule controls the result in this appeal," but advances various arguments to support his contention that the court erred factually and legally. He also argues that the court erred in resolving the " reasonable inquiry" issue.
Alaska applies a three-year statute of limitations for professional malpractice actions. A statute of limitations usually begins to run upon the occurrence of the last element essential to the cause of action. But Alaska has adopted the discovery rule, which can affect when the applicable statute begins to run. Under the discovery rule, a cause of action accrues when the plaintiff has " information sufficient to alert a reasonable person to the fact that he has a potential
cause of action."  We look to the date when " a reasonable person in like circumstances would have enough information to alert that person that he or she has a potential cause of action or should begin an inquiry to protect his or her rights."  Cameron v. State articulated the discovery rule as follows:
(1) a cause of action accrues when a person discovers, or reasonably should have discovered, the existence of all elements essential to the cause of action;
(2) a person reasonably should know of his cause of action when he has sufficient information to prompt an inquiry into the cause of action, if all of the essential elements of the cause of action may reasonably be discovered within the statutory period at a point when a reasonable time remains within which to file suit.[]
If a person makes a reasonable inquiry that does not reveal the elements of the cause of action within the limitations period while a reasonable time remains within which to file suit, the discovery rule tolls the running of the limitations period until a reasonable person would obtain actual knowledge of, or would again be prompted to inquire into, the cause of action.
The discovery rule therefore simply determines when the cause of action accrues for purposes of triggering the applicable limitations period.  We have stated that " the discovery rule operates only to lengthen— and never to shorten— the limitations period."  As we will see, that principle does not prevent us from affirming the judgment.
The first question is whether, as the superior court ruled, Christianson was put on inquiry notice by Great Divide's September 24, 2004 letter. That legal question turns on whether the superior court committed clear error in finding the facts that led it to conclude that Christianson had " enough information to alert him that he should begin an inquiry to protect his rights." The next question is whether Christianson made a reasonable inquiry that did not timely reveal all elements of his cause of action. That question turns on whether the superior court committed clear error in finding facts bearing on what Christianson would have learned had he made an inquiry after receiving the September 24, 2004 letter. It also turns on whether the court failed to make fact findings material to the reasonable-inquiry issue and therefore committed legal error.
A. The Superior Court Did Not Commit Clear Or Legal Error In Ruling That Christianson Was Put On Inquiry Notice.
1. The court did not clearly err in finding facts regarding inquiry notice.
After conducting the evidentiary hearing, the superior court made findings of fact about the information Christianson possessed when or soon after he received the September 24, 2004 letter. We quoted its pertinent findings above, in Part II.B.
In summary, the court found that the letter told Christianson he had to " protect [his] own interest" and should consider consulting an attorney to respond to Jones's complaint. It found that the liability insurer had effectively disclaimed its duty to defend Christianson. It found that the letter disclosed a " preliminary determination" that the accident did not trigger the duty to defend. It
found that the letter indicated that the policy did not cover entities other than Titan and did not cover claims of Titan employees injured at work. It found that upon receipt of the letter, " Christianson was aware of potential coverage gaps, despite the fact he had asked his broker to purchase all-inclusive insurance."  It found that this was sufficient to alert a reasonable person in Christianson's position that he should begin an inquiry to protect his rights. And it found that Christianson began incurring actual damages in the form of litigation costs.
Christianson disputes these findings. We review them for clear error.  " On appeal, findings of fact by a trial court may not be disturbed unless they are clearly erroneous." 
But before beginning that analysis, we consider the undisputed facts in their most elemental form. As of the fall of 2004, Christianson had expected CHI to procure insurance coverage for his landscaping activities. He knew Jones was suing him for reasons connected with those activities. He knew Great Divide, following his tender, had not provided him a defense. He knew Great Divide had identified two policy provisions that potentially foreclosed coverage. He knew he was incurring defense costs. Those circumstances were enough to put him on notice that he needed to make an inquiry to determine why Great Divide was not providing him a defense— including asking whether CHI had failed to secure adequate insurance for his businesses. These undisputed circumstances establish as a matter of law that Christianson had a duty to make a reasonable inquiry to protect his interests.
Gudenau & Co. v. Sweeney Insurance, Inc. is analogous. That case involved a denial of coverage under an insurance policy obtained through a broker that had promised the insured a policy covering virtually all damage to the property at issue. We held that the insurer's letter to the insured, " which drew the reader's attention to the policy's structural defect exclusion clause," was " sufficient to alert a reasonably diligent plaintiff" to the possibility of a gap in coverage and, accordingly, to the possibility of the broker's potential breach of warranty.
Once Christianson began incurring defense costs, all elements of the alleged tort— the claim he filed almost four years later— were present: duty (to use adequate professional skill); breach of the duty (in failing to secure coverage allegedly requested or to recommend that GALL get coverage); causation (of the ...