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, email 

corrections@akcourts.us. 

THE SUPREME COURT OF THE STATE OF ALASKA 

ALLSTATE INSURANCE COMPANY

and KATHY BERRY, 

Appellants, 

v. 

MARY KENICK and ANGELINA 

TRAILOV, 

Appellees. 

 ) 

) Supreme Court No. S-16509 

Superior Court No. 4BE-04-00103 CI 

O P I N I O N 

No. 7331 – January 25, 2019 

) 

) 

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) 

) 

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) 

Appeal from the Superior Court of the State of Alaska, 

Fourth Judicial District, Bethel, Charles W. Ray Jr. and 

Bethany S. Harbison, Judges. 

Appearances: Gary A. Zipkin and Kristin E. Bryant, Guess 

& Rudd, P.C., Anchorage; Rebecca J. Hozubin, Hozubin 

Moberly Lynch & Associates, Anchorage; and Peter H. Klee, 

Sheppard, Mullin, Richter & Hampton, LLP, San Diego, 

California, for Appellant Allstate Insurance Company. 

Alfred Clayton, Jr., Clayton & Diemer, LLC, Anchorage, for 

Appellant Kathy Berry. Mark A. Sandberg, Law Office of 

Mark A. Sandberg, Anchorage; Dennis Mestas, Law Office 

of Dennis Mestas, Anchorage; and Myron E. Angstman, 

Angstman Law Office, Bethel, for Appellees Mary Kenick 

and Angelina Trailov. 

Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, 

and Carney, Justices. 

CARNEY, Justice. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I. INTRODUCTION 

We are asked to determine the preclusive effect of a declaratory judgment 

in favor of an insurance company against its insured in federal court in a subsequent state 

court proceeding. The superior court concluded that the declaratory judgment had no 

preclusive effect on a negligent adjustment action brought in state court by the insured’s 

assignees against the insurance company and its claims adjuster. The state action 

proceeded to an 11-day jury trial ending with a multi-million dollar verdict against the 

insurance company and its claims adjuster. 

The insurance company and the adjuster raise a number ofissues on appeal, 

but it is necessary for us to decide only one: the preclusive effect of the federal 

declaratoryjudgment. Thedeclaratory judgment determined that theinsurancecompany 

and the adjuster acted reasonably when they offered policy limits to settle the underlying 

claim against the insured. Because the insurance company’s and adjustor’s 

reasonableness in adjusting the insurance claim is a necessary element of a negligent 

adjustment tort, we hold that the assignees of the insured were precluded from 

relitigating this issue. The superior court therefore erred in denying the insurance 

company’s and claims adjuster’s motions for summary judgment, and we vacate the 

judgment against them. 

II. FACTS AND PROCEEDINGS 

A. Facts 

In mid-September 2002 Charles Herron, who was under the influence of 

alcohol and not old enough to legally possess or consume it, was involved in a singlevehicle accident in Bethel. A 15-year-old passenger in Herron’s vehicle, Angelina 

Trailov, was injured. 

Herron was insured by Allstate Insurance Company. The policy provided 

liability coverage of up to $100,000 per person/$300,000 per occurrence, medical 

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payments coverage of $25,000 per person, and underinsured motorist (UIM) coverage 

of up to $100,000 per person/$300,000 per occurrence. 

Shortly after the accident Allstate was notified of Trailov’s injuries and her 

liability claim against Herron. By the end of September Allstate received notice that 

attorney Michele Power represented Trailov in the matter. Allstate assigned Trailov’s 

bodily injury claim to its in-house claims adjuster, Kathy Berry. Over the next few 

months Berry and Power corresponded regarding Trailov’s claim; much of their 

communication related to obtaining medical records documenting Trailov’s injuries. 

Power made a “policy limits demand plus attorney’s fees, costs and 

interest” for Trailov’s claim in a February 14, 2003, letter to Berry. In the same letter 

Power also for the first time asserted a separate negligent infliction of emotional distress 

(NIED) claim on behalf of Mary Kenick, Trailov’s mother. Power made “a policy limits 

demand plus attorney’s fees, costs and interest” for Kenick’s NIED claim. 

In March Berry responded to Power’s February demand letter. Berry 

requested additional information about any treatment Trailov had received since the 

accident. She also asked for information about Kenick’s NIED claim. 

Power responded in April that Kenick had taken a new job because of her 

emotional distress from the accident (and had taken a substantial pay cut); however, 

Power noted that Kenick had not sought counseling. Power asserted that Trailov had 

been absent-minded and forgetful since the accident and disclosed for the first time that 

Trailov was suffering back pain from the accident. In closing Power wrote: “While the 

offer dated February 14, 200[3], remains open, it will be revoked on May 16, 2003, and 

acomplaint will be filed, unless there is somediscussionregarding pre-filingresolution.” 

On May 9 Berry responded to Power that “[w]e are in the process of 

completing our evaluation of Angelina Trailov’s claimand anticipate responding to your 

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demand by your May 16, 2003 deadline.” Berry stated she needed additional support for 

Kenick’s NIED claim. 

On May 15 Power sent Berry two pay stubs for Kenick as proof of her 

NIED claim; there was no mention of the May 16 deadline in the letter. On May 16 

Berry sent another letter to Power requesting additional information about Kenick’s job 

change and its relationship to the NIED claim. Berry also advised that Allstate’s 

evaluation of Trailov’s claim was not complete: “Our evaluation will be completed by 

the end of the month, and I am hoping to respond to your demand sooner than that.” 

Berry referred the entire claim to a higher-ranking claims adjuster for 

evaluation. That adjuster directed Berry to open a UIM claim for Trailov because, based 

upon her knowledge of similar claims in the Bethel area, Trailov would likely receive the 

$100,000 policy limit on the UIM claim as well as the underlying liability limit of 

$100,000. But the second adjuster suggested offering $10,000 for the NIED claim 

because she did not believe there was sufficient information to determine its value. 

On May 29, 2003, an attorney fromthe Law Office of Dennis Mestas wrote 

to Berry that he had been retained as co-counsel to file suit on behalf of Kenick and 

Trailov. The letter stated that the policy limits offer had lapsed on May 16 and that no 

further policy limits offers would be made or accepted. The following day Berry wrote 

to Power offering to settle Trailov’s bodily injury claim for $112,500, encompassing 

policy limits plus attorneys’ fees. Berry also offered to settle Kenick’s NIED claim for 

$10,000 in an effort to resolve the matter expeditiously, but she advised that if the offer 

was not accepted she would need additional documentation for the claim. 

B. Proceedings 

Three pleadings, and the proceedings related to them, define the current 

appeal. The first pleading is Kenick’s and Trailov’s personal injury and NIED complaint 

against Herron filed in June 2003 in the superior court in Bethel. The second is 

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Allstate’s March 2004 federal complaint against Herron for declaratory relief. And the 

third pleading is the complaint filed by Kenick and Trailov as Herron’s assignees against 

Allstate in April 2004 in the superior court in Bethel. 

In their June 2003 personal injury complaint against Herron, Kenick and 

Trailov sought both compensatory and punitive damages for injuries and distress 

resulting from the September 2002 accident. Herron resolved Kenick and Trailov’s 

personal injury action against him in early April 2004 by signing a consent to entry of 

judgment. Herron consented to judgment in favor of Kenick, on behalf of her minor 

daughter Trailov, for $1,750,000 on Trailov’s liability claims and attorneys’ fees and 

consented to judgment in favor of Kenick for $187,500 on her NIED claim and 

attorneys’ fees. The total judgment entered against Herron was $1,937,500. He also 

assigned to Kenick and Trailov any and all legal claims he possessed against Allstate. 

Herron and Kenick, individually and on behalf of Trailov, also entered into a covenant 

not to execute on any of Herron’s assets other than the potential proceeds from the 

assigned claims against Allstate. 

Meanwhile in early March 2004 Allstate filed a complaint for declaratory 

relief in the U.S. District Court for the District of Alaska in anticipation of Herron 

confessing judgment in the accident-related personal injury suit. Allstate requested a 

declaration that “its good faith attempt to settle Trailov and Kenick’s claims satisfied its 

obligation to its insured, and a further declaration that Allstate [wa]s not obligated to pay 

any portion of the confessed judgment that exceed[ed] the limit of the bodily injury 

coverage afforded Herron under the [p]olicy.” In late May, due to Herron’s April 

confessionofjudgment and assignment of claims, Allstate amended itsfederal complaint 

for declaratory relief. The only material addition was the statement that Herron had 

confessed judgment and assigned his rights against Allstate. 

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In April 2004, shortly after Herron’s confession of judgment, Kenick and 

Trailov, as his assignees, filed a complaint against Allstate and Berry in the Bethel 

superior court. Kenick and Trailov asserted that Allstate and Berry had negligently and 

recklessly adjusted the claims arising from the accident and by doing so they had 

exposed Herron to a large nondischargeable liability. Kenick and Trailov argued that as 

Herron’s assignees they were entitled to compensatory damages in the amounts agreed 

to in the confessed judgments and to punitive damages in an amount to be determined 

by a jury. The superior court action was stayed during the pendency of the federal 

declaratory action. 

InlateJune2004HerronansweredAllstate’s declaratory complaint; Kenick 

and Trailov were not parties to that action. Herron asserted a number of affirmative 

defenses, including an allegation that “the plaintiff’s damages, if any, are the result, in 

whole or in part, of its negligence, or that of others for whom the defendant is not 

responsible.” He also alleged that Allstate had breached the insurance contract. 

In early December 2004 Allstate filed a second amended complaint for 

declaratoryrelief,seekingdeclarations thatHerron breachedtheinsurancecontract when 

he confessed judgment and assigned his rights and that his “breach was not excused by 

any prior material breach by Allstate” and thus “voided the insurance contract.” Later 

that month Allstate filed a notice ratifying Berry’s conduct and actions as an Allstate 

employee. 

Berry was Allstate’s first witness in the federal trial, held in June 2008. 

After describing her employment in 2002-03, she discussed her evaluation of Kenick’s 

and Trailov’s claims. She was cross-examined about actions she took relating to her 

determination of the claims’ reserves, company standards and legal requirements for 

documenting her file, and the language of her communications with Power from 

February to May 2003. Berry was also questioned about alleged delays in obtaining 

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medical records relevant to evaluating Trailov’s claim; her delay in responding to 

Power’scommunications;thelack of documentationabout when sheevaluated Trailov’s 

claim; and the lack of an apparent reason why Trailov’s claim could not have been 

evaluated by May 16, Power’s purported deadline to avoid a lawsuit. In response to 

questioning about the meaning of Power’s April letter, Berry testified that she believed 

it required either that Allstate agree to settle for policy limits or that it engage in 

settlement discussions. Berry testified that she believed that discussion of settlement in 

her May 9 and May 16 letters satisfied the terms of the April letter. 

Allstate called Charles Bean as an expert in handling insurance claims. 

Bean testified that Allstate’s claims handling from February 14 to May 31, 2003, met 

industry standards. Bean also testified to his understanding of the communications 

between Berry and Power, including the meaning of Power’s April letter. Bean opined 

that Berry’s evaluation of Trailov’s claim was of a high quality and that Berry’s 

documentation in the claims log was acceptable. Bean also believed Allstate had acted 

appropriately to protect Herron’s interests. On cross-examination Bean agreed that 

Allstate had a duty to protect Herron and conduct an investigation. He conceded that it 

was unclear when Berry performed her evaluation of Trailov’s claim and that Allstate 

“could” have done the evaluation prior to May 16. 

Allstate also called Power as a witness. Power conceded that her April 

letter was too imprecise for Berry to rely on and that the letter’s meaning was unclear. 

At the close of evidence, after instructing the jury that Allstate had the 

burden of proof in the matter, the court further instructed that: 

An insurer is bound to exercise that degree of care which an 

insurer of ordinary prudence would exercise. Insurance is a 

profession with skill in the investigation and settlement of 

liability claims. It is not an extraordinary degree of care, but 

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the care that a reasonable insurer is required to exercise under 

the circumstances. 

The court next instructed the jury: 

In response to a policy limits demand, an insurer owes a duty 

to its insured to offer the full policy limits available when the 

insurer knows or should know that there is a substantial 

likelihood of an excess verdict against that insured. 

These were the only substantive legal instructions given to the jury in the 13 closing 

instructions. 

Only a single question was submitted to the jury: “Considering all the facts 

and circumstances contained in the evidence submitted to you, did Allstate act 

reasonably by offering policy limits on May 30, 2003?” The jury answered the question 

“yes” and returned the verdict in favor of Allstate. 

The federal court entered judgment that “Allstate did act reasonably by 

offering policy limits on May 30, 2003.” Allstate moved to amend the judgment; the 

federal court granted Allstate’s motion in February 2009. The amended judgment stated: 

1. The jury returned a verdict in favor of Allstate on June 11, 

2008, finding that under all the facts and circumstances 

Allstate acted reasonably by offering policy limits on 

May 30, 2003. 

2. It is undisputed that Herron breached the insurance 

contract by consenting to entry of judgment and assigning his 

rights without Allstate’s consent. 

3. Pursuant to the jury’s verdict, Herron’s breach was not 

excused by any prior breach by Allstate. 

4. Herron’s breach voided the insurance policy’s liability 

coverage. 

5. Herron’s assignment of rights to Trailov and Kenick is 

null and void because Herron had no rights to assign as of the 

date of the assignment. 

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Herron appealed to the Ninth Circuit Court of Appeals in March 2009. He 

argued that the district court’s exercise of jurisdiction was improper, the court erred in 

not granting Herron’s motions for summary judgment or directed verdict, the court erred 

in excluding evidence concerning other claimed breaches by Allstate, and the judgment 

was improperly amended. 

The Ninth Circuit ruled in March 2011 that the district court had not 

improperly exercised its jurisdiction over Allstate’s suit for declaratory relief.1 After 

addressing Herron’s argument that the district court had improperly exercised 

jurisdiction, the Ninth Circuit stated: 

The issues in this suit and the tort suit overlap solely because 

Kenick and Trailov’s rights against Allstate are entirely 

derivative of Herron’s rights under his insurance agreement. 

The jury’s declaration of Allstate’s reasonableness pertains 

to Alaska law defining an insurer’s contractual obligations to 

its insured, not tort law. That declaration may well be fatal to 

Kenick and Trailov’s tort claims against Allstate, but only 

because an unexcused breach of the contract by Herron may 

have thus prevented him from assigning any rights against 

Allstate to Kenick and Trailov in the first place. At bottom, 

Allstate’s suit sounds in contract, not tort, regardless whether 

the merits of this action have become entwined with a 

defenseAllstatemay potentiallyraisetoKenick and Trailov’s 

derivative tort action.[2] 

The Ninth Circuit held that the district court had abused its discretion by 

amending the judgment to include paragraphs 4 and 5.3 The jury had not considered 

1 Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1108 (9th Cir. 2011). 

2 Id. (citing Cont’l Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 293 

(Alaska 1980)). 

3 Id. at 1112-13. 

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whether Herron’s breach prejudiced Allstate enough to void the insurance policy’s 

liability coverage.4 And without a finding of prejudice, Allstate was not relieved of its 

liability up to the policy limits.5 The appeals court then found that entering paragraph 5 

of the judgment was an abuse of discretion, stating: “[B]ecause Allstate remains liable 

to Herron within the insurance policy’s limits, Herron retained assignable rights against 

Allstate to the extent of that liability.”6 

On remand the district court granted partial summary judgment on the issue 

of prejudice in favor of Herron. The district court found that, as a matter of law, 

Herron’s confession of judgment had not prejudiced Allstate and thus had not voided 

Allstate’s obligation to indemnify himup to the policy limits. The court entered a second 

amended final judgment in July 2012. It removed paragraphs 4 and 5 of the first 

amended final judgment and added a new paragraph 4: “Herron’s breach did not 

prejudice Allstate, therefore it did not void the liability portion of the insurance policy.” 

Following the conclusion of the federal case, the superior court lifted its 

stay of the state proceedings. In July 2012 Allstate moved to dismiss the state court case, 

arguing that Herron’s assignment of claims to Kenick and Trailov was invalid and that 

Kenick’s and Trailov’s claims had been conclusively determined in the federal case. 

Berry joined Allstate’s motion. Kenick and Trailov responded that the federal court’s 

holding that Allstate was not prejudiced by Herron’s breach meant that the assignment 

had not been voided. They filed a cross-motion for summary judgment, arguing they 

were not precluded from litigating their negligent adjustment claim because this claim 

4 Id. 

5 Id. at 1113. 

6 Id. 

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had not been adjudicated on the merits to a final judgment in the federal declaratory 

action. 

In March 2013 the superior court denied Allstate’s motion — which it 

treated as a summary judgment motion7 — and granted Kenick and Trailov’s 

cross-motion for summary judgment. The court found that identical issues had not been 

decided in the federal declaratory action; it therefore held that issue preclusion did not 

preclude litigation of the negligent adjustment claim. The court stated that the federal 

court had not “decide[d] any issues of Alaska law outside of that defining Herron and 

Allstate’s contractual relationship” and that the issue of negligence was not identical to 

any issue decided in the federal declaratory action.8 

Allstate and Berry both appeal the superior court’s ruling; they argue that 

the determination of their reasonableness — and by implication whether they were 

negligent — was precluded by the federal declaratory judgment. Because we hold that 

Kenick and Trailov were precluded from relitigating the issue of Allstate and Berry’s 

reasonableness as it relates to the negligent adjustment claim, we do not discuss any later 

superior court proceedings. 

7 The court noted that because matters outside of pleadings were presented 

in Allstate’s motion to dismiss, it was treating it as a motion for summary judgment. See 

Alaska R. Civ. P. 12(b). 

8 Allstate and Berry continued to raise arguments throughout the subsequent 

state court proceedings that Kenick and Trailov’s negligent adjustment claim was 

precluded by the federal decision. None of the court’s later rulings disturbed the 

reasoning outlined in the court’s order denying Allstate’s motion to dismiss and granting 

Kenick and Trailov’s cross-motion for summary judgment. 

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III.	 STANDARD OF REVIEW 

The applicability of issue preclusion “is a question of law subject to 

independent review.”9 “We therefore review de novo whether the elements of [issue 

preclusion] are met.”10 

IV.	 DISCUSSION 

Issue preclusion “bars the relitigation of issues actually determined in 

[earlier] proceedings.”11 Issue preclusion prohibits a party from relitigating an issue of 

fact if the following four factors are met: 

(1) the party against whom the preclusion is employed was a 

party to or in privity with a party to the first action; 

(2) the issue precluded from relitigation is identical to the 

issue decided in the first action; 

(3) the issue was resolved in the first action by a final 

judgment on the merits; and 

(4) the determination of the issue was essential to the final 

judgment.[12] 

A.	 Kenick And Trailov Are In Privity With Herron, Who Was A Party 

To The Federal Action. 

Kenick and Trailov concede that they are in privity with Herron as his 

assignees and that he was a party to the federal declaratory judgment action. The first 

9 Lane v. Ballot, 330 P.3d 338, 341 (Alaska 2014). 

10 Id. 

11 Latham v. Palin, 251 P.3d 341, 344 (Alaska 2011) (alteration in original) 

(quoting Jeffries v. Glacier State Tel. Co., 604 P.2d 4, 8 n.11 (Alaska 1979)). 

12 Id. (quoting Midgett v. Cook Inlet Pre-Trial Facility, 53 P.3d 1105, 1110 

(Alaska 2002)). 

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factor is therefore satisfied. Their concession is also in accord with the approach adopted 

by the Restatement (Second) of Judgments.13 

B.	 The Issue Of “Reasonableness” Is Identical In Both The Federal And 

State Proceedings. 

We now consider the second issue preclusion factor: identity of the issue. 

In the federal proceeding, the jury was asked to determine whether Allstate and Berry 

acted reasonably by offering policy limits on May 30. The jury was instructed on the 

standard of care for an insurer in adjusting claims and on an insurer’s duties to respond 

to a policy limits demand and protect its insured. The jury made a factual finding that 

Allstate acted reasonably by offering the policy limits on May 30. The question before 

us is whether this determination of reasonableness is identical to the determination of 

reasonableness required in the state court action. 

In evaluating this factor we have applied the analysis suggested in 

commentary to the Restatement (Second) of Judgments for resolving identity issues.14 

To determine whether the issue resolved in the federal action is identical to the issue in 

the state action, we weigh a number of considerations, including: 

Is there a substantial overlap between the evidence or 

argument to be advanced in the second proceeding and that 

advanced in the first? Does the new evidence or argument 

13 “A judgment in an action that determines interests in . . . personal property 

. . . [h]as preclusive effect upon a person who succeeds to the interest of a party to the 

same extent as upon the party himself.” RESTATEMENT (SECOND) OF JUDGMENTS § 43 

(AM. LAW INST. 1982). “A judgment in an action by either the assignee or the assignor 

against the obligor of an obligation that has been assigned precludes a subsequent action 

on the obligation by the other of them if the person maintaining the action had power to 

discharge the obligation.” Id. § 55. 

14 Powercorp Alaska, LLC. v. Alaska Energy Auth., 290 P.3d 1173, 1182 

(Alaska 2012), as amended on reh’g (Jan. 7, 2013) (citing RESTATEMENT (SECOND) OF 

JUDGMENTS § 27 cmt. c (AM. LAW INST. 1982)). 

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involve application of the same rule of law as that involved 

in the prior proceeding? Could pretrial preparation and 

discovery relating to the matter presented in the first action 

reasonably be expected to have embraced the matter sought 

to be presented in the second? How closely related are the 

claims involved in the two proceedings?[15] 

No party has identified, nor can we discern, any difference between the 

pretrial preparation and discovery for the federal action and what could reasonably be 

expected in the state court action.16 

The federal jury was tasked with deciding a single issue of fact: it found 

that Allstate had acted reasonably by offering the policy limits on May 30. This factual 

finding allowed the federal court to conclude that Herron’s breach of the contract was 

not excused. But the jury instructions indicate that the determination of reasonableness 

foreclosed any possibility of a claim that Allstate had breached the covenant of good 

faith and fair dealing. 

As wediscussed in Lockwoodv. Geico General InsuranceCo., all contracts 

carry an implied duty of good faith and fair dealing.17 This gives the insured both a 

cause of action that sounds in contract and one that sounds in tort.18 In Lockwood we 

stated that “our precedent makes clear that the element of breach at least requires the 

insured to show that the insurer’s actions were objectively unreasonable under the 

15 Id. (quoting RESTATEMENT(SECOND)OF JUDGMENTS § 27 cmt. c (AM.LAW 

INST. 1982)). 

16 Cf. id. at 1182-83. During the state court trial it was clear there was a 

tremendous amount of overlap of discovery and the evidence that was presented. 

However, in analyzing this issue, we place ourselves in the same position as the superior 

court at the time of the motion to dismiss and cross-motion for summary judgment. 

17 323 P.3d 691, 697 (Alaska 2014). 

18 Id. at 697 n.19. 

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circumstances.”19 The parties do not appear to dispute that the federal jury’s 

determination that Allstate acted reasonably in offering a policy limits demand on 

May 30 forecloses Kenick and Trailov from pursuing a tort claim based on a breach of 

the duty of good faith and fair dealing. 

Butthejury’s finding that Allstateacted reasonably likewiseforecloses any 

claim for negligent adjustment. To find that Allstate or Berry committed the tort of 

negligent adjustment, a fact finder would need to find that Berry had been negligent — 

that she had breached the tort duty of reasonable or ordinary care20 — by not agreeing 

to settle for policy limits before May 30. A finding that she was negligent would be 

inconsistent with the federal jury’s determination that Allstate, which had ratified its 

employee Berry’s conduct, acted reasonably by offering policy limits on May 30. 

While the evidence and argument for each involve application of different 

rules of law, Kenick’s and Trailov’s two claims and legal theories remain entwined. The 

tort of negligent adjustment is an independent cause of action that may be separate from 

a claim based on the insurance contract, but a negligent adjustment claim stems in part 

from the contractual relationship between an insured and an insurance company.21 An 

19 Id. at 697. 

20 See C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d 1216, 1220 (Alaska 

2000) (quoting Cont’l Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 287 (Alaska 

1980)) (stating that an insurance adjuster “could be held liable for negligence arising out 

of a breach of the general tort duty of ordinary care”). 

21 Id. at 1220-22 (Alaska 2000) (“[W]e recognize[] that an insurance adjuster 

owes a duty of care to the insured which is independent of any contractual obligation 

arising out of the insurance policy, and that a breach of this duty is actionable.” (quoting 

Sauer v. Home Indemn. Co., 841 P.2d 176, 184 (Alaska 1992))); Cont’l Ins. Co., 608 

P.2d at 287-88, 288 n.10 (stating adjuster “could not be held liable for a breach of the 

fiduciary duty of good faith arising out of the insurance contract, but he could be held 

(continued...) 

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adjuster’s duties to the insured do not arise from an insurance contract because an 

adjuster is not a party to the contract. But for the adjuster to owe the insured a duty to 

act with reasonable care, a contractual relationship must exist.22 Absent a contractual 

relationship between an insurance company and an insured, an adjuster would owe no 

duty. Kenick and Trailov focus on the fact that Berry was not a party to the federal 

action, but they ignore that Allstate ratified Berry’s conduct and that Berry’s actions as 

Allstate’s in-house adjuster were at issue in the federal action. It was her conduct on 

Allstate’s behalf that the federal jury found to be reasonable. 

The evidence and argument to be advanced in the state proceeding overlap 

significantly with that which was advanced in the federal declaratory action.23 The focus 

of the litigation in both proceedings, as shown by the available record of the federal 

proceeding and as outlined in the underlying complaint, is Berry’s actions or omissions 

in evaluating Trailov’s bodily injury claim and Kenick’s NIED claim, with particular 

focus on what Berry did after receiving Power’s February demand letter and the letter 

with the May 16 deadline.24 

Weighing all of these considerations, we hold that the federal jury’s 

determination that Allstate acted reasonably in offering policy limits on May 30 

encompasses the issue of fact that Berry, as Allstate’s employee, acted reasonably in 

offering policy limits on May 30. 

21 (...continued) 

liable for negligence arising out of a breach of the general tort duty of ordinary care”). 

22 Cf. C.P. ex rel. M.L., 996 P.2d at 1220-21. 

23 See Powercorp Alaska, LLC v. Alaska Energy Auth., 290 P.3d 1173, 1182 

(Alaska 2012), as amended on reh’g (Jan. 7, 2013). 

24 Cf. id. at 1182-83. 

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C.	 The Issue Of Allstate’s Reasonableness Was Resolved In A Final 

Judgment On The Merits. 

Kenick and Trailov argue that “no tort issues were decided in the federal 

case, [only] a series of contract issues were decided.” But this argument seemingly 

conflates the identity of issues factor with the final judgment factor for determining 

whether issue preclusion applies.25 The relevant inquiry here is whether the issue had 

“actually be[en] litigated.”26 We have identified the issue of fact — that Allstate acted 

reasonably. Because this issue was determined by a federal jury, “the issue was resolved 

in the first action by a final judgment on the merits.”27 

D.	 TheDeterminationOfAllstate’sReasonableness Was Essential To The 

Final Judgment. 

The fourth and final factor in determining whether issue preclusion applies 

is whether the issue was essential to the final judgment in the federal case. Allstate’s 

reasonableness was the only issue of fact resolved by the federal jury. It therefore was 

essential to the federal court’s declaration that Allstate had not breached the insurance 

contract and that Herron’s breach was not excused.28 If the federal jury had returned a 

verdict that Allstate had not acted reasonably, Allstate would have been in breach and 

Herron’s breach would have been excused. 

25 As we noted, the second factor of the four-factor issue preclusion test is 

whether the precluded issue is “identical to the issue decided in the first action”; the third 

factor is whether that issue “was resolved in the first action by a final judgment on the 

merits.” See supra 12 (quoting Latham v. Palin, 251 P.3d 341, 344 (Alaska 2011) 

(quoting Midgett v. Cook Inlet Pre-Trial Facility, 53 P.3d 1105, 1110 (Alaska 2002))). 

26 In re Adoption of A.F.M., 15 P.3d 258, 268 n.46 (Alaska 2001). 

27 Id. 

28 Cf. Powercorp Alaska, LLC., 290 P.3d at 1183. 

-17-	 7331
 
 

 

 

 

 

 

 

 

Because all four factors of issue preclusion are met, Kenick and Trailov are 

precluded from relitigating the issue of reasonableness. An essential element of the tort 

of negligent adjustment is the lack of reasonable care; the federal jury found that there 

was no such lack.29 The superior court erred in denying Allstate and Berry’s motion to 

dismiss. 

V. CONCLUSION 

We VACATE the jury’s verdict and resulting judgment. We REVERSE 

the superior court’s order denying the motion to dismiss and REMAND for dismissal of 

the complaint consistent with this opinion. 

See C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d 1216, 1220-21 (Alaska 

2000); Cont’l Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 287 (Alaska 1980). 

-18- 7331 

29