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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Jackson v. American Equity Insurance Co. (04/02/2004) sp-5791

Jackson v. American Equity Insurance Co. (04/02/2004) sp-5791

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


JACKSON,                      )    Supreme Court No. S-10328
             Appellants,      )    Superior Court No. 3AN-99-9862
     v.                       )    O P I N I O N
AMERICAN EQUITY INSURANCE     )    [No. 5791 - April 2, 2004]
COMPANY, a foreign insurance  )
corporation authorized in the State     )
of Alaska,                         )
             Appellee.             )

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Rene J. Gonzalez, Judge.

          Appearances:   Neil  T. O'Donnell,  Atkinson,
          Conway  &  Gagnon, Anchorage, for Appellants.
          Mark  A. Sandberg and William M. Wuestenfeld,
          Sandberg, Wuestenfeld & Corey, Anchorage, for

          Before:    Fabe,  Chief  Justice,   Eastaugh,
          Bryner,  and Carpeneti, Justices.  [Matthews,
          Justice, not participating.]

          EASTAUGH, Justice.


                This  case  presents questions about the  duty  a

liability   insurer  owes  its  insured  when   personal   injury

plaintiffs  make  a  policy  limits settlement  demand.   A  jury

ultimately  returned a special verdict for the liability  insurer

following  a  trial of the insured's bad faith claim against  the

insurer.   We hold that it was not error, under the circumstances

of this case, to decline to give the trial jury a special verdict

form  that  would have allowed the jury to find that the  insurer

breached  a duty to give the insured an assurance that  it  would

pay any judgment even if it exceeded the insured's policy limits.

We also hold that the insured did not preserve his assertion that

the court misinstructed the jury about the duties an insurer owes

its  insured, and hold that it was not plain error  to  give  the

instruction.  We therefore affirm the judgment.


            Laura  and  Dale  Jackson  sustained  serious  bodily

injuries  on  July  25, 1997 when a trailer  separated  from  its

towing  truck, crossed the centerline of the Seward Highway,  and

crashed  into  their  car.   The Jacksons  settled  their  claims

against  the  owner and operator of the trailer and truck,  Great

Alaska  Lawn & Landscaping Company (Great Alaska) for about  $1.2

million.   This  sum represented the policy limit of  the  Alaska

National  Insurance  Company  insurance  policy  covering   Great

Alaska,  plus  attorney's fees and interest.  Great  Alaska  also

assigned  the  Jacksons its contractual indemnity rights  against

James  N. Evridge, the mechanic who installed the trailer  hitch,

and  his  company, Jim's Mobile Equipment Repair.   The  Jacksons

filed  suit  against  Evridge.  The Jacksons'  complaint  against

Evridge  alleged negligence per se and strict products  liability


           About  a  year before the Jacksons' accident, Evridge,

doing business as Jim's Mobile Equipment Repair, had entered into

a  year-long  contract with Great Alaska under which Evridge  had

repaired  a  number of Great Alaska's trucks and  trailers.   The

contract provided that Evridge was to procure insurance "to  hold

harmless  Great  Alaska  Lawn and Landscaping  .  .  .  from  all

liability  and responsibility for work performed by Jim's  Mobile

Equipment  Repair."   Evridge had obtained a liability  insurance

policy  through  his  insurance  broker,  CHI  of  Alaska,   Inc.

American Equity Insurance Company (AEI) issued Evridge's  policy.

AEI's  policy  covered  Evridge at  the  time  of  the  Jacksons'


           After  the  Jacksons' accident,  AEI  retained  lawyer

Patrick McKay to defend Evridge and AEI's interests in the action

brought  by  the  Jacksons.  AEI later  hired  Paul  Stockler  to

replace  McKay  as  Evridge's  defense  counsel.   Evridge   also

retained his own private counsel, Marshall Coryell.

           The  Jacksons  and  Evridge  both  moved  for  summary

judgment  on  the negligence per se and strict liability  claims.

Evridge  also  moved for summary judgment on  the  issue  of  his

liability  for  punitive damages.  In July  1999  Superior  Court

Judge Karen L. Hunt dismissed the strict liability claims against

Evridge,  but  allowed  the Jacksons' negligence  per  se  claims

brought  under 13 Alaska Administrative Code (AAC) 04.002  (2003)

and 13 AAC 04.005(a) (2003) and their punitive damages claims  to

proceed to trial.

           The  Jacksons made Evridge an offer of judgment  under

Alaska  Civil Rule 68, offering to settle for the amount  of  his

policy  limits  with  AEI.  Marshall Coryell, Evridge's  personal

attorney, wrote several letters to AEI requesting that AEI either

accept the Jacksons' offer of judgment and settle the case for no

more  than  the  policy  limits,  or,  alternatively,  issue   an

assurance  to  Evridge  that AEI would pay  any  excess  judgment

against  Evridge  if the case went to trial.  On  three  separate

occasions, AEI informed Evridge that it was not obligated to  pay

a  judgment in excess of his policy limit of $1 million, and that

it  would not agree to provide Evridge written assurance that  it

would  pay a judgment in excess of the policy limits if the  case

went to trial.

            AEI,  the  Jacksons,  Evridge,  and  their  attorneys

participated  in a mediation in July 1999 at the  office  of  the

Jacksons'  attorney,  Baker  Brattain,  LLC.   AEI  declined  the

Jacksons' policy limits settlement offer, and instead offered  to

settle  the Jacksons' claims for $400,000.  AEI had conducted  an

assessment  of  Evridge's  liability  and  concluded   that   the

Jacksons'  claims were worth substantially less than  the  policy

limits, and that Great Alaska, the owner of the truck and trailer

involved in the Jacksons' accident, was primarily at fault.   The

Jacksons  refused  AEI's  offer.   Evridge's  personal  attorney,

Marshall  Coryell,  again asked AEI to issue a written  assurance

that AEI would cover a judgment against Evridge in excess of  his

policy  limits if no settlement was reached and the case went  to

trial.   Paul  Stockler,  the attorney  AEI  retained  to  defend

Evridge,  explained to Coryell and Evridge that if AEI  lost  the

case  and a judgment was actually entered for more than Evridge's

policy limits, it might be liable for the excess judgment but  it

was  not  willing to guarantee in writing prior to trial that  it

would  pay  a  judgment  in excess of the policy  limits.   Roger

Holmes, the mediator, testified that AEI intimated to Evridge and

Coryell that:

          [W]e're  not  in  the  position  .  .  .   of
          guaranteeing  that,  if  you  buy  a  million
          dollars  worth of insurance, we're  going  to
          pay three or four million.  You didn't pay  a
          premium  for that, so we'll see what happens.
          We  want to try the case, but we're not going
          to put this in writing.
           After  the mediation attempt failed, Coryell  wrote  a

letter to AEI's legal counsel, William Wuestenfeld, advising  him

that  Evridge  was  poised to enter into settlement  negotiations

with  the  Jacksons because of AEI's refusal to provide  him  any

assurance that it would cover any excess damages if the case went

to  trial.   Coryell's letter asserted that AEI's conduct  "is  a

textbook  case  of  an  insurer's bad faith conduct  against  its

insured." (Emphasis omitted.)

           On the eve of trial, Evridge entered into a settlement

agreement   with   the  Jacksons  and  confessed   judgment   for

approximately  $6  million.   Per the settlement  agreement,  the

Jacksons agreed to prosecute in Evridge's name all of his  claims

against  AEI  at  the Jacksons' expense and discretion.   Evridge

agreed  to pay over the proceeds of any recovery, less attorney's

fees,  to  the  Jacksons in satisfaction of  the  amount  of  the

confessed  judgment.  The Jacksons also agreed to "indemnify  and

hold Evridge harmless from . . . [any] award of attorney fees  or

costs which might be asserted against him by [AEI] if the case is

lost."  Judge Hunt approved the settlement agreement.

           In  a  letter to Coryell, AEI claimed that it was  not

bound  by  the settlement agreement because its policy  "bars  an

insured  from  settling directly with the injured  party  without

[its]  consent  so long as [they] are providing a defense."   AEI

warned  that  "settlement of the case without [its] consent  will

constitute a breach of the insurance contract resulting in  total

forfeiture of coverage."

           The  Jacksons hired Baker Brattain, LLC, the firm that

represented  the Jacksons in the prior case against  Evridge,  to

litigate  the bad faith suit on behalf of Evridge.  In  September

1999  Evridge, individually and for the benefit of Laura and Dale

Jackson,  brought suit against AEI, Montgomery  &  Collins  (M&C)

(AEI's  managing  agent), and CHI of Alaska (Evridge's  insurance

broker).   The complaint alleged, among other things,  that  AEI,

CHI, and M&C acted in bad faith towards the insured, Evridge,  by

not  advising him of the coverage his policy gave him, and by not

giving him written assurance that it would cover any judgment  in

excess  of  the  policy  limits.   The  complaint  also  asserted

negligence claims against each defendant.

           Evridge moved for partial summary judgment, requesting

dismissal  of AEI's affirmative defenses.  In a cross-motion  for

summary  judgment, AEI argued that Evridge breached his  policy's

cooperation clause by entering into the settlement agreement  and

consent  judgment  without AEI's consent.  Superior  Court  Judge

Rene  J.  Gonzalez granted Evridge's summary judgment  motion  in

part,  striking AEI's affirmative defenses asserting  failure  to

state  a  claim,  collateral estoppel/res  judicata,  comparative

negligence,  failure  to  name  indispensable  parties,  Rule  11

violations,  and unclean hands.  The superior court  also  denied

AEI's   cross-motion  for  summary  judgment  because  it   found

unresolved  issues of fact about whether AEI or Evridge  breached

the  insurance  policy.  The superior court  also  granted  M&C's

motion  for  summary judgment, holding that because  M&C  was  an

agent  of  a  disclosed principal - AEI - M&C was not vicariously

liable to AEI's insured for any contracts made on behalf of AEI.

          The breach of good faith and fair dealing claim went to

trial  in  May  2001.  Although Evridge does not argue  that  the

verdict was contrary to the weight of the evidence, we note  that

at  trial  Evridge testified that he shared the view of  Stockler

that  the  Jacksons'  claim was not worth $1  million.   He  also

testified that he had thought the settlement and consent judgment

were  a mistake and a fraud.  The jury returned a special verdict

in  favor  of  AEI,  finding that AEI's  refusal  to  settle  the

Jacksons'  claims  against Evridge for policy limits  was  not  a

breach  of  the duty of good faith and fair dealing.   The  court

entered judgment against Evridge for attorney's fees and costs in

the amount of $101,194.68.

           The  Jacksons moved for a new trial, arguing that  the

court's  special  verdict  form was improper.   The  trial  court

denied  the Jacksons' motion.  The Jacksons then moved  to  amend

the judgment under Alaska Civil Rule 60 to require AEI to collect

its  attorney's  fees  and  costs from the  Jacksons  instead  of

Evridge,  the  named  plaintiff.  The court denied  this  motion,

observing  that  "the Jacksons chose to have  Evridge  bring  the

claim for their benefit, but in his name.  A consequence of  that

action  is  that  Evridge, not the Jacksons, is  subject  to  any

judgment  for costs in the event the claim failed."  The judgment

against Evridge therefore stood.

           Evridge and the Jacksons appealed to this court.   AEI

and  CHI  each  filed cross-appeals.  As of September  2001,  the

Jacksons  had  not yet indemnified Evridge, per their  settlement

agreement, for the outstanding attorney's fees and costs he  owed

AEI.   AEI  offered not to execute upon any of Evridge's personal

assets  if,  in  exchange, Evridge would assign  his  contractual

right  to  be  indemnified by the Jacksons to  AEI,  dismiss  the

appeal,  and  write a letter to William Brattain,  the  Jacksons'

attorney,  directing him to dismiss the appeal.  In a  letter  to

Evridge's  personal  attorney,  Marshall  Coryell,  the  Jacksons

contended  that Evridge did not have the authority to  settle  or

dismiss  the case.  To avoid losing his personal assets,  Evridge

entered into a stipulation for dismissal with prejudice with  AEI

and  CHI.   Per the agreement,  Evridge, AEI, and CHI  stipulated

"that  all appeals relating to their respective interests,  inter

alia,  in [Evridge v. AEI] may be dismissed with prejudice."   We

granted  AEI  and  Evridge's motion to dismiss  their  respective

cross-appeals.  The order did not affect the Jacksons' appeal  of

Evridge's bad faith claim against AEI brought for their benefit.1

           In  March  2002  AEI moved this court to  dismiss  the

Jacksons'  appeal on the theory the Jacksons were not parties  to

the proceedings in the superior court.  We denied the motion, and

directed  AEI  to address the standing argument in its  brief  to

this court. We now consider the Jacksons' appeal.


     A.        The Special Jury Verdict Form Was Not Improper.

           We  conduct a de novo review of jury instructions  and

special  verdict forms to which timely objection  was  made.2   A

jury  instruction  containing an erroneous statement  of  law  is

reversible error if it prejudices one of the parties.3  Prejudice

exists if we determine the verdict would have been different  had

the erroneous instruction not been given.4

            The Jacksons argue that the special verdict form  was

erroneous  because it "only presented half of their case  to  the

jury."  (Emphasis omitted.)  They argue that their case rested on

a  two-part theory that AEI breached its duty of good  faith  and

fair dealing by either (1) not settling for policy limits, or (2)

not giving Evridge assurances that AEI would indemnify him for  a

judgment  entered against him in excess of his policy  limits  if

the case proceeded to trial.

            The  special  verdict  form  submitted  to  the  jury


          Did  American Equity Insurance Company breach

          its  duty  of good faith and fair dealing  to

          James N. Evridge by its refusal to accept the

          Jacksons' $1 million policy limits demand?

The  Jacksons  argue that it was reversible  error  to  submit  a

special  verdict  form that failed to ask the  jury  whether  AEI

breached its duty of good faith and fair dealing by not providing

assurances  to  Evridge that it would cover an  excess  judgment.

Their proposed special verdict form provided in part:

          1.    Was American Equity's failure to accept
          the Jacksons' policy limits settlement demand
               . . . .

          2.    Did  American Equity breach its implied
          obligation of good faith and fair dealing  by
          refusing    to   give   Evridge    reasonable
          assurances   that   it  would   protect   his
          interests in the event the underlying case of
          Jackson v. Evridge went to trial and  a  jury
          returned  a  verdict in excess of his  policy
           The  Jacksons  assert that they  were  entitled  to  a

special verdict form consonant with their two-part theory because

their theories were supported by evidence.

           Although  a  trial court generally must  give  a  jury

instruction consonant with a party's theory where that theory  is

supported by evidence,5 the Jacksons are not entitled to  a  jury

instruction  consonant with their case theory if that instruction

incorrectly  states  the  law.6   The  Jacksons  therefore   were

entitled  to a jury instruction encompassing the second prong  of

their  theory only if the covenant of good faith and fair dealing

imposes a legal duty on an insurer to give its insured assurances

that  it  will  cover  an  excess judgment  entered  against  its

insured.    The  Jacksons,  however,  cite  no  legal   authority

establishing that such a duty exists.

          The covenant of good faith and fair dealing is implicit

within every insurance contract; it requires "that neither  party

will  do  anything which will injure the right of  the  other  to

receive the benefits of the agreement."7  When a plaintiff  makes

a  policy  limits  demand, the covenant of good  faith  and  fair

dealing  places  a  duty on an insurer to tender  maximum  policy

limits to settle a plaintiff's demand when there is a substantial

likelihood of an excess verdict against the insured.8  This  duty

is  grounded in the insurer's legal duty to act in good faith  to

protect the interests of the insured.9

          When  "there  is a great risk of  a  recovery
          beyond  the  policy limits so that  the  most
          reasonable manner of disposing of  the  claim
          is  a  settlement which can  be  made  within
          those  limits, a consideration in good  faith
          of   the  insured's  interest  requires   the
          insurer to settle the claim."[10]
In  such  a  situation, "an insurance company  has  the  duty  to

determine `the amount of a money judgment which might be rendered

against  its insured,' and `to tender in settlement that  portion

of  the  projected money judgment which [it] contractually agreed

to pay.' "11

           The  covenant  of  good faith and  fair  dealing  also

obligates  an  insurer to inform the insured  of  all  settlement

offers  and to inform the insured of the possibility the  injured

claimant may recover a judgment in excess of the insured's policy

limits.12  Breach of the covenant of good faith and fair  dealing

exposes the insurer to a claim of bad faith and may expose it  to

liability for any excess judgment against its insured.

          But the covenant of good faith does not broadly require

an  insurer to give its insured pre-trial assurances that it will

cover an excess judgment against the insured if the insurer fails

to  accept  a  plaintiff's policy limits demand.   The  Jacksons'

proposed  theory would translate into a general duty to  issue  a

pre-trial  waiver of policy limits, and there is  no  such  broad


            In  its order denying the Jacksons' new trial motion,

the  trial  court  noted  that if a duty  to  provide  assurances

existed,  that  duty would only arise if there was a  "reasonable

likelihood"  of  recovery  of  an  excess  judgment  against  the

insured.13  We agree with the trial court's reasoning.  If  there

were a duty to provide assurances that an insurer would cover  an

excess  judgment, it would coincide with an insurer's  duties  to

settle  for policy limits.  It would therefore arise only  if  an

insurer's failure to settle were unreasonable, or in other words,

if  there were a reasonable likelihood the injured claimant would

recover  against  the insured an amount exceeding  the  insured's

policy limits.

           Even  if there was any error in failing to submit  the

Jacksons' alternate theory to the jury, it did not prejudice  the

Jacksons.   AEI  argued to the superior court that   because  the

jury found that it was reasonable for AEI to reject the Jacksons'

policy  limits demand, the jury implicitly found "that there  was

not a reasonable likelihood of an excess judgment."  The superior

court agreed, stating that: "Instruction # 23 explained that  the

implied obligation of good faith imposes a duty on an insurer  to

`accept  a  reasonable offer to settle  .  .  .  if  there  is  a

reasonable likelihood of recovery.' "

           The  Jacksons argue, however, that the  jury  did  not

implicitly find that there was not a reasonable likelihood of  an

excess  verdict.   In support, the Jacksons cite Instruction  No.

20,  which  listed four elements the Jacksons  had  to  prove  to

establish that AEI breached its duty of good faith.  Two of these

elements  are relevant here.  The first required the Jacksons  to

prove  that  there  was  a  reasonable likelihood  of  an  excess

judgment  against Evridge.  The second required the  Jacksons  to

prove  that  AEI's failure to accept the Jacksons' policy  limits

demand  was  unreasonable.  The Jacksons argue that  "[t]he  only

reason for having these two separate elements was if each element

could  exist  (or  not exist) independent  of  the  other."   The

Jacksons claim that the jury could have found - as it did -  that

AEI's refusal to settle was reasonable without implicitly finding

that  there  was  no  reasonable likelihood  of  excess  recovery

against  Evridge, if the jury determined that AEI  exercised  bad

judgment or negligence "in failing to recognize that likelihood."

           The  Jacksons also point to Instruction No. 22,  which

explained  that  bad  faith  does  not  mean  "bad  judgment   or

negligence,"  and  Instruction No. 24, which explained  that  AEI

would not be liable for its failure to settle if that failure was

based on an "honest mistake."  The Jacksons argue that "the  jury

could have concluded that there was a reasonable likelihood of an

excess verdict but that AEI simply made an `honest mistake.' "

           The Jacksons' arguments are unpersuasive.  The special

verdict form required the jury to determine whether AEI's refusal

to  settle  with the Jacksons was a breach of its  duty  of  good

faith  and  fair  dealing.   The accompanying  jury  instructions

submitted  by  the court adequately informed the  jury  that,  in

order  to  determine whether AEI breached the duty of good  faith

and  fair  dealing,  the  jury would implicitly  need  to  decide

whether  there was a reasonable likelihood of an excess  judgment

against Evridge.  Instruction No. 23 correctly told the jury:

               The implied obligation of good faith and
          fair dealing in an insurance policy imposes a
          duty  on  an  insurance company to  accept  a
          reasonable  offer to settle a  claim  against
          the person insured if the offer is within the
          limits of the insurance coverage and if there
          is   a   reasonable  likelihood  of  recovery
          against  the person insured for an amount  in
          excess of the insurance coverage.
(Emphasis added.)

          Because the jury found that AEI's refusal to settle did

not  breach  its  duty of good faith and fair dealing,  the  jury

implicitly  concluded  that there was  no  reasonable  likelihood

Evridge  was  exposed to a judgment exceeding his policy  limits.

Therefore,  even  if a liability insurer has a  duty  to  provide

assurances to its insured that it would cover an excess judgment,

that duty would not arise under the circumstances of this case.

          B.    The Superior Court Did Not Commit Plain Error  by
          Giving Instruction No. 22
           The  Jacksons  argue  that  the  second  paragraph  of

Instruction  No.  22 incorrectly describes an insurer's  duty  of

good   faith  in  considering  settlement  offers.   The   second

paragraph of Instruction No. 22 provided in part:

          Bad  faith  does  not mean  bad  judgment  or
          negligence,  but  means  having  a  dishonest
          purpose  through some motive of self-interest
          or  ill  will,  or  having  maliciousness  or
          hostile  feelings  towards  its  insured,  or
          acting  with  reckless  indifference  to  the
          interests or rights of its insured.
          The Jacksons argue, instead, that "an insurance company

is  liable  for  an  excess judgment if there  is  a  substantial

likelihood  of  an excess judgment - regardless  of  whether  the

insurance company acted maliciously or negligently in failing  to

recognize  that fact."  They also argue that the instruction  was

plainly  erroneous because at the very least a negligent  failure

to   accept  a  reasonable  policy  limits  demand  would  be  an

actionable breach of the obligation of fair dealing.  To  support

this  argument,  the Jacksons cite Continental Insurance  Co.  v.

Bayless  &  Roberts, Inc., in which we held that "an  insurer  []

defending  an  action against the insured, is bound  to  exercise

that  degree  of  care  which a man of  ordinary  prudence  would

exercise  in the management of his own affairs . . . irrespective

of fraud or bad faith."14

           Because the Jacksons did not object to Instruction No.

22  at  trial, they must demonstrate that it was plain  error  to

give that instruction.15  Plain error is present when an "obvious

mistake  exists  such that the jury instruction creates  a  `high

likelihood  that  the  jury  will  follow  an  erroneous   theory

resulting in a miscarriage of justice.' "16  To find plain error,

we  look  to see if a correct jury instruction would have  likely

altered the result.17  We place a heavy burden on the appellant to

prove that the error was "highly likely determinative."18

           The  Jacksons  are  not  entitled  to  a  plain  error

analysis, however, if their failure to object to Instruction  No.

22 indicates a tactical choice.19  During AEI's closing argument,

AEI's  trial counsel, William Wuestenfeld referred to the  second

paragraph of Instruction No. 22.  He told the jury that

          [T]here  is  no  evidence  to  suggest   that
          American Equity acted in bad faith,  that  it
          was acting in some motive of self-interest or
          ill  will.  Rather, the evidence supports the
          instruction  number 24, that American  Equity
          had  a bona fide . . . good faith belief that
          the insurer had a good possibility of winning
          the suit.
Instead  of  objecting  to AEI's definition  of  bad  faith,  the

Jacksons'  trial counsel also referred to Instruction No.  22  in

his  rebuttal argument, arguing to the jury that the  instruction

explained  that  "bad  faith  can be  measured  by  the  reckless

indifference to the interests or the rights of the insured."  The

Jacksons'  failure  to  object and their subsequent  reliance  on

Instruction No. 22 in their rebuttal argument suggests  that  the

Jacksons were fully aware of the language of Instruction No.  22,

and that their failure to object was the result of sound tactical

choice, thereby precluding a claim of plain error on appeal.   If

the  Jacksons'  counsel  did not see fit to  object  under  these

circumstances, we hesitate to consider whether it was plain error

for  the  trial  court to give the instruction.  AEI  asserts  on

appeal  that  this language originated in an instruction  Evridge

proposed.   It does appear that Evridge proposed the  instruction

and  that  AEI objected to it on the ground it was a  first-party

insurance instruction.

           Because  the  second paragraph of Instruction  No.  22

incorrectly states the standard for finding bad faith  in  third-

party  insurance disputes, this paragraph should  not  have  been

submitted to the jury.  The disputed language appears in  a  jury

instruction  discussed  in State Farm  Fire  &  Casualty  Co.  v.

Nicholson,  in  which we held that an insured's cause  of  action

against an insurer for breach of the duty of good faith and  fair

dealing sounded in tort in first-party insurance disputes.20  The

disputed paragraph may also have originated in a punitive damages

claim.   In any event, it erroneously described the standard  for

finding  bad faith in this case.  We disapprove of the submission

of  this  language  on the issue of bad faith  in  a  third-party

insurance  dispute, the type of dispute we have  here.   But  the

error  in  giving Instruction No. 22 was not plain.   Instruction

No.  23  correctly states the law, and mitigates the presence  of

the second paragraph of Instruction No. 22.

          C.   The Trial Court Did Not Err in Admitting Testimony
          of AEI's Expert, Ronald Mallen.
           The Jacksons argue that the trial court also erred  in

allowing  AEI to present expert testimony that was not  disclosed

in  an  expert report, per the requirements of Alaska Civil  Rule

26(a)(2)(B).  That rule provides in part that during discovery  a

disclosure  of  the  identity  of  an  expert  witness  must  "be

accompanied  by  a  written report prepared  and  signed  by  the

witness.   The report shall contain a complete statement  of  all

opinions to be expressed and the basis and reasons therefor . . .

."   The  Jacksons  contend that the trial court  allowed  Ronald

Mallen,  over  their  objection,  to  testify  about  things  not

revealed in his expert report.

           We  review  the  trial  court's  admission  of  expert

testimony  under  an  abuse of discretion  standard.21   We  will

reverse  the trial court's decision to admit evidence "only  when

left  with the definite and firm conviction that the trial  court

erred in its decision."22

           The  Jacksons take issue with the portion of  Mallen's

expert disclosure report which states that AEI "was not obligated

.  . . to inform Mr. Evridge that, as a guarantee, it would be so

liable  [for  any excess judgment]."  At trial, Mallen  testified

that  AEI  could  not  provide  the assurance  Evridge  requested

because  giving such an assurance would breach AEI's  reinsurance

agreements.   The  Jacksons  contend that,  had  Mallen  properly

disclosed before trial that AEI could not provide Evridge written

assurances  because it was in danger of breaching its reinsurance

agreements,  they could have conducted appropriate  discovery  on

the issue to rebut Mallen's testimony at trial.

           We  hold  that  there  was  sufficient  disclosure  of

Mallen's  expert opinion before he testified at trial.   Although

Mallen  did  not disclose a basis for his ultimate conclusion  in

his  expert  report,  if there was any dissatisfaction  with  the

report, the Jacksons should have filed a motion to compel further

disclosures, or should have taken Mallen's deposition to discover

how  he  arrived  at  his ultimate opinion.   Moreover,  Mallen's

opinion  was  only  part of AEI's evidence on  this  point.   The

report  and  subsequent  trial testimony of  another  AEI  expert

witness, Robert Wainscott, echoed Mallen's conclusion that  AEI's

refusal  to settle was reasonable, and that AEI was not obligated

to  give  Evridge written assurances.  Wainscott  also  testified

that  AEI had no duty to give assurances and that doing so  would

have threatened its relationship with its reinsurers.  His expert

report   did  not  mention  reinsurance  either.   The  Jacksons,

however,  do  not  object  to  the  trial  court's  admission  of

Wainscott's testimony.  The admission of Wainscott's  report  and

testimony  into evidence without objection renders  harmless  any

possible error in admitting Mallen's disputed testimony.

     D.         The Trial Court's Ruling on the Offset Issue  Did
          Not Prejudice the Jacksons.
           Finally, the Jacksons argue that the trial court erred

in  ruling that Evridge would have been entitled to an offset  of

any  settlement proceeds paid to the Jacksons to the extent  that

their total recovery exceeded their total damages.  Evridge asked

the  trial  court  to take judicial notice under Alaska  Evidence

Rule  202,  and  instruct  the jury, that  at  the  time  of  the

Jacksons'  July  25,  1997 accident Alaska  followed  Restatement

(Third)  of  Torts   16  cmt. e (2000), which  provides  that  an

injured  person can recover more than 100 percent of his  or  her

damages  by  separately  suing two severally  liable  defendants.

Acknowledging   that  this  court  generally   disfavors   double

recovery,  the trial court denied Evridge's motion  for  judicial

notice,  and  held  that  an  offset  was  permissible  for   the

settlement  proceeds from Great Alaska because the proceeds  were

from a non-collateral source and paid by a joint tortfeasor.23

           The  Jacksons  argue  that the  trial  court's  ruling

thwarted their attempt to argue at trial that AEI had erroneously

undervalued  their claims against Evridge.  The  Jacksons  assert

that  they  had planned to present evidence that AEI believed  it

was  entitled to a first-dollar offset for the $1.2 million Great

Alaska  previously  paid, and the $185,000 the Jacksons  received

under  their underinsured motorist coverage.  The Jacksons  argue

on  appeal that "the ruling caused [them] to restrict and curtail

their arguments that AEI had misapplied the law in evaluating the

likely amount of the judgment against Evridge."

           The real purpose of the request was to establish as  a

matter of law that AEI breached its duty to Evridge to accurately

assess his exposure by assuming his exposure would be reduced  by

anything  paid  to  the Jacksons on behalf of Great  Alaska,  the

other  tortfeasor.  But the trial court's ruling did not  prevent

the Jacksons from offering evidence that AEI improperly evaluated

Evridge's  exposure.   They introduced  evidence  about  how  AEI

evaluated that exposure, and introduced expert testimony that AEI

breached its duty when it allegedly assumed payments on behalf of

Great Alaska would reduce Evridge's damages exposure.  They  have

not   explained  on  appeal  what  evidence  the  court's  ruling

prevented them from offering, and have not demonstrated  how  the

ruling  kept  them  from trying to convince  the  jury  that  AEI

breached its duty to Evridge.24          The Jacksons also  claim

that  AEI  was  able to unfairly "whipsaw" one of their  experts,

Bruce  Gagnon,  on cross-examination by asking  him  whether  the

trial  court  "disagreed"  with  the  expert's  opinion  that   a

plaintiff can "double recover for the same things . . .  ."   But

the  Jacksons did not object to this brief exchange and requested

no curative instruction.  Moreover, their expert's admission that

this was a "debatable issue" is at odds with a contention that as

a  matter  of  law AEI must have breached its duty  by  allegedly

thinking  the  Jacksons  could not recover  twice  for  the  same

things.    Finally, the expert's subsequent testimony  on  cross-

examination continued to express his opinions that AEI should not

have assumed an offset.

           We  hold that the Jacksons have not demonstrated  that

the trial court's ruling actually impaired their ability to argue

that  AEI undervalued their claims against Evridge.  We therefore

need  not reach the substance of the underlying several liability



               We therefore AFFIRM the judgment.25

1    Following the dismissal, the Jacksons are the only remaining
appellants.   We  therefore  refer  to  the  appellants  as  "the
2    Reich v. Cominco Alaska, Inc., 56 P.3d 18, 25 (Alaska 2002).
3    Id.
4    Id.
5     See Chenega Corp. v. Exxon Corp., 991 P.2d 769, 780 (Alaska
1999);  Clary  Ins. Agency v. Doyle, 620 P.2d  194,  201  (Alaska
6     See  75A  Am. Jur. 2d Trial  1142 (2002) (noting  that  "an
instruction  which  correctly states the  law  and  is  based  on
competent  evidence  is  not  erroneous  merely  because  not  in
consonance with the theories of either party").
7    Guin v. Ha, 591 P.2d 1281, 1291 (Alaska 1979).
8     Schultz  v.  Travelers Indem. Co.,  754  P.2d  265,  266-67
(Alaska 1988).
9    Id. at 267.
10     Crisci  v.  Sec. Ins. Co., 426 P.2d 173, 176  (Cal.  1967)
(quoting  Comunale v. Traders & Gen. Ins. Co., 328 P.2d 198,  201
(Cal. 1958)).
11     Bohna  v. Hughes, Thorsness, Gantz, Powell & Brundin,  828
P.2d 745, 768 (Alaska 1992) (quoting Schultz, 754 P.2d at 267).
12    O.K. Lumber Co. v. Providence Washington Ins. Co., 759 P.2d
523, 525 (Alaska 1988).
13     The trial court stated that the standard for deciding  the
reasonableness of AEI's refusal to settle with the  Jacksons  was
whether  there  was  a  "reasonable likelihood,"  rather  than  a
"substantial likelihood," of an excess judgment against  Evridge.
The Jacksons do not object to the trial court's substitution.  We
will  therefore  rely  in this case on the reasonable  likelihood
standard.   Cf. Schultz, 74 P.2d at 266-67 (applying "substantial
likelihood" standard).
14    608 P.2d 281, 293 (Alaska 1980) (emphasis omitted) (quoting
J.  Appleman,  Insurance Law and Practice  4687, at 1780  (Berdal
ed. 1979)).
15     Barrett  v. Era Aviation, Inc., 996 P.2d 101, 105  (Alaska
16     Id. (quoting Conam Alaska v. Bell Lavalin, Inc., 842  P.2d
148, 153 (Alaska 1992)).
17     Conam  Alaska  v. Bell Lavalin, Inc., 842  P.2d  148,  153
(Alaska 1992).
18    Id. (emphasis omitted).
19    Henry v. State, 861 P.2d 582, 589 (Alaska App. 1993) ("[W]e
will  not  find  plain error when there appears to  have  been  a
tactical  reason  to withhold objection."); see  also  Massey  v.
State, 771 P.2d 448, 453 (Alaska App. 1989).
20    777 P.2d 1152, 1154-57 (Alaska 1989).
21    L.C.H. v. T.S., 28 P.3d 915, 919 (Alaska 2001).
22    Id. (quoting Belluomini v. Fred Meyer, Inc., 993 P.2d 1009,
1016 (Alaska 1999)).
23     The  Jacksons were injured on July 25, 1997.  As  of  that
date, AS 09.17.080 provided:

          Apportionment of damages.  (a) In all actions
          involving fault of more than one party to the
          action, including third-party defendants  and
          persons  who  have  been  released  under  AS
          09.16.040, the court, unless otherwise agreed
          by  all  parties, shall instruct the jury  to
          answer  special interrogatories or, if  there
          is no jury, shall make findings, indicating
               (1)  the amount of damages each claimant
          would  be entitled to recover if contributory
          fault is disregarded; and
                (2)   the percentage of the total fault
          of  all of the parties to each claim that  is
          allocated to each claimant, defendant, third-
          party  defendant,  and person  who  has  been
          released from liability under AS 09.16.040.
          (b)  In determining the percentages of fault,
          the  trier  of fact shall consider  both  the
          nature of the conduct of each party at fault,
          and the extent of the causal relation between
          the  conduct  and  the damages  claimed.  The
          trier of fact may determine that two or  more
          persons  are to be treated as a single  party
          if  their conduct was a cause of the  damages
          claimed  and the separate act or omission  of
          each person cannot be distinguished.
          (c)   The court shall determine the award  of
          damages  to each claimant in accordance  with
          the findings, subject to a reduction under AS
          09.16.040,  and enter judgment  against  each
          party  liable. The court also shall determine
          and   state  in  the  judgment  each  party's
          equitable  share  of the obligation  to  each
          claimant  in  accordance with the  respective
          percentages of fault.
          (d)   The  court shall enter judgment against
          each  party  liable on the basis  of  several
          liability  in  accordance with  that  party's
          percentage of fault.
AS  09.17.080  was  amended  in 1997,  but  that  amendment  only
affected  causes of action accruing on or after August  7,  1997.
Ch. 26,  55, SLA 1997.

24     Cf.  Alaska  R. Evid. 103(a)(2) (precluding  parties  from
challenging trial court rulings that have the effect of excluding
evidence unless "the substance of the evidence was made known  to
the  court by offer or was apparent from the context within which
questions were asked").
25     Because  we  uphold the jury verdict, we do  not  need  to
consider AEI's alternative argument that the Jacksons, as unnamed
parties  to  the suit below, do not have standing to  bring  this
appeal.   We  also  do  not need to address AEI's  argument  that
because the duty to pay an excess judgment would only arise after
a  judgment was entered, and the Jacksons' underlying case  never
proceeded to trial, Evridge's bad faith claim was not mature.