Return to Table of Contents

XIII. Recoverable Damages

1. Direct
2. Stigma Damages
3. Loss of Use
4. Punitive Damages
5. Emotional Distress
6. Interest
7. Attorney Fees

A. Direct

In construction claims, Alaska allows recovery based on either the actual cost method, in which each element of extra expense incurred because of the alleged breach is added up for a total claimed amount; or, in the alternative, based on a variant of the actual cost method, in which the contractor may present less direct evidence of the cost of additional work, "including any actual cost data, accounting records, estimates by law and expert witnesses, and calculations from similar projects." K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 722 (Alaska 2003). The latter method reflects the principle that a contractor need not prove damages with mathematical precision, but may only recover those damages which it proves with reasonable certainty. Id.

B. Stigma Damages

Alaska courts have not addressed the issue of "stigma damages." However, in property damage cases, the Alaska courts have approved jury instructions that allow for an award of the lesser of two figures: (1) the reasonable expense of necessary repair of the property, plus the difference between the fair market value of the property immediately before it was damaged and the fair market value of the property after it was repaired; or (2) the difference between the fair market value of the property immediately before it was damaged and the fair market value of the unrepaired property immediately after it was damaged. Era Helicopters, Inc. v. Digicon Alaska, Inc., 518 P.2d 1059, 1061 (Alaska 1974). Thus, where repairs have not restored damaged property to its original value, recovery has been allowed for both cost of repairs and the difference in market value before the damage and after the repair. Willett v. State, 826 P.2d 1142, 1145 (Alaska App. 1992).

C. Loss of Use

Alaska courts will allow for loss of use damages, where appropriate. Era Helicopters, Inc. v. Digicon Alaska, Inc., 518 P.2d 1059, 1062 (Alaska 1974)(when a long period of repair will be required, the cost of renting a replacement unit is to be included in the cost of the repair.).

D. Punitive Damages

Alaska's 1997 Tort Reform statute holds that a fact finder may make an award of punitive damages if the defendant's conduct was (1) "outrageous, including acts done with malice or bad motives," or (2) "evidenced reckless indifference to the interest of another person." AS 09.17.020(b). Punitive damages must be established by clear and convincing evidence. AS 09.17.020(b).

The 1997 Tort Reform statute appears to have codified prior Alaska case law on the subject of punitive damages. The Alaska Supreme Court has previously held that to be entitled to punitive damages, the plaintiff must establish at a minimum that the defendant's conduct amounted to reckless indifference regarding the rights of others, and "conscious action in deliberate disregard of those rights." Chizmar v. Mackie, 896 P.2d 196, 210 (Alaska 1995). Thus, a court should not allow a claim of punitive damages to go to the jury unless there is evidence that gives rise to an inference of "actual malice or conduct sufficiently outrageous to be deemed equivalent to actual malice." Id. (quoting State Farm Mutual Automobile Ins. Co. v. Weiford, 831 P.2d 1264, 1266 (Alaska 1992)).

There is a statutory cap on punitive damages, which are determined in a separate trial only after a jury has determined such damages are appropriate. AS 09.17.020.

Evidence of insurance may be admissible to determine defendant's financial condition, and thus what is an appropriate level of punitive damages. Fleegel v. Estate of Boyles, 61 P.3d 1267 (Alaska 2003).

Punitive damages are not recoverable for breach of contract unless conduct constituting breach is also a tort for which punitive damages are recoverable. Reeves v. Alyeska Pipeline Service Co., 56 P.3d 660 (Alaska 2002).

Punitive damages are insurable. There is no statutory or public policy prohibiting insuring against punitive damages in Alaska. See Providence Washington Ins. Co. v. City of Valdez, 684 P.2d 861 (Alaska 1984); LeDoux v. Continental Ins. Co., 666 F. Supp. 178 (D. Alaska 1987). In the absence of a policy exclusion, punitive damages will be deemed covered. State Farm v. Lawrence, 26 P.3d 1074 (Alaska 2001).

E. Emotional Distress

The general rule in Alaska is that there is no recovery for emotional distress unaccompanied by physical injury. Hancock v. Northcutt, 808 P.2d 251 (Alaska 1991) Kallstrom v. United States, 43 P.3d 162 (Alaska 2002). The Alaska courts have not addressed the amount of physical injury required to support a claim for emotional distress. One exception to the physical injury rule is that, where a plaintiff has suffered severe emotional distress as a result of "extreme or outrageous conduct," the plaintiff may have a claim for intentional infliction of emotional distress.

A second exception is that the "physical injury" requirement does not apply to pre-existing duty claims. A plaintiff may recover for emotional distress, without physical injury, where the defendant owed the plaintiff a pre-existing duty and breached that duty. Chizmar v. Mackie, 896 P.2d 196 (Alaska 1995). The only contracts that will give rise to this type of duty, however, are contracts highly personal and laden with emotion, such as contracts to marry or conduct a funeral. Nome Commercial Co. v. National Bank of Alaska, 948 P.2d 443 (Alaska 1997). A contract for the sale of a home will not support a claim for emotional distress. Hancock v. Northcutt, 808 P.2d 251 (Alaska 1991).

In Hancock, homeowners sued construction contractors for defective concrete work in the construction of their home, alleging breach of contract and negligent infliction of emotional distress. The court held that a plaintiff may not recover damages for negligently caused emotional distress absent a physical injury, a viable bystander claim, or a breach of contractual duty that, by its nature, "is particularly likely to result in serious emotional disturbance," and accordingly held the homeowner did not have a claim for emption distress. 808 P.2d at 257-59. The Hancock court held:

In our view, breach of a house construction contract is not especially likely to result in serious emotional disturbance. Such contracts are not so highly personal and laden with emotion as contracts where emotional damages have typically been allowed to stand on their own. Examples of the latter include contracts to marry, to conduct a funeral, to sell a sealed casket, to conduct a cesarean birth, to surgically rebuild a nose, to provide promised maternity coverage, to provide medical services, and to keep a daughter informed of her mother's health.

Similarly, no emotional distress is allowed in a typical misrepresentation case. Nelson v. Progressive Corp., 976 P.2d 859, 867 (Alaska 1999)(the usual rule is that the plaintiff must show pecuniary loss in misrepresentation cases and the damages are limited to such pecuniary loss, with no recovery for emotional distress).

F. Interest

Alaska courts award prejudgment interest as a measure of damages. Under Alaska's statute on prejudgment interest, AS 09.30.070, the rate of prejudgment interest is "three percentage points above the Twelfth Federal Reserve District discount rate in effect on January 2 of the year in which the judgment or decree is entered." For causes of action accruing after August 7, 1997, the rate of prejudgment interest changes January 1 of every year. The rate of prejudgment interest for judgments entered in 2008 is 7.75%. The current rate can be found at the Alaska court system website.² The rate of interest for actions accruing prior to August 7, 1997 remains at 10.5%, regardless of when judgment is entered. Prejudgment interest runs from the date of notice that a claim may be brought. AS 09.30.070(b).

Prejudgment interest may not be awarded for future economic losses, future non-economic losses, or punitive damages. AS 09.30.070(c). McConkey v. Hart, 930 P.2d 402 (Alaska 1996); Anderson v. Edwards, 625 P.2d 282 (Alaska 1981). Prejudgment interest is simple interest, not compound interest. Alyeska Pipeline Service Co. v. Anderson, 669 P.2d 956 (Alaska 1983). A different prejudgment interest rate may be applied if founded on a contract in writing. Also, prejudgment interest should not be awarded where funds have been paid in advance for past damages. Liimatta v. Vest, 45 P.3d 310, 322 (Alaska 2002).

Alaska awards post-judgment interest on judgments at the same rate as prejudgment interest. See AS 09.30.070. The interest rate is based on the year judgment is entered, and changes January 1 of each year, based on the federal discount rate in effect January 1. As with prejudgment interest, a higher or lower rate may be negotiated in contract cases, so long as the rate is specified within the contract.

G. Attorney Fees

Unlike other jurisdictions, Alaska routinely allows partial reimbursement of attorney fees to the prevailing party by both statute and court rule. See AS 09.60.010; Alaska R. Civ. P. 82. There is extensive Alaska case law explaining which party qualifies as the "prevailing party," but generally, the term "prevailing party" refers to the party in whose favor the decision or verdict is rendered and in whose favor judgment is entered. See Cooper v. Carlson, 511 P.2d 1305, 1308 (Alaska 1973).

The purpose of the Alaska R. Civ. P. 82 is to partially reimburse the prevailing party for attorney fees. In cases where money is recovered, Alaska R. Civ. P. 82 sets a schedule detailing the amount of attorney fees allowed. In cases in which the prevailing party does not recover a money judgment, the presumption is that the prevailing party is entitled to 30% of the prevailing party's attorney fees if a case goes to trial, and 20% of attorney fees in other cases. Alaska R. Civ. P. 82(b)(2).

²http://www.state.ak.us/courts/int.htm