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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Brannon v. Continental Casualty Company (06/09/2006) sp-6016

Brannon v. Continental Casualty Company (06/09/2006) sp-6016, 137 P3d 280

     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,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA


RANCE BRANNON and PAUL )
BRANNON, ) Supreme Court No. S- 11505
)
Appellants, ) Superior Court No. 3AN-02-05553 CI
)
v. ) O P I N I O N
)
CONTINENTAL CASUALTY ) No. 6016 - June 9, 2006
COMPANY, A Stock Insurance )
Company and CNA INSURANCE )
COMPANIES, )
)
Appellees. )
)

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Sharon L. Gleason, Judge.

          Appearances:   Peter  J. Maassen,  Ingaldson,
          Maassen  &  Fitzgerald, P.C., Anchorage,  for
          Appellants.  Jahna M. Lindemuth and  John  A.
          Treptow, Dorsey & Whitney LLP, Anchorage, for
          Appellees.

          Before:    Bryner,  Chief Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          EASTAUGH, Justice.

I.   INTRODUCTION
          Paul  and Rance Brannon sued Terry Pfleiger.  When  his
insurer,  Continental  Casualty Company, failed  to  defend  him,
Pfleiger  assigned  to  the  Brannons  his  rights  arising  from
Continentals   failure  to  defend.   The  Brannons   then   sued
Continental.   Pfleiger later confessed judgment to the  Brannons
in   the  underlying  lawsuit.  Reasoning  that  the  statute  of
limitations began running on Pfleigers claims against Continental
when  Continental denied Pfleiger a defense, the  superior  court
dismissed the Brannons suit against Continental as untimely.   We
hold  that the claim that Continental breached its duty to defend
accrued  when Continental notified Pfleiger it would  not  defend
him,  but  that  the  running  of  the  limitations  statute  was
equitably  tolled until the underlying litigation  was  complete.
We therefore vacate the judgment of dismissal and remand.
 II. FACTS AND PROCEEDINGS
     A.   The Underlying Lawsuit
          Paul  and Rance Brannon purchased California restaurant
franchising assets from California investors in 1992.  The assets
included  a  Johnny  Rockets restaurant in  Huntington  Beach,  a
Johnny  Rockets  restaurant in Newport Beach, and Johnny  Rockets
franchising  rights  for  Orange  County.   Terry  Pfleiger,   an
associate at Jack White Real Estate (JWC) in Anchorage, acted  as
the  Brannons  real-estate broker during this transaction.1   For
his  assistance with the transaction, Pfleiger was  given  a  ten
percent share in JROC, Inc., the corporation formed to manage the
restaurant franchises.
          The  asset purchase agreement was secured by a $750,000
note  executed  by  JROC,  Inc. and  was  jointly  and  severally
guaranteed  by Rance and Clara Brannon, Paul Brannon,  Terry  and
Nancy Pfleiger, and Mr. and Mrs. Ronald Paradis.
          JROC  defaulted on the note in 1994.  In December  1994
the California investors filed an Alaska superior court complaint
captioned  JROC Fashion Island v. Brannon, Case No.  3AN-94-10728
CI,  against  Rance Brannon, Clara Brannon, Paul  Brannon,  Terry
Pfleiger, and Nancy Pfleiger.  Paul and Rance Brannon then  filed
a  cross-claim  (the Brannon cross-claim) against Terry  Pfleiger
and  JWC,  alleging that [a]s broker and agent for the  Brannons,
Pfleiger  and  JWC  owed fiduciary duties to the  Brannons.   The
Brannons requested damages exceeding $1,000,000.
          Through  his  personal attorney, Pfleiger answered  the
Brannon  cross-claim  on  July 11,  1997.   Continental  Casualty
Company  was  JWCs professional liability insurance carrier.   It
was  promptly notified of the Brannon cross-claim.  On  July  16,
1997  Continental  sent Pfleiger a Reservation of  Rights  letter
which stated the insurance companys intent to preserve the rights
of  all  concerned  without waiving our  right  to  continue  our
coverage  investigation.  Pfleigers attorney  wrote  Continental,
arguing  that  allegations in the Brannon  cross-claim  triggered
Continentals duty to defend Pfleiger under JWCs insurance policy.
On  August 13, 1997 Continental sent Pfleigers attorney a  letter
citing  nine  policy exclusions to show that the  Brannon  cross-
claim  was not covered by the insurance policy.  The letter  also
stated:
          Based  on  the documentation we have received
          to-date   we   must   respectfully   disclaim
          coverage  to your client for this  loss.   We
          base  our  disclaimer on the fact  that  your
          client  was not working within the  scope  of
          his  duties  as an agent for Jack White  Real
          Estate  at  the  time  he  entered  into  the
          franchise   purchase   agreement   with   the
          [Brannons].   In addition, the  above  quoted
          exclusions   would  apply   to   this   loss.
          Finally,  the  original complaint  was  filed
          prior to the policys inception date.
          
On  the same day, in a separate letter, Continental notified  JWC
that  it would continue to defend JWC against the Brannon  cross-
claim  under  a  reservation of rights.  (JWC  settled  with  the
Brannons for $60,000 in 1998.)
          Facing  both  the original JROC Fashion Island  lawsuit
and  the  Brannon cross-claim, Pfleiger filed for  bankruptcy  in
September  1997.   Pfleigers  bankruptcy  petition  automatically
stayed  all  claims  against  him.2   The  trustee  of  Pfleigers
bankruptcy estate moved in 1998 for authority to sell and  assign
to  the  Brannons  any  claims Pfleiger had  against  Continental
arising  out  of  the Brannon cross-claim.  The bankruptcy  court
issued  an  order on November 5, 1998 authorizing the trustee  to
sell to the Brannons Pfleigers claims that arise from the refusal
of  Continental  Casualty Company to defend and provide  coverage
for  the  Brannons claims against [Pfleiger] related to  the  two
Johnny Rocket franchise restaurant operations in California.  The
trustee  executed the assignment of these claims on November  18,
1998.
          On  July  15,  1999  the Brannons,  invoking  Pfleigers
assigned  rights  against Continental,  filed  a  superior  court
complaint  against  Continental alleging  breach  of  contractual
duties under the insurance policy, negligence, and breach of  the
covenant of good faith and fair dealing.  This 1999 complaint was
never  served on Continental and was dismissed without  prejudice
in March 2001 for failure to prosecute.
          In  2000  the  Brannons sought bankruptcy court  relief
from  the  stay of proceedings against Pfleiger; they did  so  to
establish  Pfleigers  liability to  them  on  their  cross-claim,
obtain a liability judgment in their favor against Pfleiger,  and
pursue  that judgment against Continental for breach of its  duty
to defend Pfleiger.  The bankruptcy court granted relief from the
stay  on  October 6, 2000 solely for the purpose of allowing  the
Brannons to liquidate their claim against [Pfleiger] .  .  .  and
then to pursue collection of any judgment which may be entered in
their  favor against [Continental].  Four days later, on  October
10,  2000,  the  bankruptcy  court discharged  all  of  Pfleigers
dischargeable debts.
          In  August  2003  Pfleiger confessed  judgment  to  the
Brannons  for  $2,889,863.34.  This amount included  a  principal
award  of  $1,713,444 plus  pre-judgment interest  and  attorneys
fees.   Pfleigers confession of judgment was filed  in  the  JROC
Fashion Island case on August 28, 2003.
     B.   The Current Lawsuit
          On  March 15, 2002 the Brannons filed a superior  court
complaint against  Continental that was nearly identical to their
unserved 1999 complaint.  Continental moved for summary judgment,
asserting  the  statute of limitations, the doctrine  of  unclean
          hands, and policy exclusions; it also moved for partial summary
judgment  on  damages.  The Brannons moved  for  partial  summary
judgment on their claim that Continental had breached its duty to
defend Pfleiger.
          After  oral  argument on the summary judgment  motions,
the superior court held that [t]he statute of limitations for the
breach  of  the  duty  to  defend, when  the  insurance  contract
excludes  coverage, should begin to run on the date the insurance
company refuses to defend.  It concluded that because Continental
had  denied Pfleiger a defense on August 13, 1997, the three-year
statute  of  limitations began to run on that day.3  Because  the
Brannons did not file their complaint until March 15, 2002,  more
than  three  years later, the superior court granted Continentals
motion for summary judgment on statute of limitations grounds.
          The  superior court also held that Continental did  not
have  a  duty  to  indemnify Pfleiger  under  the  terms  of  the
insurance  contract.   The  superior  court  stated  that  it  is
uncontroverted  that Pfleiger had a direct 10%  interest  in  the
profits  and  losses of the Johnny Rockets investment  .  .  .  .
Accordingly, Exclusion N of the policy applies and there  was  no
coverage for the alleged loss under the terms of the policy.  But
the  court  left open the possibility that Continental  could  be
estopped  to  deny coverage if it was found to have breached  the
duty to defend.
          The  superior court expressly stated that  it  was  not
ruling  on  the  other  pending motions,  including  the  parties
motions for summary judgment on the question whether there was  a
breach  of  the duty to defend, Continentals motion  for  summary
judgment on damages, and Continentals motion for summary judgment
on the issue of unclean hands.
          The  Brannons  appeal the ruling that  their  complaint
against Continental was untimely.
III. DISCUSSION
     A.   Standard of Review
          We review summary judgment decisions de novo, affirming
if  there  are no genuine issues of material fact and the  moving
party  is entitled to judgment as a matter of law.4  In reviewing
the  grant  of a summary judgment motion, all factual  inferences
must be drawn in favor of the party against whom summary judgment
was  entered.5   Whether  a claim is barred  by  the  statute  of
limitations is a question of law that we review de novo.6
     B.    A  Cause  of Action for Breach of the Duty  To  Defend
Accrues when the         Insurance Company Denies a Defense,  but
Is Equitably Tolled Until          Entry of Final Judgment.

          Continentals obligation to defend its insureds  against
a  third-party  claim  is contractual.7  Generally,  a  cause  of
action  for  breach  of  contract accrues,  and  the  statute  of
limitations  begins  to run, at the time of  the  breach  of  the
agreement, rather than the time that actual damages are sustained
as  a  consequence of the breach. 8  A cause of action for denial
of  coverage  under an insurance policy accrues when coverage  is
disclaimed9 and the insured is notified.10
          Continental argued below that, per this precedent,  the
          statute of limitations for the claim of breach of the duty to
defend began to run on August 13, 1997  when Continental notified
Pfleiger that it would not defend him in JROC Fashion Island.
          The superior court stated that the cases that defendant
cites  on this issue appear dispositive and held that the statute
of  limitations on the breach of the duty to defend  claim  began
running  on  August  13, 1997.  The superior court  also  stated:
Where, as here, there is no contractual duty to indemnify, but at
most  only  a  duty to defend, the statute of limitations  should
begin to accrue at the time the defendant first refused to defend
Pfleiger.11
          When an action for breach of the duty to defend accrues
is  an  issue  of first impression for this court.  The  Brannons
argue that we should hold that the duty to defend does not accrue
until the underlying litigation is resolved  here, on August  28,
2003,  when  Pfleigers  confession of judgment  was  entered.   A
majority of the courts examining this issue have determined  that
a  cause of action for breach of the duty to defend accrues  with
the  termination of the underlying litigation which  the  insurer
refused to defend.12  Although insurance companies normally argue
that  breach  of  the duty to defend should be treated  like  any
other breach of contract,13 numerous courts have reasoned that the
duty  to  defend  cause of action is distinguishable  from  other
breach of contract causes of action because the duty to defend is
ongoing.14   For example, the United States Court of Appeals  for
the  Ninth Circuit has stated: The insurers duty to defend  is  a
continuing  duty  that may be assumed at any  time  before  final
judgment.  The insured may therefore elect to wait until a  final
judgment  is  entered  before filing  [its]  action  against  the
insurer.15
          The  California  Supreme Court  has  taken  a  slightly
different  approach.   In  Lambert  v.  Commonwealth  Land  Title
Insurance  Co., it held that the cause of action for  refusal  to
defend  accrues  upon discovery of loss or harm, i.e.,  when  the
insurer refuses to defend.16  But the court noted a problem  with
this accrual date: [T]he underlying litigation may take over  two
years  .  .  .  and  would allow expiration  of  the  statute  of
limitations  on  a lawsuit to vindicate the duty to  defend  even
before the duty itself expires.  This grim result is untenable.17
It  therefore  held  that [a]lthough the  statutory  period  [for
breach  of  the  duty to defend] commences upon  the  refusal  to
defend,  it  is equitably tolled until the underlying  action  is
terminated by final judgment.18
          We adopt the Lambert rule.  It achieves the same result
as  the  majority rule but is more consistent with  our  existing
contract  case law.  We have repeatedly observed that a cause  of
action  for breach of contract usually accrues when the agreement
is  breached.19  An insurance company therefore breaches the duty
to  defend when it refuses to defend the insured and the  insured
is notified of the refusal.
          The  Lambert  rule  is also more closely  aligned  with
general  Alaska  statute  of  limitations  principles  than   the
majority rule.  One justification for the majority rule  is  that
the  extent  of  the injury is unknown until the entry  of  final
          judgment.20  But in Alaska it is irrelevant if the full scope of
the injury is known;21 the cause of action accrues when the breach
occurs.22
          The  doctrine of equitable tolling is also  well-rooted
in Alaska law.23  Three conditions must be met before a statute of
limitations  may be equitably tolled: (1) pursuit of the  initial
remedy gives defendant notice of plaintiffs claim, (2) defendants
ability  to  gather evidence is not prejudiced by the delay,  and
(3) plaintiff acted reasonably and in good faith.24  An insurance
company has notice of a potential duty to defend when the insured
tenders  the  defense.25   Once  the  defense  is  tendered,  the
insurance  company  has  the ability  and  motivation  to  gather
evidence;  any  prejudice that thereafter results  likely  arises
from  the insurance companys refusal to defend and should not  be
held   against  the  insured.   Whether  an  insured  has   acted
reasonably  and  in  good faith is a question  of  fact  for  the
superior court to determine on a case-by-case basis.
          The  California approach also aligns more closely  with
Alaska  law in that it allows (but does not force) an insured  to
file  suit  for  breach immediately after the  insurance  company
denies the defense.26  The majority rule implies that the insured
should  wait until final judgment is entered.27  If the cause  of
action  does  not  accrue until entry of final  judgment  in  the
underlying  litigation,28 an insured who files an  action  before
entry of final judgment would be doing so prematurely.  In Alaska
a  party  can, during the pendency of the underlying  litigation,
seek  a  declaratory  judgment on whether  the  insurance  policy
requires  the  insurer to defend the insured  in  the  underlying
litigation.29  But tolling the statute of limitations during  the
pendency  of  the  underlying  litigation  avoids  requiring  the
insured  to  participate  in two lawsuits  at  once.   After  the
insurance company has denied the insured a defense, it  would  be
potentially  unfair  to require the insured  to  file  a  lawsuit
against  the  insurance  company while  simultaneously  defending
himself in the underlying lawsuit.30
          The  Brannons correctly point out that the  holding  in
Lambert  is  similar  to  the  way  we  handle  the  statute   of
limitations in some legal malpractice cases.  In Shaw v. State we
held that the statute of limitations for legal malpractice claims
arising  out  of  a  criminal case should be  tolled  during  the
pendency  of a claim for post-conviction relief.31  We determined
that  tolling  the statute of limitations would promote  judicial
economy,  lead  to  certainty of damages, and  assist  courts  by
establishing  a  bright-line rule.32  Our holding here  addresses
these  same issues.  It establishes a bright-line rule by tolling
the statute of limitations until final judgment in the underlying
litigation.  Waiting until after entry of final judgment to  file
against  the insurer ensures that the full extent of the insureds
damages   is  known,  promoting  judicial  economy  and  reducing
speculation.
          We  therefore hold that although a cause of action  for
breach of the duty to defend accrues when the insured is notified
of  the  insurance  companys refusal to defend,  the  statute  of
limitations is equitably tolled until entry of final judgment  in
          the underlying lawsuit.
     C.    The Brannons Claim that Continental Breached Its  Duty
To Defend           Pfleiger Is Not Time-Barred.

          The  superior court did not err by determining that the
accrual  date for the duty-to-defend claim was August  13,  1997.
But,  as  we  held above, the statute of limitations should  have
been  equitably  tolled while the JROC Fashion Island  litigation
was  pending.  That litigation was ongoing until at least  August
28, 2003, when Pfleigers confession of judgment was entered.  The
Brannons March 15, 2002 complaint was therefore not untimely.
          Continental  contends  that  Pfleigers  confession   of
judgment could not start the statute of limitations running as  a
matter  of  law.  It argues that the confession of  judgment  was
void  from  the beginning because it was entered after  Pfleigers
bankruptcy discharge.  Continental points to Standifer v.  State,
in  which  we  held that the district court will be  deprived  of
subject matter jurisdiction to act on the judgment if the debt is
discharged.33  We there instructed the district court to set aside
a  default  judgment  as void if the court  determined  that  the
underlying  debt  had  been previously discharged  by  Standifers
bankruptcy.34
          Our  review  of the bankruptcy courts actions  in  this
case  convinces  us that the bankruptcy court did not  discharge,
and  did  not  intend to discharge, the Brannons  claims  against
Pfleiger.  All claims against Pfleiger were automatically  stayed
when  he  filed  for  bankruptcy protection.35   The  trustee  of
Pfleigers  bankruptcy  estate moved for  authority  to  sell  the
Brannons all of Pfleigers claims against Continental arising  out
of the Brannon cross-claim.  The bankruptcy court then entered an
order  authorizing the trustee to sell to the Brannons  Pfleigers
claims that arise from the refusal of Continental . . . to defend
and  provide coverage for the Brannons claims against  [Pfleiger]
related to the two Johnny Rocket franchise restaurant operations.
Per  that order, the bankruptcy trustee assigned those claims  to
the Brannons in 1998.
          In  2000  the  Brannons moved in bankruptcy  court  for
relief  from  the  stay of claims against Pfleiger  in  order  to
establish  [Pfleigers] liability for the Brannon Crossclaims  and
obtain a judgment for damages in the State Court Lawsuit, and  in
turn, attempt to recover these damages from [Pfleigers] insurance
carrier  by  pursuing  the  claims  and  rights  purchased   from
[Pfleigers] bankruptcy estate.  On October 6, 2000 the bankruptcy
court  granted the Brannons relief from the stay solely  for  the
purpose of allowing the Brannons to liquidate their claim against
[Pfleiger]  in  the  state court proceeding and  then  to  pursue
collection  of any judgment which may be entered in  their  favor
against  the debtors insurance carrier.  On October 10, 2000  the
bankruptcy court released Pfleiger from all dischargeable  debts.
The October 10 discharge also ordered: Any judgment heretofore or
hereafter obtained in any court other than this court is null and
void as a determination of the personal liability of the debtor .
.  .  .   Given  the bankruptcy courts entry of  the  1998  order
authorizing the sale of Pfleigers claims to the Brannons and  its
          entry of the October 6, 2000 order lifting the stay and allowing
the Brannons to liquidate their claim against Pfleiger and pursue
enforcement  of  the judgment against Continental,  it  would  be
nonsensical to read the bankruptcy courts October 10, 2000  order
entered four days later as discharging Pfleiger from the Brannons
claim against him.
          Moreover,  we  have previously held that  an  insurance
company,  in  order  to  reduce its liability,  cannot  force  an
insured  to  declare bankruptcy.36  Holding that  the  bankruptcy
courts discharge removed Pfleigers ability to confess judgment on
the  Brannons  claims  would allow Continental  to  benefit  from
forcing  its  insured  into  bankruptcy.   Our  reading  of   the
bankruptcy courts orders avoids this inequitable result.37
          Continental  also argues that Pfleigers  confession  of
judgment  has  no legal effect because [t]his Court has  approved
the use of confessions of judgments . . . only when the defendant
confessing  judgment  faces  personal  risk  of  liability   that
justifies  him  entering  into such  arrangement.   But  when  an
insurance company refuses to defend its insured, the insured  can
take  reasonable  steps  to protect its interests.38  Continental
misreads  Great Divide Insurance Co. v. Carpenter,  the  case  on
which it relies in making this argument.  We there observed  that
an  insured whose insurer has committed a material breach of  one
of  its  defense  obligations  is  permitted  to  enter  into   a
settlement agreement with the injured claimant.39 Even settlement
agreements  that  contain a covenant not to enforce  against  the
insured  are allowed because an insured that has been  placed  at
economic risk by its insurers breach should be allowed to protect
itself  by  shifting  the risk to the breaching  insurer  without
first subjecting itself to potential financial ruin.40
          But  we  also  noted  in Great Divide  that  [c]ovenant
settlements can be abused;41 because of the potential for  abuse,
we  stated  that we have been careful to hold that  an  insurance
company  that  has  materially breached its  defense  obligations
whose  insured  has  made such an agreement is not  automatically
bound by the agreement.42  The check on this potential abuse is a
reasonableness review to be conducted by the trier of fact.43
          In  short, the bankruptcy courts October 10, 2000 order
did not discharge the Brannons claim against Pfleiger.  Pfleigers
subsequent confession of judgment was therefore not void.
          We  assume  that the entry of Pfleigers  confession  of
judgment ended the JROC Fashion Island litigation.  Although  the
cause  of  action for breach of the duty to defend  accrued  when
Continental  notified  Pfleiger of its  refusal  to  defend,  the
statute  of  limitations  was equitably  tolled  at  least  until
Pfleigers confession of judgment was entered on August 28,  2003.
The Brannons March 15, 2002 complaint was therefore timely.
     D.   We Decline To Affirm on Alternative Grounds.
          Continental  argues that, regardless of the limitations
issue,  we  should  affirm the superior courts  decision  because
Continental  had no duty to defend Pfleiger.44   It  claims  that
Continentals  policy  excluded coverage for  any  transaction  in
which  Pfleiger was an investor or had a financial  interest  and
that  it is undisputed that Pfleiger was an investor in the  JROC
          deal.  Continental had also moved for summary judgment based on
unclean hands and for partial summary judgment on damages.
          The  superior  court stated that, having  resolved  the
case on the statute of limitations issue, it was not reaching the
many other issues presented by the parties.  We decline to affirm
the judgment on the basis of any issue the superior court did not
reach.   Continentals  alternative grounds for  summary  judgment
potentially  raise  questions about whether  there  are  genuine,
material  factual disputes.  The superior court is  in  the  best
position  to  consider those threshold questions  for  the  first
time.45   We  remand  for further proceedings  on  the  remaining
motions.
IV.  CONCLUSION
          For the reasons discussed above, we VACATE the judgment
of dismissal and REMAND.
_______________________________
     1    Continental Casualty Company contends that Pfleiger was
an  investor  in the franchising deal, not a real-estate  broker.
The  Brannons  argue  that Pfleiger acted  as  their  real-estate
broker and advisor.  On appeal from a summary judgment, we review
the  facts  in  a light most favorable to the party against  whom
summary judgment was entered.  Zok v. Collins, 18 P.3d 39, 40 n.2
(Alaska  2001).  Because Pfleigers role is disputed  and  summary
judgment  was entered against the Brannons, we view the facts  in
the  light  most favorable to the Brannons.  We assume here  that
Pfleiger  was acting as a real-estate broker, and do  not  assume
that he was an investor.

          Our discussion of facts is meant to give context to the
legal issues arising out of the summary judgment; it is not meant
to  preclude  the  parties  from  litigating  genuine  issues  of
material fact on remand.

     2    11 U.S.C.  362(a).

     3     The  applicable statute of limitations, AS  09.10.053,
requires that a contract  action be commenced within three years.

     4    Makarka v. Great Am. Ins. Co., 14 P.3d 964, 966 (Alaska
2000).

     5     Morgan v. Fortis Benefits Ins. Co., 107 P.3d 267,  269
(Alaska 2005).

     6     Alderman v. Iditarod Props., Inc., 104 P.3d  136,  140
(Alaska 2004).

     7     Tush  v.  Pharr,  68  P.3d 1239,  1249  (Alaska  2003)
(holding  duty  to  defend is contractual obligation);  see  also
Afcan v. Mutual Fire, Marine & Inland Ins. Co., 595 P.2d 638, 645
(Alaska  1979) (An insurers duty to defend and its obligation  to
indemnify are separate and distinct contractual elements.).

     8     K&K  Recycling, Inc. v. Alaska Gold Co., 80 P.3d  702,
725  (Alaska  2003)  (quoting  Howarth  v.  First  Natl  Bank  of
Anchorage, 540 P.2d 486, 490-91 (Alaska 1975)).

     9     Howarth,  540  P.2d at 490 (holding  that  statute  of
limitations began to run when insured suffered loss and insurance
company denied insureds claim).

     10     Firemans Fund Ins. Co. v. Sand Lake Lounge, Inc., 514
P.2d  223,  227 (Alaska 1973) (holding in context of  first-party
insurance  that cause of action for denial of insurance  coverage
does  not  accrue  until insurer notifies insured  of  denial  of
coverage).

     11    We have repeatedly observed that the duty to defend is
separate  from  and  broader than the duty  to  indemnify.  E.g.,
Stephan  & Sons, Inc. v. Municipality of Anchorage, 629 P.2d  71,
73 (Alaska 1981) (We have already held in two contexts that there
may  be  a  duty to defend even if there is no duty to indemnify:
insurance cases and implied indemnity cases.); Afcan, 595 P.2d at
645  (Depending upon the nature of the claim against the insured,
the  insurer may have an obligation to defend although it has  no
ultimate liability under the policy.).

     12     Jane Massey Draper, Annotation, Limitation of  Action
Against Insurer for Breach of the Contract to Defend, 96 A.L.R.3d
1193,   2(a) (2004); see also 2 Allan D. Windt, Insurance  Claims
and Disputes  9.2, at 48 (4th ed. 2001) (The majority view . .  .
is  that  the insureds cause of action does not accrue until  the
termination  of  the  third-party  action  brought  against   the
insured.).

     13    Draper, supra note 12 at  2(a).

     14     See, e.g., Vigilant Ins. Co. v. Luppino, 723 A.2d 14,
19  (Md.  1999); Colpan Realty Corp. v. Great Am. Ins.  Co.,  373
N.Y.S.2d  802, 804 (N.Y. Sup. 1975); Bush v. Safeco Ins.  Co.  of
Am., 596 P.2d 1357, 1358 (Wash. App. 1979).

     15     Tibbs  v. Great Am. Ins. Co., 755 F.2d 1370,  1375-76
(9th Cir. 1985) (citation omitted).  See also 17 George J. Couch,
Couch  on Insurance  236.102 (2004) (Unlike a duty to pay,  which
becomes  fixed upon rendition of a judgment[,] . . . the duty  to
defend is necessarily a continuing one that commences upon notice
of  the claim and extends at least until judgment is entered  and
all  appeals from it have been resolved.); Vigilant, 723 A.2d  at
19  ([A]n insured should be allowed to expect the insurer to step
in  and  cure  its  breach so long as the  underlying  action  is
continuing.).

     16     Lambert v. Commonwealth Land Title Ins. Co., 811 P.2d
737, 739 (Cal. 1991).

     17    Id.

     18    Id.

     19     E.g.,  Kaiser v. Umialik, 108 P.3d 876,  880  (Alaska
2005); K&K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702,  724-
25 (Alaska 2003); Bauman v. Day, 892 P.2d 817, 827 (Alaska 1995);
Howarth  v.  First Natl Bank of Anchorage, 540 P.2d  486,  490-91
(Alaska  1975).  See also 14 George J. Couch, Couch on  Insurance
205.62 (2004).

     20     2 Allan D. Windt, Insurance Claims and Disputes  9.2,
at  49  (4th ed. 2001) (stating that best rationale for  majority
rule is that it is not until [the underlying action is completed]
that  the  totality of the insureds claim against the company  is
ascertainable and the right of action is complete).

     21    Sopko v. Dowell Schlumberger, Inc., 21 P.3d 1265, 1272
(Alaska  2001)  (noting that injured party  need  not  know  full
extent  of injuries before statute of limitations begins  to  run
under discovery rule).

     22    Howarth, 540 P.2d at 491.

     23     Dayhoff  v. Temsco Helicopters, Inc., 772 P.2d  1085,
1087  (Alaska  1989). See also Kaiser, 108 P.3d at  881-82;  Fred
Meyer of Alaska, Inc. v. Bailey, 100 P.3d 881, 886 (Alaska 2004);
Smith v. Thompson, 923 P.2d 101, 105 (Alaska 1996).

     24    Dayhoff, 772 P.2d at 1087.

     25     Lambert v. Commonwealth Land Title Ins. Co., 811 P.2d
737, 741 (Cal. 1991).

     26    Id.

     27     Windt,  supra note 12 at 49 ([I]t is not  until  [the
underlying action is complete] that the totality of the  insureds
claim  against  the company is ascertainable  and  the  right  of
action is complete.).

     28     See,  e.g., Bush v. Safeco Ins. Co. of Am., 596  P.2d
1357,  1358 (Wash. App. 1979) (holding that the cause  of  action
[for  breach  of  the duty to defend] does not accrue  until  the
third  party litigation involving the insured has ended in  final
judgment).

     29    State, Dept of Transp. & Pub. Facilities v. State Farm
Fire  &  Cas.  Co.,  939 P.2d 788, 790 (Alaska  1997)  (reviewing
superior  courts declaratory judgment that insurance company  had
no duty to defend).  A party can also seek a declaratory judgment
on  the  scope  of  the  duty to defend during  pendency  of  the
underlying  litigation.   See  ONeill  Investigations,  Inc.   v.
Illinois  Employers Ins. of Wausau, 636 P.2d 1170,  1172  (Alaska
1981).

     30     Cf.  Shaw  v.  State, Dept of Admin.,  Pub.  Defender
Agency,  816  P.2d  1358,  1361  (Alaska  1991)  ([W]e  note  the
desirability of allowing a criminal defendant with a valid  post-
conviction  relief  claim  to  pursue  that  remedy  without  the
distraction of also filing a legal malpractice claim.).

     31    Id. at 1361.

     32    Id.

     33    Standifer v. State, 3 P.3d 925, 928 (Alaska 2000).

     34    Id. at 929 (Thus, all judgments purporting to establish
personal  liability of a debtor on a discharged  debt,  including
judgments  obtained after bankruptcy, are void  to  that  extent.
They  are  not voidable, they are void ab initio as a  matter  of
federal statute.).

     35    11 U.S.C.  362(a).

     36     Bohna  v. Hughes, Thorsness, Gantz, Powell & Brundin,
828 P.2d 745, 754-55 (Alaska 1992).

     37     Other  courts  have similarly  refused  to  allow  an
insurers liability to be excused by the insureds bankruptcy.  See
In  re Jet Florida Sys., Inc., 883 F.2d 970, 975 (11th Cir. 1989)
(The  fresh-start policy [of 11 U.S.C.  524] is not  intended  to
provide  a  method by which an insurer can escape its obligations
based simply on the financial misfortunes of the insured.); In re
Beeney,  142  B.R. 360, 363 (B.A.P. 9th Cir. 1992) (That  through
bankruptcy  he  can divest himself of his personal obligation  to
compensate  them  for injuries suffered due  to  his  negligence,
should  not wipe out the carriers commitment which permitted  him
to  drive  a car.); In re Jason Pharm., Inc., 224 B.R.  315,  321
(Bankr. D. Md. 1998) (However, the discharge in bankruptcy, along
with  the  coextensive permanent injunction and fresh start,  are
exclusive  to  the  debtor,  and  do  not  otherwise  affect  the
enforcement  of  any underlying debt, or any nondebtor  liability
thereon.);  Levantino v. Ins. Co. of N. Am.,  422  N.Y.S.2d  995,
1002 (Sup. 1979) (Nor should a plaintiff be required to undergo a
bankruptcy  in order to benefit the wrongdoer who has caused  his
financial distress in the first place.) (citation omitted).

     38    Theodore v. Zurich Gen. Accident & Liab. Ins. Co., 364
P.2d  51, 55 (Alaska 1961) (holding that after insurer had denied
defense insured was justified in doing what it considered best to
protect  its interests).  See also Grace v. Ins. Co. of  N.  Am.,
944  P.2d  460,  464-65 (Alaska 1997) (noting that  if  insurance
company  wrongfully  denies coverage,  insured  is  excused  from
complying with policy obligations); Davis v. Criterion Ins.  Co.,
754  P.2d  1331,  1332  (Alaska 1988) (holding  that  if  insurer
wrongfully  denied  coverage, insurer could  not  raise  insureds
failure to provide notice of a suit under a cooperation clause as
a defense to liability).

     39     Great  Divide Ins. Co. v. Carpenter ex rel. Reed,  79
P.3d 599, 608 (Alaska 2003).

     40    Id. at 608-09.

     41    Id. at 609.

     42    Id.

     43    Id.

     44    We can affirm a decision on grounds other than that on
which  the  superior court relied so long as the record  supports
our  resolution.  Zaverl v. Hanley, 64 P.3d 809, 819 n.25 (Alaska
2003).

     45     See,  e.g., Fyffe v. Wright, 93 P.3d 444, 453 (Alaska
2004)  (holding that superior court is better-equipped to  decide
fact-intensive issue).

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