Court Opinion

ID: 5141952
Source: CourtListenerOpinion
Date Created: 2021-12-31 01:02:21.368152+00
Date Added: 2024-06-11T08:24:31.793047
License: Public Domain

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
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             THE SUPREME COURT OF THE STATE OF ALASKA

ALLSTATE INSURANCE COMPANY, )
                            )                         Supreme Court Nos. S-17307/17610
             Appellant,     )                         (Consolidated)
                            )
    v.                      )                         Superior Court No. 4FA-16-02769 CI
                            )
NATHAN HARBOUR,             )                         OPINION
                            )
             Appellee.      )                         No. 7545 – July 23, 2021
                            )
                            )
ALLSTATE INSURANCE COMPANY, )
                            )
             Appellant,     )
                            )
    v.                      )                         Superior Court No. 4FA-17-01656 CI
                            )
KENNETH N. MATTISON,        )
                            )
             Appellee.      )
                            )

            Appeal in File No. S-17307 from the Superior Court of the
            State of Alaska, Fourth Judicial District, Fairbanks, Douglas
            Blankenship, Judge. Appeal in File No. S-17610 from the
            Superior Court of the State of Alaska, Fourth Judicial
            District, Fairbanks, Douglas Blankenship and Earl A.
            Peterson, Judges.

            Appearances: Elizabeth Slattery and Alfred Clayton, Jr.,
            Clayton & Diemer, LLC, Anchorage, for Appellant. Ward
            Merdes, Merdes Law Office, P.C., Fairbanks, for Appellees.
             Before: Bolger, Chief Justice, Winfree, Maassen, and
             Borghesan, Justices. [Carney, Justice, not participating.]

             WINFREE, Justice.

I.    INTRODUCTION
             The primary issue in these consolidated appeals is the scope of an
automobile insurance policy’s arbitration provision. Two insureds with identical Allstate
Insurance Company medical payments and uninsured/underinsured motorist (UIM)
insurance coverage settled with their respective at-fault drivers for applicable liability
insurance policy limits and then made medical payments and UIM benefits claims to
Allstate. Allstate and the insureds were unable to resolve the UIM claims and went to
arbitration as the policy required. The arbitration panels initially answered specific
questions submitted about the insureds’ accident-related damages. At the insureds’
requests but over Allstate’s objections, the panels later calculated what the panels
believed Allstate ultimately owed the insureds under their medical payments and UIM
coverages and issued final awards. Allstate filed superior court suits to confirm the
initial damages calculations, reject the final awards as outside the arbitration panels’
authority, and have the court determine the total amounts payable to the insureds under
their policies. The judge assigned to both suits affirmed the final arbitration awards;
Allstate appealed both decisions, which we consolidated for consideration and decision.
             Because the arbitration panels had no authority to determine anything
beyond the insureds’ damages arising from their accidents and because Allstate withheld
its consent for the panels to determine anything else, we reverse the superior court’s
decisions and judgments. We also reverse some aspects of the court’s separate analysis
and rulings on legal issues that the panels improperly decided. Given (1) the arbitration
panels’ damages calculations and (2) our clarification of legal issues presented, we

                                           -2-                                      7545
remand for the superior court to determine the amount, if any, Allstate must pay each
insured under their medical payments and UIM coverages.
II.    BASIC UIM CONCEPTS
              Automobile liability insurers issuing bodily injury and death policies in
Alaska must offer optional UIM coverage.1 An underinsured motor vehicle is statutorily
defined as having insurance policy liability limits that are less than the damages for
bodily injury or death that an accident victim is legally entitled to recover from the
vehicle’s owner or operator.2 In other words, UIM coverage insures against the risk that
a liable motorist with no or insufficient liability insurance coverage may be unable to pay
the insured’s accident-related damages.
              UIM coverage is excess coverage.3 An insurer’s maximum UIM liability

       1
             AS 21.96.020(c) (requiring, in Title 21’s regulation of insurance in Alaska,
that automobile liability insurer for bodily injury and death offer UIM coverage at
various policy limit options); AS 28.20.440(a)-(b) (setting out, in Alaska Motor Vehicles
Safety Responsibility Act (AMVSRA), required provisions of motor vehicle liability
policy, including that accompanying UIM coverage must not be below mandatory
minimum for liability insurance); AS 28.20.445 (setting out, in AMVSRA, requirements
for UIM coverage); AS 28.22.201-.231 (setting out, in Alaska Mandatory Automobile
Insurance Act (AMAIA), additional UIM coverage provisions); see generally
Progressive Ins. Co. v. Simmons, 953 P.2d 510, 520-22 (Alaska 1998) (discussing
interplay between Title 21, AMVSRA, and AMAIA). Insureds may waive UIM
coverage in writing. AS 21.96.020(e); AS 28.22.201(a)(3); AS 28.20.445(e)(3).
       2
               AS 28.90.990(30). The statute does not define “uninsured motor vehicle”
but the term’s meaning is clear from the context; it is a motor vehicle not covered by
liability insurance to pay the damages that an accident victim is legally entitled to recover
from the at-fault vehicle’s owner or operator.
       3
            AS 28.20.445(b) (providing UIM coverage is “excess to” amounts payable
under automobile liability, medical payments, and workers’ compensation coverages and
“may not duplicate amounts paid or payable” under those coverages); see generally
                                                                         (continued...)

                                            -3-                                        7545
is “the lesser of” (1) the difference between the insured’s damages caused by an
underinsured motorist and the amounts paid to the insured “by or for a person who is or
may be held legally liable for the damages” or (2) the UIM coverage limits.4
                The legislature has not barred insurers from including arbitration provisions
in UIM coverage policies. But the legislature has mandated that UIM arbitration
provisions provide that “all expenses and fees, not including counsel fees or adjuster
fees, incurred because of arbitration or mediation shall be paid as determined by the
arbitrator.”5
III.   FACTS AND PROCEEDINGS
       A.       The Insureds’ Allstate Coverage
                Allstate issued separate automobile insurance policies to Nathan Harbour
and Kenneth Mattison. The policies have identical provisions for medical payments6 and

       3
             (...continued)
Simmons, 953 P.2d at 514-15 (discussing 1990 statutory change of UIM coverage from
“reduction” framework, starting with UIM policy limits and reducing for all amounts
paid or payable to insured from other sources, to an “excess” framework, compensating
an insured when other recovery sources are exhausted but insured has remaining
uncompensated damages); Victor v. State Farm Fire & Cas. Co., 908 P.2d 1043, 1044
(Alaska 1996) (subtracting settlement with at-fault driver from insured’s damages instead
of reducing UIM policy limit to determine insurer’s UIM liability).
       4
                AS 28.20.445(a).
       5
             AS 21.96.020(f)(1); cf. AS 09.43.480(b) (authorizing arbitrator to award
attorney’s fees and other arbitration expenses if otherwise allowed by law), .480(d)
(authorizing arbitrator to order payment of arbitrator’s fees and expenses, along with
other expenses, in award).
       6
                See 11 STEVEN PLITT ET. AL., Couch on Insurance § 158:1 (3rd ed. 2020):
                Standard liability insurance policies . . . generally contain . . .
                provisions by which the insurer undertakes to pay up to a
                                                                                   (continued...)

                                               -4-                                         7545
UIM coverages. The medical payments coverage limit for each insured is $100,000 per
person. The coverage contains a subrogation provision that if Allstate makes medical
payments for an insured, the insured’s “rights of recovery from anyone else become
[Allstate’s] up to the amount [Allstate has] paid.”7
             The UIM bodily injury coverage limit for each insured is $100,000 per
person. The policies clarify that Allstate’s UIM coverage is “excess” coverage, applying
only “over and above” any amounts otherwise available to the insured, including from
someone who is or may be legally liable for the insured’s damages, liability insurance,
workers’ compensation insurance, and applicable medical payments insurance. The
policies also clarify that “[i]n no event will an insured person be entitled to receive
duplicate payments for the same elements of loss” and that Allstate has no obligation to
pay any UIM benefits until all other insurance “ha[s] been used up by payments,
judgments or settlements.”

      6
             (...continued)
             stated maximum amount for medical or funeral expenses
             incurred by persons injured or killed as a result of the
             condition or use of [an] . . . automobile. . . . A typical medical
             payments clause . . . states rather directly that the insurer will
             pay “reasonable” expenses paid for “necessary” medical and
             funeral services required because of “bodily injury” caused
             by an “accident” and sustained by the insured and/or other
             described persons.
              Allstate’s medical payments coverage, in essence, provides that Allstate
will pay a defined insured’s medical bills arising from an accident up to a stated limit,
sets time limitations for payable medical bills, and limits duplicate payments.
      7
              See Ruggles ex rel. Estate of Mayer v. Grow, 984 P.2d 509, 512 (Alaska
1999) (“When an insurer pays expenses on behalf of an insured it is subrogated to the
insured’s claim. The insurer effectively receives an assignment of its expenditure by
operation of law and contract.”).

                                            -5-                                    7545
              The UIM “Insuring Agreement” states that, excluding punitive damages,
Allstate “will pay all damages” for bodily injury and property damage “that an insured
person is legally entitled to recover from the owner or operator of an . . . underinsured
auto.” It then states that the “right to benefits and the amount payable will be decided
by agreement between the insured person and Allstate” (bold text in original). A later
“Limits of Liability” section sets out the statutory limit on contractual liability for
“damages,” i.e., the lesser of (1) the damages incurred minus all amounts paid to the
insured on the at-fault driver’s behalf or otherwise paid under medical payments and
workers’ compensation insurance or (2) the policy face limits for the UIM coverage.
Particularly relevant to these appeals, the policy contains a provision requiring that, if the
parties cannot resolve the UIM claim, they will arbitrate two issues: (1) the insured’s
“right to receive any damages” and (2) “the amount” of those damages. The arbitration
provision, as required by statute, also provides that expenses and fees incurred during
arbitration, except attorney’s or adjuster’s fees, shall be paid as the arbitrator determines.
       B.     The Insureds’ Accidents And Settlements With At-Fault Drivers
              The insureds were injured in unrelated car accidents; the other drivers
undisputedly were at fault. Allstate paid medical expenses of $21,784 for Harbour and
$5,982.52 for Mattison under their medical payments coverages. Allstate sent each
insured notice that it intended to negotiate its right of recovery with the responsible
driver. Allstate later instructed the insureds that they were not authorized to pursue its
subrogated claims.8

       8
             See id. (“If the insurer does not object, the insured may include the
subrogated claim in its claim against a third-party tortfeasor. Any proceeds recovered
must be paid to the insurer, less pro rata costs and fees incurred by the insured in
prosecuting and collecting the claim. But the subrogated claim belongs to the insurer.
The insurer may pursue a direct action against the tortfeasor, discount and settle its claim,
                                                                             (continued...)

                                             -6-                                        7545
              The insureds settled with the at-fault motorists for their respective liability
insurance policy limits. Harbour received policy limits of $100,000 plus additional
available amounts for prejudgment interest, attorney’s fees, and costs, for a total of
$121,407.96. Mattison received policy limits of $100,000, but prejudgment interest was
unavailable under the at-fault driver’s liability insurance policy; Mattison did not seek
attorney’s fees and costs available under the liability policy.
              The insureds, represented by the same attorney, then submitted claims to
Allstate for medical payments and UIM benefits.
       C.     Arbitrations
                The insureds’ claims could not be resolved and were submitted to
arbitrations pursuant to Allstate’s UIM arbitration provision. The arbitration panels, with
two members in common, issued similar prehearing orders expressly limiting the
arbitration’s scope to: (1) whether the insured had a right to receive damages from the
at-fault driver; (2) the amount of such damages; and (3) the allocation of arbitration fees
and expenses.
              1.     Harbour’s arbitration
              Harbour’s arbitration panel initially determined that he incurred $93,797
in damages as a result of his accident, including $16,743 in medical bills not already paid
by Allstate under his medical payments coverage.9 The panel expressly excluded from
its damages calculation the $21,784 Allstate already had provided under Harbour’s

       8
             (...continued)
or determine that the claim should not be pursued.”).
       9
              The arbitration panel also concluded, apparently based on Allstate’s
medical payments coverage, that Harbour’s future medical bills attributable to the
accident “[s]hall be paid [by Allstate] to the extent they are incurred as recommended”
by Harbour’s doctor, “limited to [five] years from the date of loss.”

                                            -7-                                        7545
medical payments coverage. This presumably reflected either (1) the panel’s recognition
that UIM coverage is excess to medical payments coverage or (2) that Harbour was not
entitled to recover Allstate’s subrogated claim from the at-fault driver. But the panel did
not differentiate between Harbour’s medical payments and UIM coverages when it
included as damages the $16,743 in medical bills not already paid by Allstate.
              During the arbitration Harbour had asked the panel to award prejudgment
interest, attorney’s fees, and costs based on the damages amount. Allstate asserted that
these matters were outside the arbitration’s scope and did not consent to their arbitration.
The panel initially did not address Harbour’s request but stated that either party could ask
the panel to resolve future disputes about Allstate’s ultimate liability to Harbour,
including how to address the offset for his prior recovery from the at-fault driver’s
liability insurance coverage. The panel ordered Allstate to pay all arbitration costs.
              Allstate and Harbour disagreed on the amount Allstate owed Harbour.
Harbour contended he was owed nearly $25,000 in policy benefits. Allstate contended
that Harbour was not entitled to UIM benefits because the at-fault driver was not an
underinsured motorist; in the initial settlement the at-fault driver’s liability insurer had
paid more in damages ($100,000 face amount before add-ons for prejudgment interest,
attorney’s fees, and costs) than what the arbitration panel had determined was legally
recoverable from the at-fault driver ($93,797 before add-ons). Allstate also contended
that it was entitled to payment from the “excess” settlement funds to at least partially
satisfy its subrogated claim for the $21,784 paid under Harbour’s medical payments
coverage. Allstate agreed that its subrogated claim should be reduced by a pro rata share
of Harbour’s attorney’s fees incurred in recovering this portion of the medical payments
from the at-fault driver.
              Harbour asked the arbitration panel to clarify the initial award and enter a
final award recalculating his damages by including: Allstate’s subrogated medical

                                            -8-                                       7545
payment claim in his UIM damages; costs, prejudgment interest, and attorney’s fees
based on the damages award; and a pro rata share of his attorney’s fees incurred
obtaining the settlement with the at-fault driver’s insurer. Pro rata fees in this context
would be 100% under the theory that the settlement benefitted only Allstate by giving
it an offset against UIM damages. Allstate repeatedly objected that revisiting the award
exceeded the panel’s authority; it filed a superior court complaint to confirm the initial
award. To avoid consenting to the panel’s expanded authority, Allstate did not respond
to the merits of Harbour’s additional claims.
              The arbitration panel increased the award almost entirely as Harbour
requested. The panel determined that Allstate should reimburse Harbour the $41,243.61
in attorney’s fees and costs he incurred obtaining the settlement from the at-fault driver’s
insurer and that it should pay interest and attorney’s fees on the net damages amounts.
The panel’s final judgment was that Allstate owed Harbour $39,206.13. The panel
expressly rejected Allstate’s contention that the panel had no authority to determine
Allstate’s ultimate contractual obligation to Harbour, stating that the arbitration provision
submitted “the damages issues in this matter” to arbitration. One panel member
dissented, agreeing with Allstate that the panel had no authority to determine Allstate’s
ultimate contractual obligation to Harbour.
              2.     Mattison’s arbitration
              Mattison’s arbitration panel determined that he incurred $145,486 in
damages as a result of his accident. The panel itemized $32,891 of the damages as past
medical bills. But the panel did not reference the $5,982.52 in medical payments Allstate
already had made on Mattison’s behalf or Allstate’s assertion that Mattison had no
authority to pursue recovery of its subrogated claim.
              Mattison then asked the panel to award additional amounts for prejudgment
interest, attorney’s fees, and costs based on the damages amount. Allstate asserted that

                                            -9-                                        7545
these matters were outside the arbitration’s scope, and it did not consent to their
arbitration. The panel initially did not address the matter, but, as in the Harbour
arbitration, the panel stated that either party could ask the panel to resolve future disputes
about Allstate’s ultimate liability to Mattison. The panel ordered Allstate to pay all
arbitration costs.
              Allstate and Mattison disagreed on the amount Allstate owed Mattison.
Mattison asked the arbitration panel to adjudicate his unresolved claims for interest,
attorney’s fees, costs, and a pro rata share of attorney’s fees incurred to secure his
settlement. Because interest had undisputedly not been available under the uninsured
motorist’s liability coverage, Mattison also requested interest on his settlement with the
underinsured motorist. Allstate opposed Mattison’s request, arguing, as it had in
Harbour’s matter, that the panel did not have authority to determine Allstate’s ultimate
contractual liability. Allstate filed a superior court complaint to confirm the initial
award.
              The arbitration panel issued a final decision, rejecting Allstate’s contention
that the panel had no authority to decide anything beyond the specific questions set out
in the pre-arbitration order. The panel ordered Allstate to reimburse Mattison’s
attorney’s fees and costs, totaling just under $35,000, incurred in obtaining the settlement
with the at-fault driver. The panel rejected Mattison’s request for attorney’s fees based
on the damages determination because he had failed to obtain available attorney’s fees
coverage from the at-fault driver’s liability insurance. But the panel decided that
Mattison was entitled to interest on the damages, including the attorney’s fees awarded
for his efforts to collect from the at-fault driver. The final amount payable to Mattison
was $90,123.62. One panel member dissented, agreeing with Allstate that the panel did
not have authority to determine Allstate’s ultimate contractual obligation to Mattison.

                                            -10-                                        7545
       D.     Superior Court Proceedings
              Shortly after the arbitration panels issued their initial determinations, but
before the objected-to second rounds of arbitration proceedings, Allstate filed complaints
asking the superior court to confirm the initial damages determinations and then decide
Allstate’s ultimate contractual obligation to the insureds. After the panels issued their
final decisions, Allstate amended its complaints to seek relief vacating those decisions.
The same superior court judge was assigned the two cases, and the court consolidated
them for hearing but not for decision.10 The court ultimately confirmed both final awards
on summary judgment,11 deciding Harbour’s case first, then citing that decision in
Mattison’s case.
              The superior court recognized that arbitrability is a matter for the court to
decide but held that the panels had authority to issue the expanded final awards. The
court suggested that the panels’ authority “likely expanded” when the insureds submitted
the additional issues to the panels, and the court cited case law “suggest[ing]” that when
an arbitration panel is asked to decide a party’s “total damages from a tortfeasor” it also
may consider “amounts payable under the insurance policy.” The court concluded that
the panels’ consideration of payments related to, but beyond, the “damages” the at-fault
drivers owed was “reasonable.” The court then concluded that the panels’ decisions did
not otherwise violate law.

       10
              Superior Court Judge Douglas Blankenship heard and decided Harbour’s
case. Judge Blankenship also heard Mattison’s case and wrote the decision at issue in
this appeal; before all pending issues were resolved Judge Blankenship retired, and
Mattison’s case was reassigned to Judge Earl A. Peterson.
       11
              See Alaska R. Civ. P. 56(c) (providing party is entitled to summary
judgment if there is no genuine issue of material fact and party is entitled to judgment as
matter of law on undisputed facts).

                                           -11-                                      7545
              Allstate appealed both superior court decisions, and we consolidated the
appeals for consideration and decision.
IV.      STANDARD OF REVIEW
              We review grants of summary judgment de novo “and will affirm if there
are no genuine issues of material fact and the winning party was entitled to judgment as
a matter of law.”12 We review “a superior court’s review of an arbitration decision de
novo when it deals with questions of law and contract interpretation.”13 “Whether a
dispute is arbitrable and whether a superior court’s decision to affirm an arbitration
award is correct are both questions of law . . . review[ed] de novo.”14 But an “arbitrator’s
legal conclusions are . . . unreviewable, except where they pertain to arbitrability.”15
V.       DISCUSSION
         A.   The Panels Exceeded Their Arbitration Authority By Deciding Issues
              That Allstate Did Not Agree To Arbitrate.
              Arbitration clauses are creatures of contract,16 and “a party cannot be
required to submit to arbitration any dispute which [the party] had not agreed” to
submit.17 Courts “decide whether . . . a controversy is subject to an agreement to

         12
              Sidney v. Allstate Ins. Co., 187 P.3d 443, 447 (Alaska 2008).
         13
              Id. (emphasis omitted).
         14
              Id. at 447-48 (emphasis and citations omitted).
         15
              Kinn v. Alaska Sales & Serv., Inc., 144 P.3d 474, 487 (Alaska 2006).
         16
              Geotek Alaska, Inc. v. Jacobs Eng’g Grp., Inc., 354 P.3d 368, 374 (Alaska
2015).
         17
              Id. (quoting Classified Emps. Ass’n v. Matanuska-Susitna Borough Sch.
Dist., 204 P.3d 347, 353 (Alaska 2009)).

                                           -12-                                       7545
arbitrate.”18 But if interpretation of other contract provisions is necessary to determine
whether a claim fits within the contract’s arbitration clause, the arbitrator’s contract
interpretation is given due weight if the parties did not seek a pre-arbitration ruling on
arbitrability.19 For example, when a construction contract’s arbitration clause authorized
arbitrators to decide “[a]ll claims, disputes and other matters arising out of or relating to”
the contract, we said that this “necessarily gave the arbitrators power to interpret the
contract[;] otherwise it would have been impossible for them to determine which claims
or disputes they could properly arbitrate.”20 We said the later reviewing court then was
limited to determining
              . . . whether the construction of the contract made by the
              arbitrator[s] is a reasonably possible one that can seriously be
              made in the context in which the contract was made. Stated
              affirmatively, if all fair and reasonable minds would agree
              that the construction of the contract made by the arbitrator[s]
              was not possible under a fair interpretation of the contract,
              then the court would be bound to vacate or refuse to confirm
              the award. [21]

         18
                AS 09.43.330(c). Contracting parties may delegate to an arbiter the
authority to resolve questions of arbitrability, but they must do so “clearly and
unmistakably.” Lexington Mktg. Grp. v. Goldbelt Eagle LLC, 157 P.3d 470, 473 (Alaska
2007). Allstate’s policies in this matter do not address the forum for resolving questions
of arbitrability and therefore do not “clearly and unmistakably” delegate such authority.
See id. (“Because the arbitration clause . . . is silent on the proper forum to decide
arbitrability, it does not ‘clearly and unmistakably’ rebut the presumption that the courts
decide whether a dispute is arbitrable under the terms of the agreement.”).
         19
              Univ. of Alaska v. Modern Constr., Inc., 522 P.2d 1132, 1136-39 (Alaska
1974).
         20
              Id. at 1137 (first alteration in original).
         21
              Id. (alterations in original) (quoting Pirsig, Some Comments on Arbitration
                                                                            (continued...)

                                            -13-                                        7545
We concluded that the arbitrators’ decision, that the contractor could assert a claim for
“ ‘impact’ damages” arising from the project owner’s project delays despite no mention
of impact damages in the contract, “was not based upon an unreasonable interpretation
of the contract” and the claim therefore was arbitrable.22
              Harbour’s and Mattison’s arbitration panels concluded that they had
authority to determine the total amounts payable under the insureds’ coverages despite
their pre-arbitration orders expressly limiting the arbitrations’ scope to: (1) whether the
insured had a right to recover damages from the at-fault driver; (2) the amount of such
damages; and (3) the allocation of arbitrable fees and expenses. The superior court
agreed, concluding that the panels’ authority “likely expanded” to include total amounts
payable when the insureds asked the panels to determine Allstate’s ultimate liability
under the coverages. But Allstate did not consent to expanding arbitration authority; to
the contrary, it repeatedly and affirmatively withheld consent. The panels therefore had
no authority to determine the total benefit amounts payable under the policies unless that
authority can be found or implied by law in the arbitration provision; we conclude that
it cannot.
              Because the parties did not delegate to the arbitration panels the authority
to resolve questions of arbitrability, the arbitration panels were bound by applicable law

       21
             (...continued)
Legislation and the Uniform Act, 10 VAND.L.REV. 685, 706 (1957)).
       22
              Id. at 1138; accord Ahtna, Inc. v. Ebasco Constructors, Inc., 894 P.2d 657,
660-63 (Alaska 1995); see also Classified Emps. Ass’n v. Matanuska-Susitna Borough
Sch. Dist., 204 P.3d 347, 352-59 (Alaska 2009) (applying same analysis to superior
court’s pre-arbitration ruling on arbitrability of union grievance by determining whether
asserted claims fell within contract definition of “grievance” subject to arbitration).

                                           -14-                                      7545
in determining the scope of their authority.23 This includes precedent stating that we
interpret insurance contracts by looking to: (1) the policy language; (2) other provisions
in the policy; (3) extrinsic evidence; and (4) “case law interpreting similar provisions.”24
The specific question before us is whether, given the arbitration clause’s limitation to
“damages” determinations, the arbitration panels reasonably could interpret “damages”
to include not only damages legally caused by the at-fault drivers, but also the benefits
ultimately payable under the insureds’ insurance policies.
              Context always is key. The arbitration clause is not an expansive provision
covering any and all claims arising out of or related to Allstate’s insurance policy (or
even the UIM coverage). The parties were following a dispute resolution process
unrelated to a breach of contract damages claim under Allstate’s policy. The primary
factor of any UIM claim is determining the damages the insured would be legally entitled
to recover from the at-fault uninsured or underinsured motorist. Once those damages are
determined as a matter of fact, Allstate and its insured should be in a position to
calculate, based on policy language and controlling law, what Allstate owes under its
coverage.
              Our analysis thus begins with the relevant portions of Allstate’s UIM
coverage language:

       23
              See AS 09.43.330(c) (“The court shall decide whether an agreement to
arbitrate exists or a controversy is subject to an agreement to arbitrate.”); Lexington
Mktg. Grp., 157 P.3d at 473 (requiring “clear[] and unmistakabl[e]” delegation of
authority to resolve questions of arbitrability); cf. Modern Constr., 522 P.2d at 1140
(“The general rule . . . is that arbitrators need not follow otherwise applicable law when
deciding issues properly before them.” (emphasis added)).
       24
              Hahn v. GEICO Choice Ins. Co., 420 P.3d 1160, 1170 (Alaska 2018).

                                           -15-                                       7545
Insuring Agreement
[Allstate] will pay all damages, other than punitive or
exemplary damages, that an insured person is legally entitled
to recover from the owner or operator of an uninsured or
underinsured auto because of:
1.    bodily injury sustained by an insured person . . . .
      The bodily injury . . . must be caused by accident and
      arise out of the ownership, maintenance or use of an
      uninsured or underinsured auto. The right to benefits
      and the amount payable will be decided by agreement
      between the insured person and Allstate.
      ....
Limits of Liability
1.    The coverage limit shown on the Policy Declarations
      for:
      a)      “each person” is the maximum thatwe will pay
             for all damages arising out of bodily injury to
             one person in any one motor vehicle
             accident . . . .
      ....
3.    Subject to this maximum, [Allstate’s] limit of liability
      will be the lesser of:
      a)      The difference between the amount of an
             insured person’s damages for bodily injury . . .
             and the amount paid to that insured person for
             such damages, by or for a person who is or may
             be held legally liable for damages, including all
             sums paid under [this policy’s liability
             coverage]; and
      b)      The applicable limit of liability for this
             coverage.
4.    Any amounts otherwise payable for damages under

                            -16-                                 7545
                    this coverage shall apply over and above any amounts
                    available to the insured person because of the bodily
                    injury:
                    a)      By or for a person who is or may be held
                           legally liable for damages. This includes all
                           sums paid under [this policy’s liability
                           coverage].
                    b)      Under any of the following:
                           i.     Workers’ compensation law; or
                           ii.    Automobile medical payments coverage.
                    ....
             5.     [Allstate is] not obligated to make any payment for
                    bodily injury . . . under this coverage until the limits
                    of liability of all bodily injury . . . liability bonds and
                    policies that apply have been used up by payments,
                    judgments or settlements.
                    ....
             If We Cannot Agree
             If the insured person or [Allstate] don’t agree on that
             person’s right to receive any damages or the amount, then at
             the written request of either, the disagreement will be settled
             by arbitration. (Emphasis added; bold text in original.)
             The text of Allstate’s UIM coverage establishes that damages caused by an
underinsured motorist are distinct from benefits ultimately payable under the UIM
coverage. The first paragraph of Allstate’s UIM Insuring Agreement obligates Allstate
to pay “all damages . . . that an insured person is legally entitled to recover from the
owner or operator of an uninsured or underinsured auto.” But the UIM Insuring
Agreement then discusses an insured’s ultimate “right to benefits and the amount
payable” under the coverage. The policy distinguishes between damages and benefit
amounts payable because Allstate’s UIM coverage, by law and by contract language

                                           -17-                                   7545
limiting Allstate’s UIM liability, is excess coverage.25 UIM coverage begins only after
an insured exhausts recovery from all other available sources, such as an at-fault driver’s
liability coverage, the insured’s medical payments coverage, and any applicable workers’
compensation payments.26 The insurance policy refers to the amount an insured person
would have been legally entitled to recover from an at-fault driver as “damages”; it refers
to what the insured is entitled to recover from Allstate as “amount payable,” a sum that
may differ from an insured’s damages due to alternative recovery sources and add-ons
allowed by the policy.27
              In State Farm Mutual Automobile Insurance Co. v. Dowdy we discussed
a similar UIM arbitration clause committing to arbitration two questions: “(1) ‘Is the
insured legally entitled to collect damages from the owner or driver of the uninsured

       25
              AS 28.20.445(b) (defining UIM coverage as “excess” coverage); see Sidney
v. Allstate Ins. Co., 187 P.3d 443, 448 (Alaska 2008) (“In 1990 Alaska adopted an
‘excess’ coverage approach to underinsured motorist insurance.”); State Farm Mut. Auto.
Ins. Co. v. Wilson, 199 P.3d 581, 584-85 (Alaska 2008) (“The new statutory system,
referred to as an ‘excess’ approach, still sought to ensure that UIM coverage was
secondary to other sources of coverage and that it not be available to make duplicative
payments.”); Progressive Ins. Co. v. Simmons, 953 P.2d 510, 514-15 (Alaska 1998)
(discussing UIM coverage “excess” framework).
       26
              See AS 28.20.445(b); Coughlin v. GEICO, 69 P.3d 986, 992 (Alaska 2003)
(“[P]olicy limits are exhausted when the face value of the policy is paid to the insured;
any payment or non-payment of attorney’s fees and prejudgment interest is independent
of this determination.”).
       27
             Although “[a]mbiguities in . . . insurance policies are . . . construed most
favorably to an insured, . . . ambiguities . . . exist [only] when there are two or more
reasonable interpretations of particular policy language.” State Farm Mut. Auto. Ins.
Co. v. Dowdy, 192 P.3d 994, 998 (Alaska 2008). We conclude there is no ambiguity in
distinguishing between “damages” and “amount payable” in the contract provisions at
issue.

                                           -18-                                      7545
vehicle . . .’; and (2) ‘if so, in what amount?’ ”28 We concluded that “by focusing on the
insured’s right to ‘collect damages from the owner or driver[,]’ . . . the arbitration clause
unambiguously exclude[d] questions relating solely to the right to collect from the
insurer.”29 Although Allstate’s UIM arbitration provision does not use the phrase “from
the owner or driver of the uninsured motor vehicle,” Allstate’s UIM Insuring Agreement
and related provisions establish that damages are distinct from amounts payable by using
the terms to refer to necessarily different sums. Allstate’s UIM arbitration provision —
discussing only damages — thus excludes from arbitration questions relating solely to
the insureds’ rights to collect benefit amounts from Allstate, as in Dowdy.
              The insureds argue that the arbitration panels’ interpretations of Allstate’s
UIM arbitration clause (and therefore the scope of the panels’ authority) were
reasonable, but they misinterpret our precedent involving broader arbitration clauses.
For example, in Johnson v. Aleut Corp. an arbitrator’s capacious interpretation of
questions presented for arbitration was reasonable in light of a broad arbitration clause
committing to arbitration “[a]ny and all disputes . . . arising out of, relating in any way
to or in connection with” an employment agreement.30 And in Wing v. GEICO Insurance
Co. we concluded that the UIM arbitration panel could consider issues of costs, fees, and
offsets (i.e. amounts payable under the UIM coverage) because the arbitration clause
granted the panel authority “to determine ‘the amount payable’ under the policy.”31 But
Allstate’s current UIM arbitration clause is narrower than those in Johnson and Wing,
explicitly committing only two discrete issues to arbitration: an insured’s right to receive

       28
              111 P.3d 337, 338 (Alaska 2005).
       29
              Id. at 341 (emphases omitted).
       30
              307 P.3d 942, 944 (Alaska 2013).
       31
              17 P.3d 783, 786-87 (Alaska 2001).

                                            -19-                                       7545
damages from an at-fault driver and the amount of those damages.
              The insureds, the arbitration panels, and the superior court all mistakenly
relied on Sidney v. Allstate Insurance Co. to support their conclusions that the panels’
interpretations of their arbitration authority were reasonable.32 Allstate’s policy in Sidney
included two separate arbitration clauses; one permitted arbitration of the insured’s “right
to receive any damages [from the at-fault driver] or the amount” and the other permitted
arbitration of the insured’s “right to [UIM] benefits and the amount payable.”33 We
concluded that the two arbitration provisions granted the arbitration panel authority to
determine “two different and distinct concepts: (1) the total amount of damages to which
an insured is entitled (from the tortfeasor) and (2) amounts payable under the insurance
policy (by the UIM insurer).”34 The superior court affirmed the Mattison arbitration
panel’s determinations of its authority, stating that “the policy language in Sidney is
identical to the policy language [in Mattison’s policies],” but the policy language is not
identical. The Allstate policies lack the language that granted the Sidney arbitration
panel authority to arbitrate the insured’s “right to [UIM] benefits and the amount
payable.” In light of this difference, the panels’ and the superior court’s reliance on
Sidney was not reasonable.35
              The insureds, the panels, and the superior court are correct that arbitration
panels have the implied authority to determine issues not explicitly committed to

       32
              187 P.3d 443 (Alaska 2008).
       33
            Id. at 449 & n.29 (emphasis omitted) (construing Zimmerman v. Ill.
Farmers’ Ins. Co., 739 N.E.2d 990, 995 (2000 Ill. App.) as “discussing distinction
between damages and payment and noting insured entitled to ‘damages’ from tortfeasor,
but ‘payment’ from UIM insurer”).
       34
              Id. (emphasis in original).
       35
              See id.

                                            -20-                                       7545
arbitration if the issues are “inextricably intertwined” with the issues committed to
arbitration.36 But a facially non-arbitrable issue is inextricably intertwined with an
arbitrable issue only if resolution of the arbitrable issue will “necessarily resolve” the
facially non-arbitrable issue.37 A determination of an insured’s underlying damages does
not, alone, necessarily resolve the benefit amounts payable under specific coverages.
The benefit amounts payable under UIM coverage depends upon the underlying
damages, available alternative recovery sources that must be exhausted to trigger the
UIM coverage, and the UIM coverage’s specific terms. An underlying damages
determination therefore does not “necessarily resolve” an amounts payable
determination.38
              The arbitration panels exceeded their authority by purporting to determine
the total benefit amounts Allstate owed the insureds under their coverages; the panels had
authority to determine only each insured’s damages arising from the at-fault driver’s
conduct. Only a court, not an arbitration panel, may determine whether the insureds are
entitled to: prejudgment interest on Allstate’s liability to the insureds,39 Alaska Civil

         36
              State Farm Mut. Auto Ins. Co. v. Dowdy, 111 P.3d 337, 342-43 (Alaska
2005).
         37
              Id.
         38
              See id. at 343.
         39
            See Sidney, 187 P.3d at 451-53 (concluding UIM insurer not liable for
prejudgment interest after arbitration decision); Farquhar v. Alaska Nat’l Ins. Co., 20
P.3d 577, 579-81 (Alaska 2001) (deciding whether insurance policy covered
prejudgment interest); State Farm Mut. Auto Ins. Co. v. Harrington, 918 P.2d 1022, 1023
(Alaska 1996) (discussing superior court prejudgment interest award under UIM policy).

                                          -21-                                      7545
Rule 82 attorney’s fees,40 and pro rata attorney’s fees for subrogated claims.41 It was
legal error to affirm the panels’ determinations of their arbitration authority.
       B.     The Superior Court Decisions Must Be Vacated.
              After affirming the arbitration panels’ determinations of their arbitration
authority, the superior court addressed the panels’ legal justifications for determining
Allstate’s total UIM liability. One significant legal determination — that Allstate must
pay the insureds’ attorney’s fees and costs incurred to obtain the underlying policy limits
settlements with the at-fault drivers — clearly was wrong. And at least two other
significant legal determinations — regarding the interplay between Allstate’s medical
payments and UIM coverages and the availability of prejudgment interest on damages
underlying UIM benefit payments — appear to have been affirmed not by applying the
court’s independent judgment but with deference to the arbitration panels’ legal
analyses.42

       40
              See Sidney, 187 P.3d at 456 (awarding Rule 82 attorney’s fees on UIM
benefits after arbitration award); Progressive Corp. v. Peter, 195 P.3d 1083, 1094-95
(Alaska 2008) (deciding whether UIM insurer owed Rule 82 attorney’s fees); State Farm
Mut. Auto. Ins. Co. v. Lestenkof, 155 P.3d 313, 316-18 (Alaska 2007) (deciding whether
UIM insurer owed Rule 82 attorney’s fees).
       41
               See O’Donnell v. Johnson, 209 P.3d 128, 134-35 (Alaska 2009) (deciding
whether insured created common fund); Sidney, 187 P.3d at 454 (awarding pro rata fees
after arbitration for insured’s recovery of UIM insurer’s subrogated medical payments
claim from at-fault driver).
       42
              An “arbitrator’s legal conclusions are . . . unreviewable, except where they
pertain to arbitrability.” Kinn v. Alaska Sales & Serv., Inc., 144 P.3d 474, 487 (Alaska
2006). But because we hold that the panels exceeded their authority in issuing the final
awards, the superior court should have applied its independent judgment to resolve the
remaining legal issues.

                                           -22-                                      7545
              1.     UIM insurers are not required to reimburse insureds for
                     attorney’s fees and costs incurred in exhausting at-fault drivers’
                     liability insurance coverage underlying UIM excess insurance
                     coverage.
              It was error to independently adopt the arbitration panels’ mistaken legal
conclusions that the insureds’ settlements with the at-fault parties’ insurers provided
common fund benefits requiring Allstate to pay a pro rata share of the insureds’
attorney’s fees and costs incurred in obtaining the settlements. As noted above, in this
context “pro rata” would mean 100% of the fees incurred to obtain the policy limits
settlements. But, with the possible exception of subrogated medical payments claims
discussed in the next section, the insureds’ policy limits settlements did not directly
benefit Allstate and thus do not constitute common fund benefits.
              The common fund doctrine provides that “a litigant . . . who recovers a
common fund for the benefit of persons other than himself . . . is entitled to a reasonable
attorney’s fee from the fund as a whole.”43 In Ruggles v. Grow we implicitly applied the
doctrine to conclude that when an insured recovers an insurer’s subrogated medical
payments claim from a third-party in a tort suit, the “proceeds recovered must be paid
to the insurer, less pro rata costs and fees.”44 We extended the doctrine in Sidney to
conclude that an insured is entitled to pro rata fees upon recovering a subrogated medical

       43
              Edwards v. Alaska Pulp Corp., 920 P.2d 751, 754 (Alaska 1996) (quoting
Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)); see O’Donnell 209 P.3d at 135
(“[T]he elements of a common fund recovery under Alaska law are (1) the efforts of one
party (2) result in the creation of a fund benefitting a third party (3) who is benefitted in
a clear and well-defined manner, and (4) the third party is ready and willing to accept the
benefits so obtained.”).
       44
              984 P.2d 509, 512 (Alaska 1999).

                                            -23-                                       7545
payments claim through settlement, not just litigation.45 In both Ruggles and Sidney the
insureds procured a “direct benefit” for the insurers by securing satisfaction of claims
their insurers held.46
              The insureds mistakenly argue that they secured a direct benefit for Allstate
by settling with the at-fault parties because “Allstate seeks to net 100% of that liability
recovery against its UIM obligation to [the insureds].” But that argument fundamentally
mischaracterizes excess insurance coverage. Allstate’s UIM liability necessarily cannot
begin until an insured exhausts all other potential payment sources for damages arising
from an accident.47 Allstate was not liable to the insureds for amounts payable to them
by the at-fault drivers’ liability insurance coverage, and Allstate did not have a claim
against the at-fault drivers beyond its subrogated claim for medical payments to the
insureds. Securing the settlements thus did not create a common fund or otherwise
provide Allstate any direct benefit beyond the subrogated medical payment claims.
              Sidney clarifies this point. In Sidney Allstate paid an insured’s medical bills
under the medical payments coverage.48 Allstate thus became subrogated to the insured’s
claims against third parties for the medical bills; Allstate, not the insured, was legally
entitled to any payment from liable third parties for the insured’s medical bills that

       45
              187 P.3d at 455.
       46
             Id. at 453-54; Ruggles, 984 P.2d at 512; see O’Donnell, 209 P.3d at 134
(requiring “well-defined benefits” to third party for creation of common fund).
       47
              See AS 28.20.445(b); Curran v. Progressive Nw. Ins. Co., 29 P.3d 829, 833
(Alaska 2001) (stating that “UIM claimant [must] ‘exhaust’ or ‘use up’ all underlying
liability coverage before recovering under [the] UIM policy”).
       48
              187 P.3d at 446.

                                            -24-                                       7545
Allstate already had paid.49 As part of the insured’s settlement with the at-fault driver’s
insurance company, the insurance company agreed to satisfy Allstate’s subrogated
claim.50 The Sidney insured thus recovered a direct benefit for Allstate by securing
satisfaction of its subrogated claim, to which the insured held no legal interest. But in
the cases now before us, except as contemplated below with respect to Allstate’s
subrogated medical payments claims, all of the settlement money went directly to the
insureds. This case thus differs from Sidney.
              The common fund doctrine was misapplied by the superior court. The
insureds are not entitled to a 100% “pro rata” share of attorney’s fees incurred in
obtaining their policy limits settlements with the at-fault drivers’ insurance companies.
              2.     The arbitration panels’ treatment of Allstate’s subrogated
                     medical payments claims, and thus the superior court’s
                     affirmance, are unclear.
              Allstate had paid $21,784 of Harbour’s medical bills and $5,982.52 of
Mattison’s medical bills under their medical payments coverages. Allstate claimed
ownership of its subrogated claims by providing notice to the insureds that it intended
to negotiate its right of recovery directly with the responsible parties. The insureds
disputed the validity of Allstate’s directive not to recover the subrogated claims. The
arbitration panels made no findings about Allstate’s subrogated claims or its directives
to the insureds, instead awarding pro rata fees based on the entire settlement.
              Because we hold that it was improper to award pro rata attorney’s fees on
the entire settlement, the superior court must determine on remand whether the insureds
recovered any portion of Allstate’s subrogated claims, in which case they would be
entitled to recover pro rata fees only on the portion of the settlement dedicated to

       49
              Id. at 451, 454.
       50
              Id. at 451.

                                           -25­                                      7545
satisfying Allstate’s subrogated claims.51 Allstate apparently conceded that it may owe
Harbour some pro rata fees, stating in a letter that “Harbour is entitled to a pro rata
reduction . . . for the costs and attorney’s fees he incurred to recover on Allstate’s
subrogated medical payments claim.” Absent further development of the record and
factual findings, it is unclear how to resolve this issue in Mattison’s case.
              3.     The superior court must independently determine if Mattison is
                     entitled to prejudgment interest on the damages award.
              Mattison’s settlement with the at-fault driver undisputedly did not include
prejudgment interest because it was not available as an add-on above the policy limit
under the at-fault driver’s liability coverage. He therefore asked the arbitration panel to
hold Allstate liable for prejudgment interest on the underlying settlement under his UIM
coverage. But determining Allstate’s liability for prejudgment interest on the underlying
settlement requires determining Allstate’s contractual liability, and, as discussed above,
that was not submitted to arbitration. The panel exceeded its authority in awarding
Mattison prejudgment interest. The superior court apparently affirmed the award by
deferring to the panel’s legal analysis of the issue instead of applying its independent
judgment; this was error.
              The arbitration panel relied on Farquhar v. Alaska National Insurance Co.52
and Sidney53 to conclude that Allstate was liable for prejudgment interest on the
settlement amount. In Farquhar we discussed only two grounds for holding the UIM

       51
               See id. at 453-54; cf. O’Donnell, 209 P.3d at 135 (“If the insurer actively
requests that the plaintiff not pursue her subrogation claim, there is no common fund
because the insurer will not be collecting the lien from the plaintiff’s recovery fund but
will seek its own recovery.”).
       52
              20 P.3d 577 (Alaska 2001).
       53
              187 P.3d at 443.

                                           -26-                                      7545
insurer liable for prejudgment interest: (1) “if the insurer contractually assumes liability
by the terms of its policy” and (2) “if public policy requires liability despite the language
of the contract.”54 The insurance policy in Farquhar did not explicitly state whether the
insurer was liable for prejudgment interest beyond the policy limit, suggesting that it was
not.55 And we rejected the argument that an insurer is liable for any add-on fees not
expressly excluded by a coverage.56         We ultimately held that an insurer is not
automatically required to pay add-ons, such as prejudgment interest, above a facial
policy limit that is greater than the statutory minimum.57
              In Sidney we held that when an insured is able to pursue an add-on from an
at-fault driver’s insurance but does not, the insured waives the right to claim a similar
add-on from the insured’s UIM coverage provider.58 To award prejudgment interest, the
Mattison arbitration panel implicitly reasoned that the inverse was true: When an insured
is unable to pursue an add-on from an at-fault driver’s insurance, the insured may claim
a similar add-on from the insured’s UIM coverage provider.
              The superior court’s basis for affirmance is unclear. The court called the
Mattison arbitration panel’s interpretation of Farquhar “arguably questionable” but
found “no reason to modify or vacate the arbitration panel’s decision under the law” and
noted that “Allstate fail[ed] to point to any contractual language . . . to suggest . . . that
Allstate was not obligated to pay any interest.” Because the arbitration panel exceeded

       54
              20 P.3d at 578.
       55
              Id. at 579.
       56
              Id. at 580.
       57
              Id. at 583.
       58
              187 P.3d at 451-53.

                                            -27-                                        7545
the scope of its authority in awarding prejudgment interest, the court was required to
apply its independent judgment to the issue. It therefore was error to afford any
deference to the arbitration panel’s “arguably questionable” analysis. On remand the
court must independently determine whether Allstate is contractually liable for the
prejudgment interest Mattison claims.
VI.    CONCLUSION
              The superior court’s judgments are REVERSED. We REMAND for the
superior court to determine what amounts, if any, Allstate owes the insureds under their
policies in light of the arbitration determinations of the insureds’ damages caused by the
at-fault drivers.

                                          -28-                                      7545