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Travelers Casualty and Surety Co. v. Ribi Immunochen Research3/1/2005
. Although the insured had cancelled her coverage before the accident, she argued it remained in effect due to the fact that the faulty brake repair work took place during the policy period. The insured based her claims on language in the policy that allowed for recovery on injuries "to which this insurance applies." The insurer denied coverage based on the fact that the occurrence date of her injuries fell outside of coverage. The Alaska Supreme Court held insurers who accurately interpret their policies and give the insured timely notice of refusal need not provide a defense merely because a court has yet to interpret that particular policy language. See Makarka, 14 P.3d at 970.
We similarly conclude the District Court properly determined that Travelers had no duty to defend Ribi against claims brought by third-parties for cleanup costs. Travelers responded to Ribi's demand for defense and indemnity with three different reservation of rights letters. Travelers denied coverage in each, stating its investigation and participation in the defense under the policies took place under a continuing reservation of rights to decline coverage at a later time. Travelers eventually denied the claims when its investigation revealed Ribi intentionally had disposed of the hazardous wastes. Travelers's denial letters assessed Ribi's claim for injury and accurately explained that the injury occurred outside of the CGL policy's scope. Thus, the District Court correctly rejected Ribi's claim that the novelty of Travelers's defense on its own triggered a duty to provide a defense to the third-party suits. Makarka, 14 P.3d at 970.
Whether the District Court erred in determining that Travelers may recoup its defense costs expended on Ribi's behalf for those claims that the District Court ultimately determined were barred by the CGL policy's pollution exclusion.
Although the District Court initially denied Travelers's recoupment costs for the neighboring property owners' suit, it later amended its order to include these costs in addition to the costs expended in the government suits it awarded earlier. Ribi argues that an insurer may not extinguish its duty to defend "potentially covered" claims retroactively and that Travelers thereby waived its recoupment rights when its reservation on March 10, 1999, came five years after the initial tender of the third-party suits. Ribi further argues that Travelers's reservation letters proved ineffective because it never expressly accepted the reservation and thus Travelers may not recoup its defense costs.
Travelers, on the other hand, contends that we should follow decisions from other jurisdictions that allow an insurer to recover defense costs when the insurer had no duty to defend. The court in Grinnell Mut. Reinsurance Co. v. Shierk (S.D. Ill. 1998), 996 F. Supp. 836, reviewed cases from other jurisdictions for guidance in deciding whether an insurer could recover defense costs in an assault claim when it had no duty to defend under a homeowner's policy. The court in Grinnell determined that to be entitled to reimbursement, an insurer must: (1) specifically reserve the right to seek reimbursement from the insured; and (2) provide the insured with adequate notice of this potential reimbursement. Grinell, 996 F. Supp. at 839. The court held that the insured had accepted the benefit of the insurer's defense and was fully appraised that the insurer reserved its right to seek reimbursement in the event that it was later determined that it had no duty to defend the insured. Grinell, 996 F. Supp. at 839.
Similarly, in United Nat. Ins. Co. v. SST Fitness Corp. (6th Cir. 2002), 309 F.3d 914, the court held that an insurer may recove
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