Kyakwok v. Yeager

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UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA
Brandi Yeager, )
)
Plaintiff, ) 3:14-cv-00023 JWS
)
vs. ) ORDER AND OPINION
)
Philadelphia Indemnity Insurance ) [Re: Motion at Docket 24]
Company, )
)
Defendant. )
)
I. MOTION PRESENTED
At docket 24 defendant Philadelphia Indemnity Insurance Company (“PIIC”)
moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil
Procedure. Plaintiff Brandi Yeager (“Yeager”) responds at docket 30. PIIC replies at
docket 38. Oral argument was not requested and would not assist the court.
II. BACKGROUND
This case presents claims arising from a 2012 automobile collision between
Yeager and Hope Jackson (“Jackson”). At the time of the collision Yeager was
employed by Safe and Fear-Free Environment, Inc. (“SAFE”), an organization that
assists victims of domestic violence and sexual assault in the Bristol Bay area. Yeager
was on “back-up duty” that night, meaning that she was required to be available to
Case 3:14-cv-00023-JWS Document 44 Filed 06/10/15 Page 1 of 16

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respond to calls from individuals in crisis if SAFE’s on-duty employee needed
assistance.1 According to SAFE, while Yeager was performing this duty “she had
access to the SAFE vehicle and permission to use it for her back-up duties.”2 The
exact scope of this permission is in dispute. SAFE’s “Director Services Coordinator,”
Karen Carpenter (“Carpenter”), stated that SAFE allows its employees performing
“back-up” or “on-call” duty to use the SAFE vehicle if they “don’t happen to have a
personal vehicle” or if they need to transport clients.3 For example, Carpenter stated
that Yeager could have used the vehicle if she “had to go out on call,” if she had to
come into work, or if she had to go to court on the weekend.4
On the night of the collision Yeager drove the SAFE vehicle to a bar where she
consumed alcohol. After leaving the bar Yeager’s blood alcohol content (“BAC”) was
above the legal limit.5 Her vehicle collided with Jackson’s, injuring herself, her
passenger Wassily Kyakwok (“Kyakwok”), Jackson, and Jackson’s passenger. SAFE
terminated Yeager’s employment the next day stating that Yeager had used SAFE’s
1Doc. 24-2 at 2-3.
2Doc. 24-2 at 3.
3Doc. 30-1 at 3.
4Id.
5Doc. 24-7 at 1; Doc. 24-8; and Doc. 24-9. Yeager objects to this evidence (and a
variety of other evidence) on the grounds that PIIC has not authenticated it or laid a sufficient
foundation for its admissibility. See Doc. 30 at 3-4, 17. Yeager does not dispute the accuracy
of the evidence’s content or that PIIC could present that content in an admissible form at trial.
Yeager’s objections are overruled. Fed. R. Civ. P. 56(c)(2) (“A party may object that the
material cited to support or dispute a fact cannot be presented in a form that would be
admissible in evidence.”) (emphasis added); Fed. R. Civ. P. 1 (The court should construe the
Civil Rules “to secure the just, speedy, and inexpensive determination of every action and
proceeding.”). See also Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003) (“At the
summary judgment stage, we do not focus on the admissibility of the evidence’s form. We
instead focus on the admissibility of its contents.”); Block v. City of Los Angeles, 253 F.3d 410,
418-19 (9th Cir. 2001).
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vehicle “for personal use without authorization” and drove it while intoxicated “in
violation of state law and SAFE’s policies.”6
Kyakwok brought a negligence action against Yeager in state court.7 Yeager’s
responsive pleading includes a “counterclaim”8 against PIIC in which she alleges that
she is entitled to a declaration that she is owed benefits pursuant to the uninsured
motorist (“UIM”) and medical payments coverage found in SAFE’s automobile
insurance policy with PIIC (“the Policy”).9 PIIC removed the case to this court pursuant
to 28 U.S.C. § 1332.10 The case was then severed—Kyakwok’s negligence claim
against Yeager was remanded to state court, and this court retained jurisdiction ov er
Yeager’s declaratory judgment claim against PIIC.11 PIIC now moves for summary
judgment.
III. STANDARD OF REVIEW
Summary judgment is appropriate where “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.”12 The
materiality requirement ensures that “only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.”13 Ultimately, “summary judgment will not lie if the . . . evidence is such that
6Doc. 24-10 at 1.
7Doc. 1-2 at 2-4.
8What Yeager styled as a “counterclaim” is actually an affirmative claim against a
third-party defendant. See Fed. R. Civ. P. 14; Arthur R. Miller & Mary Kay Kane, 6 Fed. Prac. &
Proc. Civ. § 1449 (3d ed.).
9Doc. 1-2 at 9 ¶¶ 20-21.
10Doc. 1 at 1.
11Doc. 13.
12Fed. R. Civ. P. 56(a).
13Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
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a reasonable jury could return a verdict for the nonmoving party.”14 However, summary
judgment is mandated under Rule 56(c) “against a party who fails to make a showing
sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.”15
The moving party has the burden of showing that there is no genuine dispute as
to any material fact.16 Where the nonmoving party will bear the burden of proof at trial
on a dispositive issue, the moving party need not present evidence to show that
summary judgment is warranted; it need only point out the lack of any genuine dispute
as to material fact.17 Once the moving party has met this burden, the nonmoving party
must set forth evidence of specific facts showing the existence of a genuine issue for
trial.18 All evidence presented by the non-movant must be believed for purposes of
summary judgment, and all justifiable inferences must be drawn in favor of the
non-movant.19 However, the non-moving party may not rest upon mere allegations or
denials, but must show that there is sufficient evidence supporting the claimed factual
dispute to require a fact-finder to resolve the parties’ differing versions of the truth at
trial.20
IV. DISCUSSION
The parties agree that Yeager is an “insured” under the Policy’s UIM
endorsement because she was occupying a covered automobile at the time of the
14Id.
15Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
16Id. at 323.
17Id. at 323-25.
18Anderson, 477 U.S. at 248-49.
19Id. at 255.
20Id. at 248-49.
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crash.21 PIIC argues that Yeager’s claim is nevertheless precluded by the UIM
endorsement’s Exclusion C.7 (“the exclusion clause”), which states that UIM coverage
“does not apply to . . . [a]nyone using a vehicle without a reasonable belief that the
person is entitled to do so.”22 Yeager disagrees, arguing that the exclusion clause is
void because it violates Alaska statutory law and, alternatively, the clause does not
apply under the facts of this case.
A. Yeager’s Statutory Arguments
Yeager argues that the exclusion clause is void because it violates
AS 28.20.440(b) and AS 21.96.020(c). T he first statute is part of the Motor Vehicle
Safety Responsibility Act (“MVSRA”), codified as Title 28, chapter 20, of the Alaska
Statutes.23 All automobile policies issued in Alaska must meet the content
requirements imposed by the MVSRA.24 Among other things, the requirements found at
AS 28.20.440(b) provide that every liability policy must (1) insure the named insured,
“and every other person using the vehicle with the express or implied permission of the
named insured, against loss from the liability imposed by law for damages arising out of
the . . . use of the vehicle.;”25 and (2) contain uninsured motorist coverage for the
protection of persons insured under the policy who are legally entitled to recover
damages from uninsured motorists for damages arising out of the use of the uninsured
motor vehicle.26
21Doc. 24-13 at 3-4 (“If the Named Insured is designated in the Declaration as . . . [any]
form of organization, then the following are ‘insureds’: . . . Anyone ‘occupying’ a covered
‘auto.’”).
22Id. at 4. This is a standard clause found in uninsured motorist policies. See 2 William
J. Schermer & Irvin E. Schermer, Automobile Liability Insurance § 25:13 (4th ed.).
23Progressive Ins. Co. v. Simmons, 953 P.2d 510, 520 (Alaska 1998).
24Id.
25AS 28.20.440(b)(2).
26AS 28.20.440(b)(3).
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The second statute, AS 21.96.020(c), is part of the Alaska Insurance Act, which
also “sets out ‘required motor vehicle coverage’ in Alaska.”27 The statute “prescribes
requirements partly by referring to provisions of two other statutes, the [MVSRA] and
the Alaska Mandatory Automobile Insurance Act.”28 Relevant to this case,
AS 21.96.020(c) requires automobile liability insurers to offer UIM coverage “prescribed
in AS 28.20.440 and AS 28.20.445 or AS 28.22.” 29
Yeager’s first statutory argument relies on both AS 21.96.020 and AS 28.20.440.
She argues that AS 21.96.020(c) requires PIIC to offer UIM coverage to every person
using a covered vehicle with permission of the named insured, and AS 28.20.440(b)(2)
provides that such coverage must exist for damages arising out of any “use” of the
vehicle.30 She concludes that the exclusion clause violates these two statutes because
it “purports to limit what uses are covered.”31 Yeager’s argument relies on Kalenka v.
Invinity Insurance Companies.32 There, the insurer’s policy limited the covered uses to
those that are “the main cause of a bodily injury or property damage.”33 The Alaska
Supreme Court held that this limitation is void because it reduces the scope of
coverage below the statutory minimum, which does not limit the scope of coverage
depending on the type of “use” that caused the damages.34
27Ayres v. United Servs. Auto. Ass’n, 160 P.3d 128, 129 (Alaska 2007) (citing
AS 21.89.020, the former version of AS 21.96.020). See McDonnell v. State Farm Mut. Auto.
Ins. Co., 299 P.3d 715, 730 n.82 (Alaska 2013) (“Alaska Statute 21.89.020(c)(1) was
renumbered as AS 21.96.020(c)(1).”).
28Ayres, 160 P.3d at 129 n.7.
29AS 21.96.020(c).
30Doc. 30 at 10.
31Id. at 11.
32262 P.3d 602 (Alaska 2011).
33Id. at 610.
34Id. (citing AS 28.22.101(a)).
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Kalenka does not control here. There, the court held that the only causes of
damages that insurers may exclude from liability coverage are those which do not arise
from the “ownership, maintenance, or use” of a vehicle.35 The exclusion clause here
does not purport to limit coverage based on the “use” that caused damages. Instead, it
purports to limit coverage based on the user. Alaska law permits insurers to provide
UIM coverage only to the named insured and permissive users.36 The real question
presented here is whether the exclusion clause limits the covered users below what is
required by Alaska law.
Yeager’s next argument focuses on that very question. Yeager argues that the
exclusion clause is void because it focuses on the user’s “reasonable belief” and not his
or her actual permission, as is required under AS 28.20.440(b). Courts considering
similar arguments have reached divergent conclusions; at least one court ruled that the
clause impermissibly limits the scope of coverage,37 and at least one other upheld the
clause because it expands the required coverage.38 The Alaska Supreme Court has yet
to weigh in.
In order to determine whether the exclusion clause either restricts or expands
upon the minimum coverage required by Alaska law, the court must first determine the
35Id.
36AS 28.20.440(b).
37See Allied Grp. Ins. Co. v. Allstate Ins. Co., 852 P.2d 485, 487 (Idaho 1993) (“The
entitlement exclusion focuses on the driver’s state of mind. I.C. § 49-1212(1)(b), on the other
hand, requires that an owner’s policy of liability insurance shall insure the named person and
any other person using the insured vehicle with the express or implied permission of the named
person. . . . . The entitlement exclusion violates the provisions of I.C. § 49–1212(1)(b), and is,
therefore, not enforceable.”).
38Nationwide Mut. Ins. Co. v. Baer, 439 S.E.2d 202, 204 (N.C. Ct. App. 1994) (holding
that reasonable belief exclusion does not conflict with liability policy statute because it actually
“‘broadens the coverage which it provides beyond those who use the covered vehicle with
permission. It now covers persons who have a subjective, reasonable belief that they are
entitled to use the vehicle.’”) (quoting Aetna Cas. & Sur. Co. v. Nationwide Mut. Ins. Co., 381
S.E.2d 874, 875 (N.C. Ct. App. 1989), aff’d, 392 S.E.2d 377 (N.C. 1990)).
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clause’s meaning. Courts and commentators have noted that the clause “differs from
the traditional ‘omnibus’ clause, which authorizes coverage for a non-owner’s
permissive use of a vehicle” because it “is couched in terms of entitlement rather than
permission, causing a shift in the inquiry from an objective determination, whether the
owner or one in legal possession of the car gave the user permission, to a mixed
objective and subjective determination of the user’s state of mind.”39 The scope of
authority that may form the basis of such “entitlement” has been the subject of much
litigation. According to the Georgia Supreme Court, this aspect of the clause
is susceptible of three logical and reasonable interpretations: that the user
must be authorized by law to drive in order to reasonably believe he is
entitled to use a vehicle; that the user must have the consent of the owner
or apparent owner in order to reasonably believe he is entitled to use the
vehicle; or, that the user must have both consent and legal authorization
in order to be entitled to use the vehicle.40
The court concludes that only the second of these three interpretations is consistent
with the coverage requirements found at AS 28.20.440(b). For a user to be considered
an “insured” under a liability policy, and thereby receive the mandatory UIM coverage
that comes with that status, the user need only be “using the vehicle with the express or
implied permission of the named insured.”41 To require additional permission, such as
the legal authorization, would impermissibly narrow the scope of coverage below the
statutory minimum.
Under Alaska law, insurers may include in their policies exclusions not found in
AS 28.20.440 or other similar statutes so long as the exclusions do not “reduce the
scope of coverage below the legal minimum.”42 If an insurance policy “does not provide
39John Bordeau, et al., 7 Am. Jur. 2d Automobile Insurance § 241 (2nd ed.) (citing Hurst
v. Grange Mut. Cas. Co., 470 S.E.2d 659, 661 (Ga. 1996)).
40Hurst, 470 S.E.2d at 663.
41AS 28.20.440(b)(2).
42Burton v. State Farm Fire & Cas. Co., 796 P.2d 1361, 1363 (Alaska 1990). See also
Nelson v. Progressive Cas. Ins. Co., 162 P.3d 1228, 1231 (Alaska 2007).
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statutorily required coverage, it will be reformed to conform with statutory
requirements.”43 To bring the exclusion clause in this case into compliance with Alaska
law, the court will reform it to make clear that it applies to preclude coverage only where
the individual using the vehicle lacks a reasonable belief that he or she has the named
insured’s permission to do so. After that reformation the exclusion clause is valid
because it expands upon, not limits, the coverage mandated by AS 28.20.440(b).44
B. Interpretation and Application of the Exclusion Clause
The parties dispute the correct interpretation of the exclusion clause, which
presents a question of law.45 In Alaska, insurance contracts are construed according to
the principle of “reasonable expectations,” which means that “‘[t]he objectively
reasonable expectations of applicants and intended beneficiaries regarding the terms of
insurance contracts will be honored even though painstaking study of the policy
provisions would have negated those expectations.’”46 In order to determine the
insured’s reasonable expectations, Alaska courts look to “(1) the language of the
disputed provisions in the policy, (2) other provisions in the policy, (3) extrinsic
evidence, and (4) case law interpreting similar provisions.”47 “Where a clause in an
insurance policy is ambiguous in the sense that it is reasonably susceptible to more
43State Farm Mut. Auto. Ins. Co. v. Houle, 269 P.3d 654, 660 (Alaska 2011).
446-61 New Appleman on Insurance Law Library Edition § 61.05 (“The ‘reasonable
belief’ standard should cover not only those with actual permission, but also those who have a
reasonable basis for so believing.”).
45See Nelson, 162 P.3d at 1231.
46Bering Strait Sch. Dist. v. RLI Ins. Co., 873 P.2d 1292, 1295 (Alaska 1994) (quoting
State v. Underwriters at Lloyds, London, 755 P.2d 396, 400 (Alaska 1988)).
47Allstate Ins. Co. v. Teel, 100 P.3d 2, 4 (Alaska 2004). See also Stordahl v.
Government Employees Ins. Co., 564 P.2d 63, 66 (Alaska 1977).
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than one interpretation, the court accepts that interpretation w hich most favors the
insured.”48 Courts should narrowly construe exclusions to a policy’s coverage.49
PIIC argues that the exclusion clause precludes coverage because Yeager did
not reasonably believe she was entitled to operate the SAFE vehicle while intoxicated
or for personal purposes.50 More specifically, PIIC argues that Yeager could not have
reasonably believed she was entitled to use SAFE’s vehicle to (1) drive from Dillingham
to Lake Aleknagnik to pick up Kyakwok; (2) drive to and from the bar; and (3) drive after
she had become “legally impaired.”51 The court declines to consider PIIC’s first
argument because what matters here are Yeager’s reasonable beliefs at the time of the
collision,52 not when she drove to Lake Aleknagnik. Yeager responds that the exclusion
clause is ambiguous and, in any event, does not apply here.
With respect to Yeager’s argument that the clause is ambiguous, Yeager
focuses on the clause’s usage of the phrase “entitled to [use the vehicle]” and argues
that the scope of the necessary “entitlement” is unclear. Specifically, she asserts that it
is unclear whether the clause evaluates the reasonableness of her belief that she was
permitted to use the vehicle in a specific manner (i.e., while intoxicated),53 or merely
that SAFE had given her permission to use the vehicle.54 Yeager contends that under
the latter, more favorable interpretation, the clause does not apply because she was in
lawful possession of the vehicle at the time of the accident. PIIC’s reply does not
meaningfully address Yeager’s argument. PIIC focuses on the word “use,” not the word
48Bering Strait Sch. Dist., 873 P.2d at 1295.
49Id.
50Doc. 24 at 18.
51Doc. 24 at 8 (citing AS 28.35.030).
52See Doc. 1-2 at 8 ¶ 6; id. at 9 ¶¶ 18-21.
53Doc. 30 at 15.
54Doc. 30 at 14-15.
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“entitled,” and argues that “use” is a broad, unambiguous term that includes driving a
vehicle or riding as a passenger and “perhaps other forms of ‘using’ in other contexts.”55
If “a clause in an insurance policy is ambiguous in the sense that it is reasonably
susceptible to more than one interpretation,” courts accept “that interpretation w hich
most favors the insured.”56 “[T]he mere fact that two parties to an insurance contract
have differing subjective interpretations of that contract does not make it ambiguous.
Rather, ambiguity exists ‘only when the contract, taken as a whole, is reasonably
subject to differing interpretations.’”57
The court concludes that each of Yeager’s two interpretations of the exclusion
clause is reasonable, and therefore the clause is ambiguous.58 The policy does not
specify whether the “entitlement” referenced in the exclusion clause refers to a user’s
method of use or to the user’s permission to use the vehicle. Based on this ambiguity,
the court accepts the interpretation most favorable to Yeager. In other words, the
relevant inquiry is whether Yeager reasonably believed that she had SAFE’s permission
to use SAFE’s vehicle regardless of the method with which she used it.
Applying this interpretation of the exclusion clause to the facts of this case, the
court must decide whether a fact question exists regarding Yeager’s reasonable belief.
55Doc. 38 at 21.
56Bering Strait Sch. Dist., 873 P.2d at 1295.
57Dugan v. Atlanta Cas. Companies, 113 P.3d 652, 655 (Alaska 2005) (quoting U.S. Fire
Ins. Co. v. Colver, 600 P.2d 1, 3 (Alaska 1979)).
58See Hurst v. Grange Mut. Cas. Co., 470 S.E.2d 659, 663 (Ga. 1996) (“The number of
reasonable and logical interpretations makes the clause ambiguous, and the statutory rules of
construction require that we construe the ambiguous clause against the insurer.”) (citations
omitted); Farm & City Ins. Co. v. Gilmore, 539 N.W.2d 154, 157 (Iowa 1995) (“We find that the
term ‘entitled’ in the policy exclusion is ambiguous and we adopt the interpretation most
favorable to the insured. Accordingly, coverage is excluded when a person is using a vehicle
without a reasonable belief that he or she had permission of the owner or apparent owner to do
so.”); State Farm Mut. Auto. Ins. Co. v. Moore, 544 A.2d 1017, 1020 (Pa. Super. Ct. 1988)
(“[W]e find that ‘entitled’ as it is used in the clause at issue is ambiguous. As such, the
provision is to be construed against the insurer, who was the drafter of the agreement.”).
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Whether there has been a permissive use of a vehicle ordinarily presents a question of
fact for the jury.59 There is no dispute that SAFE granted Yeager initial permission to
use the SAFE vehicle and, as a result, the cases upon which PIIC relies involving a
user who lacked such initial permission are inapposite.60 The relevant question here is
instead whether Yeager’s actual use fell within the scope of SAFE’s initial permission.
Courts have adopted three different legal theories for determining whether a
permissive user has sufficiently deviated from the purpose and use for which the initial
permission was granted to defeat coverage: (1) the “conversion” or “strict construction”
rule; (2) the “liberal” or “initial permission” rule; and (3) the “moderate” or “minor
deviation” rule.61 The first and third rules represent opposite extremes. Under the strict
construction rule, “any deviation, no matter how slight,” will defeat coverage. Under the
initial permission rule (referred to by some courts as the “hell or high water rule”), once
initial permission is given, it extends “to any and all uses of the vehicle.” And finally,
under the minor deviation rule, slight or nonmaterial deviations do not preclude
coverage whereas substantial deviations do.62
Yeager does not refer to the initial permission rule by name, but she effectively
advocates for that rule’s application where she argues that her lawful possession of the
vehicle at the time of the accident is sufficient to establish that she reasonably believed
her use was permissive.63 In jurisdictions following the initial permission rule, “when a
597 Am. Jur. 2d Automobile Insurance § 226; Hawkeye-Sec. Ins. Co. v. Bunch, 643 F.3d
646, 651 (8th Cir. 2011); State Farm Mut. Auto. Ins. Co. v. Scheel et al., 973 S.W.2d 560, 567
(Mo. Ct. App. 1998).
60See Allstate Ins. Co. v. U.S. Fid. & Guar. Co., 663 F. Supp. 548, 554 (W.D. Ark. 1987),
aff’d sub nom. U.S. Fid. & Guar. Co. v. Cumpton, 846 F.2d 1147 (8th Cir. 1988); Taylor v. Pekin
Ins. Co., 797 N.W.2d 131 (Table) (Iowa Ct. App. 2010).
617 Am. Jur. 2d Automobile Insurance § 233.
62 Steven Plitt, et al., 8 Couch on Ins. § 113:5 (3rd ed.); 6-63 Appleman on Insurance
§ 63.06.
63See Doc. 30 at 15.
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person is given permission to use a vehicle in the first instance, any subsequent use
‘barring theft or the like,’ is a permissive use” regardless whether that use was
contemplated by the parties.64
In Johnson v. U.S. Fidelity & Guaranty Co.,65 the Alaska Supreme Court was
confronted with the possibility of adopting the initial permission rule, but found it
unnecessary to reach the issue. Johnson involved a car owned by a man who lived in
Ketchikan and worked on the North Slope. The car’s owner told his friend that while he
was out of town the friend could use the car whenever he needed. While the owner
was away, the friend allowed a third party to drive the vehicle, and the third party was
involved in an accident. The court construed the policy’s omnibus clause broadly and
held that the third party’s use was permissive.66 It ruled that the only two restrictions
imposed by the friend on the third party were that the third party had to arrive at the
small boat harbor when requested, and he was “not to ‘monkey’ with” the car, which the
third party understood to mean “not to ‘hot rod’” it.67 Because the third party’s use at
the time of the accident did not violate either of these restrictions, the court held that his
use was within the scope of the owner’s implied permission.68
The Johnson court rendered its decision without deciding which of the three
permissive use legal theories applies in Alaska. Justice Matthews in his concurrence,
however, stated that the court should have reached “the question whether the initial
permission rule should be adopted in Alaska” because a f act question existed as to
whether the third party “was operating the vehicle beyond the permission given to
64Johnson v. U. S. Fid. & Guar. Co., 601 P.2d 260, 265 (Alaska 1979) (Matthews, J.,
concurring). See also 7 Am. Jur. 2d Automobile Insurance § 235.
65601 P.2d at 265.
66Id. at 264.
67Id.
68Id.
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him.”69 Justice Matthews concurred with the outcome of the majority opinion because
he would have adopted the initial permission rule as the rule of decision.
“When interpreting state law, federal courts are bound by decisions of the state’s
highest court.”70 If that court has not addressed the relevant issue, the district court
must use its best judgment to predict how the highest state court would resolve it “using
intermediate appellate court decisions, decisions from other jurisdictions, statutes,
treatises, and restatements as guidance.”71 Because the Alaska Supreme Court has
not decided which of these three rules applies in Alaska, the court must use its best
judgment to predict which rule it would choose.
The Alaska Supreme Court based its Johnson decision on public policy
grounds.72 The Alaska legislature’s “stated policy behind the MVSRA is to ensure that
‘motorists be financially responsible for their negligent acts so that innocent victims of
motor vehicle accidents may be recompensed for the injury and financial loss inflicted
upon them.’”73 Consistent with this public policy, Alaska statutory law mandates
omnibus liability coverage for all permissive users, and Alaska courts construe such
coverage liberally “so as to effectuate its basic intent, which is to protect the public from
damages caused by vehicles operated by persons other than the named insured.”74
Because liability coverage must be construed liberally, it follows that UIM coverage
must be construed in the same manner because the MVSRA requires insurers to
69Id. at 265.
70Strother v. S. Cal. Permanente Med. Group, 79 F.3d 859, 865 (9th Cir.1996)
(quotation omitted).
71Id. (quotation omitted). See also Med. Lab. Mgmt. Consultants v. Am. Broad. Cos.,
Inc., 306 F.3d 806, 812 (9th Cir. 2002).
72Johnson, 601 P.2d at 263.
73Nelson, 162 P.3d at 1236 (quoting AS 28.20.010).
74Johnson, 601 P.2d at 263.
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provide UIM coverage to all insureds under the liability policy.75 These provisions of the
MVSRA evince the Alaska legislature’s robust policy of protecting innocent victims of
automobile accidents, whether they are a third party injured by a permissive user or
they are a permissive user injured by an uninsured third party.
With these public policy principles in mind, the court concludes that the Alaska
Supreme Court would not adopt the strict construction rule. Under this rule any
deviation from the named insured’s grant of permission voids coverage. Contrary to
Alaska’s public policy goals, this rule minimizes coverage of innocent tort victims. It has
not been widely adopted.76 The more difficult determination is whether Alaska would
adopt the minor deviation or the initial permission rule. On one hand, the minor
deviation rule’s moderate approach has been adopted in the “ov erwhelming majority” of
jurisdictions.77 But, on the other hand, the initial permission rule is commonly adopted
in states with financial responsibility laws like Alaska’s that require that “automobile
insurance policies must insure the driver named in the policy, the ‘named insured,’ as
well as any other person using the automobile with the named insured’s express or
75AS 28.20.440(b)(3).
766-63 Appleman on Insurance § 63.06; 6-61 New Appleman on Insurance Law Library
Edition § 61.05.
776-61 New Appleman on Insurance Law Library Edition § 61.05.
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implied permission.”78 This rule best advances the Alaska’s public policy goals by
providing “maximum coverage for injured tort victims.”79
After careful consideration, the court concludes that the initial permission rule
would likely be adopted in Alaska. Of the three possible rules, the initial permission rule
is the most consistent with the legislature’s policy of protecting innocent victims of
automobile accidents. Further, the only Alaska Supreme Court Justice to have weighed
in on this question would have adopted the rule.80 Because it is undisputed that SAFE
granted Yeager initial permission to use its vehicle, PIIC’s summary judgment motion is
denied.
V. CONCLUSION
Based on the preceding discussion, defendant’s motion at docket 24 is DENIED.
DATED this 10th day of June 2015.
/s/ JOHN W. SEDWICK
SENIOR UNITED STATES DISTRICT JUDGE
786-63 Appleman on Insurance § 63.06. See, e.g., Norton v. Lewis, 623 So. 2d 874,
875-76 (La. 1993) (“In our opinion, the narrower ‘minor deviation’ and ‘conversion’ rules
followed by some jurisdictions, which make coverage turn on scope of the permission given in
the first instance, render coverage uncertain, foster unnecessary litigation, and do not comport
with our state’s legislative policy of assuring an available fund for the innocent victims of
automobile accidents.”); Commercial Union Ins. Co. v. Johnson, 745 S.W.2d 589, 591 (Ark.
1988) (same); U. S. Fid. & Guar. Co. v. Fisher, 494 P.2d 549, 551-52 (Nev. 1972) (“Our
Legislature has spoken on the issue, as evidenced by NRS 485.3091, subsection 2, of the
Safety Responsibility Act, supra. Once an owner voluntarily hands over the keys to his car, the
extent of permission he actually grants is irrelevant.”); Progressive N. Ins. Co. v. Concord Gen.
Mut. Ins. Co., 864 A.2d 368, 376 (N.H. 2005) (“We conclude, as have other courts, that the
liberal approach to omnibus coverage under the ‘initial permission’ rule best preserves the
legislature’s goal of protecting accident victims from financial hardship.”).
796-63 Appleman on Insurance § 63.06.
80See Johnson, 601 P.2d at 265 (Matthews, J., concurring) (stating that the initial
permission rule “advances the goal that motorists be financially responsible for their negligent
acts so that those who are wrongfully injured may receive compensation.”).
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