TIME-LIMITED DEMAND AND BAD FAITH TOOLKIT - ALASKA

JURISDICTION NOTE: Alaska recognizes the tort of bad faith against insurers for both first-party and third-party claims. The Alaska Supreme Court established the bad faith cause of action in Hillman v. Nationwide Mutual Fire Insurance Co., 855 P.2d 1321 (Alaska 1993). Alaska's Unfair Claim Settlement Practices Act (AS 21.36.125) does not provide a private right of action but its standards are relevant to establishing bad faith conduct. There is no pre-suit notice requirement.

TABLE OF CONTENTS

1. Third-Party Time-Limited Settlement Demand Letter
2. First-Party Bad Faith Demand Letter
3. Alaska Bad Faith Elements Checklist
4. Damages Calculation Framework
5. Bad Faith Conduct Documentation Checklist
6. Pre-Suit Requirements
7. Alaska-Specific Practice Notes
8. Sample Time-Limited Demand Conditions
9. Sources and References

1. THIRD-PARTY TIME-LIMITED SETTLEMENT DEMAND LETTER

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [____________________________________]

Date: [__/__/____]

To:
[________________________________] (Claims Adjuster)
[________________________________] (Insurance Company)
[________________________________] (Address)
[________________________________] (City, State, ZIP)

Re: Time-Limited Settlement Demand
Claimant: [________________________________]
Insured/Tortfeasor: [________________________________]
Claim Number: [________________________________]
Policy Number: [________________________________]
Date of Loss: [__/__/____]
Policy Limits: $[________________________________] per occurrence / $[________________________________] aggregate

Dear Claims Professional:

This firm represents [________________________________] ("Claimant") for injuries and damages arising from [________________________________] [describe incident] that occurred on [__/__/____] in [________________________________], Alaska, involving your insured, [________________________________] ("Insured").

A. LIABILITY SUMMARY

Liability against your Insured is clear and virtually indisputable based on the following:

[________________________________]
[________________________________]
[________________________________]

[Insert specific facts: police/trooper report findings, witness statements, admissions, physical evidence, expert opinions, applicable Alaska negligence standards, etc.]

Supporting documentation is attached as Exhibit A (Liability Evidence Package).

B. DAMAGES SUMMARY

Claimant has sustained the following damages, which exceed the available policy limits:

Supporting documentation is attached as Exhibit B (Damages Package).

Note on Alaska Damages Law: Alaska does not impose a cap on noneconomic damages in personal injury cases generally. Alaska applies a pure comparative fault system (AS 09.17.060), and the jury may apportion fault among all parties. However, the insured's liability exposure here is substantial given the clear evidence of fault.

C. COVERAGE AND POLICY LIMITS

Based on available information, the applicable liability policy provides bodily injury coverage with limits of $[________________] per occurrence. No known exclusions or coverage defenses apply. If any coverage defense exists, you are obligated to promptly notify your Insured, as the Alaska Supreme Court has recognized the insurer's duty to keep the insured informed. See State Farm Mutual Auto. Ins. Co. v. Weiford, 831 P.2d 1264 (Alaska 1992).

D. DEMAND

Claimant hereby demands payment of $[________________] (the full per-occurrence policy limits) to settle all claims against the Insured.

E. TIME LIMIT

This demand expires at 5:00 p.m. Alaska Time on [__/__/____], which is [____] days from the date of this letter. Time is of the essence.

If acceptance is not received by this deadline, this demand is withdrawn and cannot be later accepted without Claimant's express written consent.

F. CONDITIONS FOR ACCEPTANCE

1. Written acceptance delivered to the undersigned at the address below by the deadline.
2. Payment of the full demanded amount within [____] business days of acceptance, payable to "[________________________________] and [________________________________], Attorneys, as Trustees."
3. Release of the Insured only, with no confidentiality clause, no indemnification beyond standard release language, and no release of the insurer from independent bad faith claims.
4. No additional conditions. Any modification constitutes a counteroffer and rejection.

G. NOTICE OF EXCESS LIABILITY EXPOSURE UNDER ALASKA LAW

Under Alaska law, an insurer owes a duty of good faith and fair dealing to its insured. Hillman v. Nationwide Mutual Fire Ins. Co., 855 P.2d 1321 (Alaska 1993). When a liability insurer unreasonably refuses to accept a reasonable settlement demand within policy limits, the insurer exposes itself to liability for the full amount of any excess judgment.

The Alaska Supreme Court has recognized that the insurer must consider the insured's interests equally with its own when evaluating settlement demands. State Farm Mut. Auto. Ins. Co. v. Weiford, 831 P.2d 1264 (Alaska 1992). An insurer that fails to accept a reasonable demand within limits when liability is clear may be liable for:

• The full amount of any excess judgment
• Consequential damages to the insured
• Compensatory damages including emotional distress
• Punitive damages for egregious conduct
• Attorney fees and costs

We urge you to notify the Insured of this demand so that the Insured may protect his/her interests, including retaining personal counsel.

H. DOCUMENTATION ENCLOSED

☐ Exhibit A: Liability Evidence Package
☐ Exhibit B: Damages Package (medical records, bills, wage verification)
☐ Exhibit C: Photographs/Video Evidence
☐ Exhibit D: Expert Reports (if applicable)
☐ Exhibit E: Policy Declarations Page (if available)

Respectfully submitted,

________________________________________
[________________________________] (Attorney Name)
[________________________________] (Firm Name)
[________________________________] (Address)
[________________________________] (City, State, ZIP)
[________________________________] (Phone / Email / Bar No.)

Counsel for [________________________________], Claimant

2. FIRST-PARTY BAD FAITH DEMAND LETTER

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [____________________________________]

Date: [__/__/____]

To:
[________________________________] (Claims Manager / General Counsel)
[________________________________] (Insurance Company)
[________________________________] (Address)
[________________________________] (City, State, ZIP)

Re: Demand for Payment and Notice of Bad Faith -- Alaska Claim
Insured/Policyholder: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Type of Policy: [________________________________]

Dear [________________________________]:

This firm represents [________________________________] ("Insured") regarding the above-referenced first-party insurance claim under [________________________________] Policy No. [________________________________], issued by [________________________________] Insurance Company ("Company").

A. CLAIM HISTORY AND COVERAGE

On [__/__/____], the Insured suffered a covered loss consisting of [________________________________]. The Insured timely reported the claim on [__/__/____] and has cooperated fully with all investigation and documentation requests.

The policy provides coverage for this type of loss under [________________________________] [identify provision]. The applicable coverage limit is $[________________________________].

B. COMPANY'S IMPROPER CLAIMS HANDLING

Despite clear coverage entitlement, the Company has engaged in the following conduct:

☐ Denied the claim without reasonable basis on [__/__/____]
☐ Unreasonably delayed investigation and/or payment for [____] days
☐ Underpaid the claim by offering only $[________________] when the covered loss is $[________________]
☐ Failed to conduct an adequate investigation before denying the claim
☐ Failed to provide a written explanation for the denial or underpayment
☐ Misrepresented policy provisions to justify the denial
☐ Required unreasonable or duplicative documentation
☐ Failed to affirm or deny coverage within a reasonable time
☐ Compelled the Insured to retain counsel and pursue litigation to recover clearly owed amounts
☐ Other: [________________________________]

[Provide factual detail for each checked item:]
[________________________________]
[________________________________]

C. VIOLATIONS OF ALASKA UNFAIR CLAIMS SETTLEMENT PRACTICES STANDARDS

The Company's conduct violates the standards set forth in AS 21.36.125, Alaska's Unfair Claim Settlement Practices statute, including:

1. Misrepresenting pertinent facts or policy provisions relating to coverage (AS 21.36.125(a)(1))
2. Failing to acknowledge and act reasonably promptly upon communications regarding claims (AS 21.36.125(a)(2))
3. Failing to adopt and implement reasonable standards for prompt investigation of claims (AS 21.36.125(a)(3))
4. Refusing to pay claims without conducting a reasonable investigation (AS 21.36.125(a)(4))
5. Not attempting in good faith to make prompt and equitable settlement of claims in which liability is reasonably clear (AS 21.36.125(a)(5))
6. Compelling the Insured to institute litigation by offering substantially less than amounts ultimately recovered (AS 21.36.125(a)(6))
7. Offering an amount that does not have an objectively reasonable basis in law and fact (AS 21.36.125(a)(7))

While AS 21.36.125 does not create a private cause of action directly, its standards inform the common law bad faith analysis. See Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321 (Alaska 1993).

D. DEMAND

The Insured demands:

1. Immediate payment of covered benefits owed: $[________________]
2. Payment of consequential damages caused by the unreasonable delay/denial: $[________________]
3. Written explanation of the basis for any continued denial within [____] days
4. Preservation of the entire claim file

E. NOTICE OF BAD FAITH CLAIM UNDER ALASKA LAW

If the Company fails to resolve this claim within [____] days, the Insured intends to pursue all remedies available under Alaska law, including:

• Breach of contract
• Breach of the implied covenant of good faith and fair dealing (tort claim)
• Compensatory damages, including consequential and emotional distress damages
• Punitive damages under Hillman and Alaska common law
• Attorney fees under Alaska Civil Rule 82 and/or as consequential damages
• All other available relief

Under Hillman, the Insured must show that the Company refused to honor the claim without a reasonable basis. The Company cannot avoid bad faith liability simply by asserting a post-hoc justification for its denial if no reasonable basis existed at the time of the decision.

Respectfully submitted,

________________________________________
[________________________________] (Attorney Name, Firm, Address, Phone, Email, Bar No.)

Counsel for [________________________________], Insured

3. ALASKA BAD FAITH ELEMENTS CHECKLIST

A. First-Party Bad Faith (Common Law Tort)

Under Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321 (Alaska 1993), the Insured must prove:

☐ A valid insurance contract existed between the Insured and the insurer
☐ The Insured submitted a claim for benefits under the policy
☐ The insurer refused to honor (denied, delayed, or underpaid) the claim
☐ The insurer's refusal was without a reasonable basis
☐ The insurer knew or recklessly disregarded the fact that there was no reasonable basis for its refusal
☐ The Insured suffered damages as a proximate result

Key Standard: The insured must establish that "the insurer's conduct was unreasonable and that the insurer knew its conduct was unreasonable or acted with reckless disregard as to the reasonableness of its conduct." Hillman, 855 P.2d at 1328.

B. Third-Party Bad Faith (Failure to Settle)

☐ A valid liability insurance policy covered the insured for the third-party claim
☐ A third-party settlement demand was made within the policy limits
☐ The demand was reasonable given the liability exposure and damages
☐ The insurer had adequate time and information to evaluate and accept the demand
☐ Liability was reasonably clear
☐ The insurer failed to accept the demand within the time allowed
☐ The failure to settle was unreasonable under the totality of the circumstances
☐ A judgment was entered against the insured in excess of the policy limits
☐ The insurer failed to give equal consideration to the insured's interests

C. "Fairly Debatable" Defense

The insurer may defend by showing:
☐ A genuine dispute existed regarding coverage, liability, or damages
☐ The insurer conducted a reasonable investigation before reaching its decision
☐ The insurer's position had an objectively reasonable basis in law or fact
☐ The dispute was not manufactured or the result of a biased investigation

Note: Even if the claim is ultimately "fairly debatable," the insurer cannot escape bad faith liability if it failed to conduct an adequate investigation before concluding the claim was debatable. The insurer must investigate before it can rely on the "fairly debatable" defense.

4. DAMAGES CALCULATION FRAMEWORK

A. Contract Damages

B. Consequential Damages

Alaska recognizes consequential damages in bad faith cases when foreseeable:

C. Emotional Distress Damages

Alaska allows recovery of emotional distress damages in bad faith tort actions:

Note: Under Hillman, emotional distress damages are recoverable as an element of the bad faith tort without requiring a separate showing of physical injury, although evidence of physical manifestation strengthens the claim.

D. Attorney Fees

Practice Note: Alaska Civil Rule 82 provides for mandatory partial fee-shifting to the prevailing party. In addition, attorney fees incurred to recover policy benefits may be recoverable as consequential damages of the insurer's bad faith.

E. Punitive Damages

Alaska allows punitive damages in bad faith tort actions:

Standard: Punitive damages are available where the insurer's conduct was "outrageous" -- that is, motivated by ill will, spite, or an intent to injure, or where the conduct was so egregious as to evidence reckless indifference to the rights of the insured. See AS 09.17.020.

Alaska Punitive Damages Cap: AS 09.17.020(f) limits punitive damages to the greater of three times compensatory damages or $500,000 (whichever is greater), unless the conduct was motivated by financial gain, in which case the cap is the greater of four times compensatory damages, four times the aggregate amount of financial gain, or $7,000,000.

F. Total Damages Summary

5. BAD FAITH CONDUCT DOCUMENTATION CHECKLIST

A. Timeline Documentation

☐ Date of loss: [__/__/____]
☐ Date claim reported to insurer: [__/__/____]
☐ Date insurer acknowledged claim: [__/__/____]
☐ Dates of all communications with insurer (maintain detailed log)
☐ Date insurer requested documents/information: [__/__/____]
☐ Date insured provided requested documents: [__/__/____]
☐ Date insurer inspected loss (if applicable): [__/__/____]
☐ Date of coverage decision (denial/partial payment): [__/__/____]
☐ Date written explanation of denial received: [__/__/____]
☐ Total elapsed time from claim report to decision: [____] days

B. Investigation Deficiencies

☐ Insurer failed to conduct any investigation before denying
☐ Insurer conducted a cursory or inadequate investigation
☐ Insurer used biased or outcome-oriented experts (identify: [________________________________])
☐ Insurer ignored favorable evidence submitted by the insured
☐ Insurer's own adjuster recommended payment but was overridden by management
☐ Insurer failed to obtain relevant records or interview relevant witnesses
☐ Insurer relied on unreliable or discredited information

C. Communication Failures

☐ Insurer failed to acknowledge the claim within a reasonable time
☐ Insurer failed to respond to insured's inquiries for [____] days
☐ Insurer failed to provide a written explanation for the denial
☐ Insurer provided a misleading or incomplete explanation
☐ Insurer misrepresented policy provisions in communications
☐ Insurer failed to inform the insured of all available coverages

D. Documents to Preserve and Obtain

☐ Complete claim file (request via discovery or DOI complaint)
☐ All internal adjuster notes and activity logs
☐ Supervisor and management review notes
☐ Reserve history (initial reserves, changes, and dates)
☐ All correspondence (insured, claimant, counsel, vendors)
☐ Expert reports and consultant communications
☐ Claims handling guidelines and manuals applicable to this claim type
☐ Adjuster training records
☐ Prior bad faith claims or complaints against the insurer (pattern evidence)

6. PRE-SUIT REQUIREMENTS

Alaska-Specific Pre-Suit Requirements

Alaska does not require a pre-suit notice or administrative filing before bringing a bad faith lawsuit. There is no equivalent of Florida's Civil Remedy Notice or Georgia's 60-day demand.

However, practitioners should consider:

☐ Filing a complaint with the Alaska Division of Insurance (not required, but may be strategically useful to create an administrative record): Alaska Division of Insurance, P.O. Box 110805, Juneau, AK 99811-0805
☐ Sending a pre-suit demand letter (not legally required, but recommended to establish the insurer's notice and opportunity to cure, which strengthens the bad faith case)
☐ Confirming the statute of limitations has not expired:
- Bad faith tort: 2 years (AS 09.10.070(a))
- Breach of insurance contract: 3 years (AS 09.10.053)
- Accrual: Generally accrues on the date of the insurer's denial or last unreasonable act

☐ Confirming venue: Alaska Superior Court in the judicial district where the insured resides or where the loss occurred
☐ Excess judgment requirement (third-party cases): Confirm whether an excess judgment has been entered before filing a third-party bad faith claim

7. ALASKA-SPECIFIC PRACTICE NOTES

A. Key Alaska Bad Faith Cases

1. Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321 (Alaska 1993)
   - Established the tort of bad faith in Alaska for first-party insurance claims
   - Standard: Insurer refused to honor a claim "without a reasonable basis"
   - Insured must show the insurer knew or recklessly disregarded the lack of reasonable basis
   - Emotional distress and punitive damages are available

2. State Farm Mut. Auto. Ins. Co. v. Weiford, 831 P.2d 1264 (Alaska 1992)
   - Recognized the insurer's duty of good faith in third-party liability context
   - Insurer must give equal consideration to the insured's interests
   - Failure to settle a clear-liability claim within limits can give rise to excess liability

3. O.K. Lumber Co. v. Providence Washington Ins. Co., 759 P.2d 523 (Alaska 1988)
   - Recognized the implied covenant of good faith and fair dealing in insurance contracts
   - Insurance contract creates a special relationship giving rise to tort duties

4. Era Aviation, Inc. v. Seekins, 973 P.2d 1137 (Alaska 1999)
   - Addressed the scope of consequential damages in first-party bad faith claims
   - Insurer may be liable for all foreseeable consequences of its bad faith conduct

B. Alaska Bad Faith Standards

First-Party Bad Faith:
- The insured must show the insurer's conduct was unreasonable
- The insured must show the insurer knew or recklessly disregarded the unreasonableness of its conduct
- The "fairly debatable" defense applies: if a reasonable insurer could have denied the claim, bad faith is not established
- However, the insurer must actually investigate before it can claim the issue was "fairly debatable"

Third-Party Bad Faith:
- The insurer has a duty to accept reasonable settlement demands within policy limits when liability is clear
- The insurer must give equal consideration to the insured's interests
- Failure to settle may result in liability for the full excess judgment
- The standard is whether a reasonably prudent insurer would have accepted the demand

C. AS 21.36.125 -- Unfair Claim Settlement Practices

Alaska's statute prohibits:
- Misrepresenting pertinent facts or policy provisions
- Failing to acknowledge and act reasonably promptly upon communications regarding claims
- Failing to adopt and implement reasonable standards for prompt investigation
- Refusing to pay claims without conducting a reasonable investigation
- Not attempting in good faith to make prompt and equitable settlement where liability is reasonably clear
- Compelling litigation by offering substantially less than amounts ultimately recovered
- Offering an amount without an objectively reasonable basis in law and fact

Private Right of Action: AS 21.36.125 does not create a private cause of action. However, violations of the statute's standards are relevant and admissible evidence in a common law bad faith action. See Hillman, 855 P.2d at 1327.

D. Unique Alaska Considerations

1. Alaska Civil Rule 82 -- Attorney Fees: Alaska is one of the few states with mandatory partial fee-shifting to the prevailing party. This significantly affects litigation economics for both sides.

2. Punitive Damages Caps: AS 09.17.020 imposes caps on punitive damages (generally 3x compensatory or $500,000, whichever is greater). The cap is higher (4x compensatory or $7,000,000) if the conduct was motivated by financial gain.

3. Comparative Fault: In third-party bad faith cases, be aware that Alaska's pure comparative fault system (AS 09.17.060) may affect the underlying liability assessment.

4. Remote/Bush Alaska Claims: Claims involving remote Alaska locations may raise unique issues regarding investigation timelines and access to evidence. Delays attributable to geographic remoteness should be distinguished from unreasonable delays by the insurer.

5. No First-Party Statutory Bad Faith Remedy: Unlike some states (CO, FL, TX), Alaska does not have a first-party statutory bad faith claim with specific statutory penalties. Claims are brought under common law tort and contract theories.

E. Statute of Limitations

Accrual: A bad faith cause of action generally accrues when the insured knows or should know of the insurer's bad faith conduct. For denial claims, this is typically the date of the denial. For delay claims, accrual may be based on the date the unreasonable delay became apparent.

8. SAMPLE TIME-LIMITED DEMAND CONDITIONS

A. Payment and Release

☐ Full payment of demanded amount within [____] business days of acceptance
☐ Payment by certified or cashier's check
☐ Check payable to "[________________________________] and [________________________________], as Trustees"
☐ Standard release of the named insured only
☐ No confidentiality provisions in the release
☐ No indemnification or hold-harmless provisions beyond standard release
☐ No release of the insurer from independent bad faith claims
☐ No structured settlement unless separately agreed

B. Communication Requirements

☐ Written acceptance received at counsel's office by the stated deadline
☐ Email acceptance acceptable if confirmed in writing
☐ Any modification constitutes a counteroffer and rejection of this demand
☐ Insurer must confirm acceptance is binding on behalf of the insured

C. Disclosure Requirements

☐ Insurer must disclose all applicable policy limits, including umbrella/excess layers
☐ Insurer must confirm whether other claims may exhaust available limits
☐ Insurer must disclose any coverage disputes or reservations of rights

D. Insured Notification

☐ Insurer must provide a copy of this demand to the insured within [____] business days
☐ Insurer must advise the insured of the right to retain personal counsel
☐ Insurer must advise the insured of the potential excess exposure
☐ Failure to notify the insured of this demand may constitute independent bad faith

9. SOURCES AND REFERENCES

Alaska Statutes

• AS 21.36.125 -- Unfair Claim Settlement Practices: https://www.touchngo.com/lglcntr/akstats/Statutes/Title21/Chapter36/Section125.htm
• AS 09.10.070 -- Statute of Limitations: https://www.touchngo.com/lglcntr/akstats/Statutes/Title09/Chapter10/Section070.htm
• AS 09.17.020 -- Punitive Damages: https://www.touchngo.com/lglcntr/akstats/Statutes/Title09/Chapter17/Section020.htm

Key Cases

• Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321 (Alaska 1993): https://www.courtlistener.com/opinion/1113434/hillman-v-nationwide-mut-fire-ins-co/
• State Farm Mut. Auto. Ins. Co. v. Weiford, 831 P.2d 1264 (Alaska 1992)
• O.K. Lumber Co. v. Providence Washington Ins. Co., 759 P.2d 523 (Alaska 1988)
• Era Aviation, Inc. v. Seekins, 973 P.2d 1137 (Alaska 1999)

Additional Resources

• Alaska Division of Insurance: https://www.commerce.alaska.gov/web/ins/
• United Policyholders -- Alaska: https://uphelp.org/claim-guidance-publications/insurance-consumer-rights-in-alaska-2022/
• Chartwell Law -- Alaska Bad Faith: https://www.chartwelllaw.com/bad-faith-claims-map/alaska

This template is provided by ezel.ai for informational purposes only. It does not constitute legal advice and should not be used as a substitute for consultation with a qualified attorney licensed in Alaska. Bad faith law evolves through case law and legislative changes. Always verify current law and confirm all citations before use.

Last updated: 2026-02-26