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Alaska Interstate Construction, LLC v. Crum & Forster Specialty Insurance Co., Inc.

United States District Court, D. Alaska

December 23, 2014



RALPH R. BEISTLINE, District Judge.


Plaintiff Alaska Interstate Construction, LLC ("AIC") filed the present suit against Defendant Crum & Forster Specialty Insurance Company, Inc ("C&F") as a result of C&F's refusal to provide liability insurance coverage. AIC sought coverage from C&F in response to a lawsuit filed by VC Sellers Reserve ("VC Sellers") in the Superior Court for the State of Alaska ("Underlying Suit"). AIC asserts that its policy from C&F provides coverage for the Underlying Suit and C&F is therefore obligated to both defend and indemnify AIC. C&F has disclaimed any obligation to provide coverage under the suit. AIC moves for summary judgment on this insurance coverage issue at Docket 15. AIC has asked the Court to declare that C&F is obligated to provide a complete defense to AIC in relation to the underlying suit and that C&F is obligated to indemnify AIC for certain potential exposures. C&F responds at Docket 24 asserting that there is no obligation to provide coverage in the Underlying Suit and makes a cross motion for summary judgment. AIC replies at Docket 26.


AIC is a company providing engineering and construction-related services throughout Alaska, including heavy civil construction, bridge building, mining-support, oilfield services, and thermal soil remediation.[1] AIC was approached by Restoration Science and Engineering ("RSE") in the spring of 2008 to provide thermal soil remediation services on the North Slope. RSE had been hired by VC Sellers to clean up three areas in Prudhoe Bay, but lacked the equipment and facilities to perform the remediation work.[2] AIC eventually submitted a proposal to RSE on July 7, 2008, outlining its services and pricing, as well as details on its plant operations and operating parameters.[3] The proposal provided that the price for removing the remediated soil from the AIC yard would be based on time and materials, with the material remediated at a price of $99 per ton.[4] The weight and measurement of the material would be determined based on the calibrated belt scale which was attached to the conveyor belt which transported material from the hopper to the tumbler.

RSE accepted the proposal from AIC without modification, and the remediation project began on August 18, 2008.[5] The amount of contaminated ground water in the material was allegedly problematic for AIC, as the "soupy" material had a moisture content that exceeded the operational parameters of AIC's machinery.[6] AIC addressed this problem by reportedly utilizing portions of recently remediated soil to mix in with the contaminated soil, thereby lowering the moisture content of the soil to be remediated. The project was completed on September 19, 2010, but a dispute arose regarding an internal deadline of August 31, 2010, and payment for work after that date.[7] A demand letter was sent by AIC to VC Sellers (through RSE) on November 3, 2011, requesting payment of the final bill and AIC filed suit against RSE on May 29, 2012.[8] In meetings during the suit, VC Sellers raised issue with the alleged revelation of AIC blending remediated and contaminated soil, which they alleged led to inflated charges as material was being weighed and billed each time it was put on the conveyor belt.[9] AIC eventually dropped their lawsuit on January 11, 2013, however VC Sellers responded by filing their own lawsuit on June 14, 2013.[10] VC Sellers has alleged in six causes of action that AIC charged for multiple burning of the same soil, charged for burning soil blended from clean and contaminated material, utilized an uncertified scale, and used a scale that was uncalibrated.[11]

Shortly after VC Sellers filed suit, AIC tendered a claim with C&F, who had issued a series of policies to AIC which included a General Liability Policy ("GL"), a Contractors Pollution Liability Policy ("CPL"), and an Errors and Omissions Policy ("E&O").[12] C&F denied AIC's claim and disclaimed any liability, indicating that the allegations of VC Sellers were not "wrongful acts" committed in the course of "professional services."[13] C&F also asserted denial was based on the claim not being reported during the policy period, certain wrongful acts were committed prior to retroactive coverage, and that AIC knew of the wrongful acts prior to policy period.[14] AIC filed the present suit seeking a determination on the existence of coverage.


A. Applicable Law

This matter was removed based on diversity of citizenship from the Superior Court for the State of Alaska to the Court pursuant to 28 U.S. Code ยง 1441. Accordingly, the Court applies Alaska substantive law.[15]

1. Insurance Policy Interpretation

When interpreting an insurance policy, Alaska law instructs courts to look to the language of the disputed provision, other provisions in the policy, extrinsic evidence, and case law interpreting similar provisions.[16] Insurance policies are construed in a manner that honors a lay insured's reasonable expectations.[17] Any ambiguity should be construed in favor of the insured and against the insurer.[18] Also, grants of coverage should be viewed broadly, while exclusions should be viewed narrowly.[19] Yet where a reasonable lay interpretation of the policy would not encompass coverage under the circumstances, there is no ambiguity and therefore no coverage.[20]

2. Duties of Insurer

An insurer's duty to defend and its obligation to indemnify are separate and distinct contractual elements, with the duty to defend being broader than the duty to provide coverage.[21] Under Alaska law, an insurer must defend the insured "whenever a complaint states a cause of action within, or potentially within, the policy coverage."[22] The existence of a duty to defend is determined by the factual allegations asserted in the complaint of the underlying litigation.[23] While the duty to defend may also exist where the interpretation of the policy presents an open legal question, this does not mean it arises whenever an insurer and an insured have a ...

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