Richmond & Quinn: Litigation Overview Part 11

Prepared by Richmond & Quinn
Anchorage, Alaska

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XI. Damages

A. Recoverable Losses

1. Personal Injury
In a personal injury claim recoverable losses always include special damages such as lost wages and medical expenses. In addition, a personal injury plaintiff is entitled to damages for pain, suffering, inconvenience, physical impairment, disfigurement, loss of enjoyment of life, and loss of consortium, as well as other non-pecuniary damages. AS 09.17.010(a). As noted earlier, there may be caps on non-economic damages.

a. Loss of Consortium
Alaska allows claims for loss of spousal consortium. Schreiner v. Fruit, 519 P.2d 462 (Alaska 1971). A child may also claim loss of consortium for injuries to a parent and a parent may claim loss of society for injuries or death of a child below the age of majority. Hipbschman v. Prudhoe Bay Supply, Inc., 734 P.2d 991 (Alaska 1987); Gillispie v. Beta Construction Co., 842 P.2d 1272 (Alaska 1992); Scott v. United States, 884 F.2d 1280 (9th Cir. 1989). Under Alaska law, a consortium claim must be joined with the underlying cause of action. This rule applies to both claims of spousal consortium, Schreiner v. Fruit, supra, 519 P.2d at 466, and, "wherever feasible," to a child's claim for loss of parental consortium. Hipbschman, supra, 734 P.2d at 997.
b. Negligent Infliction of Emotional Distress
In cases involving negligent infliction of emotional distress (NIED), emotional distress unaccompanied by physical injury will not allow recovery. Hancock v. Northcutt, 808 P.2d 251 (Alaska 1991) (general rule in Alaska is that in the absence of physical injury, there can be no claim for emotional distress). There is also no negligence claim for emotional distress absent physical injury. Kallstrom v. United States, 43 P.3d 162 (Alaska 2002). The Alaska courts have not addressed the amount of injury required to support a claim for NIED. 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 (IIED). The "physical injury" requirement does not apply to bystander claims, pre-existing duty claims, or claims for intentional infliction of emotional distress. See below.
c. Bystander Claims
One exception to the physical injury requirement is the "bystander claim," in which a plaintiff claims emotional distress from observing a loved one being physically injured by the act of a tortfeasor. This type of claim is sometimes known in shorthand as a "bystander" claim. In Tommy's Elbow Room, Inc. v. Kavorkian, 727 P.2d 1038 (Alaska 1986), the Alaska Supreme Court followed the California approach in ruling that the bystander need not be directly in the zone of danger in order to recover. In Kavorkian, a father arrived at the scene of an accident sometime after the accident occurred and observed his daughter's serious physical injury. The court allowed the father to recover for emotional distress. The court determined that what had formerly been known as a "zone of danger" requirement "is not a rigid requirement of sensory and contemporaneous observance of the accident, but rather is a reasonable foreseeability that the plaintiff-witness would suffer emotional harm." Id. at 1043. While the bystander need not necessarily observe the loved one's injury at the scene of the accident (e.g., observing the injury at the hospital, for example, might suffice), "there remains a requirement that the shock result more or less contemporaneously with the plaintiff learning of the nature of the victim's injury." Mattingly v. Sheldon Jackson College, 743 P.2d 356, 365-66 (Alaska 1987) (father notified of son's accident by telephone was precluded from claiming emotional distress damages where he had to travel from one island to another to see his son for the first time in the hospital); see also Beck v. State, 837 P.2d 105 (Alaska 1992) (court should apply concepts of foreseeability and duty with view toward reasonable limitations on liability).
Factors in determining whether a third party may bring a claim for negligent infliction of emotional distress (NIED) include (1) whether the third party was near the scene of the accident, (2) whether shock resulted from contemporaneous observation of the accident, and (3) the closeness of the relationship between the plaintiff and the victim. Beck v. Department of Transp., 837 P.2d 105 (Alaska 1992).
d. Pre-Existing Duty Claims
A plaintiff may recover for emotional distress where the defendant owed the plaintiff a pre-existing duty and breached that duty. Chizmar v. Mackie, 896 P.2d 196 (Alaska 1995). The Alaska courts originally held the only contracts that will give rise to this type of duty 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). In Chizmar, the court allowed a claim for negligent infliction of emotional distress to go to the jury where a doctor made an incorrect AIDS diagnosis. Subsequently, the court suggested that breach of a duty to supply medical services would also support such a claim. Hinsberger v. State, 53 P.3d 568 (Alaska 2002).
e. Intentional Infliction of Emotional Distress
In determining whether a third party may bring a claim for intentional infliction of emotional distress (IIED) the court considers whether the third person was foreseeably harmed by the extreme and outrageous conduct. See King v. Brooks, 788 P.2d 707 (Alaska 1990) (to recover for intentional infliction of emotional distress, the "offending party, through extreme or outrageous conduct, must intentionally or recklessly cause severe emotional distress"). There is no physical injury requirement for recovery under intentional infliction of emotional distress. Kallstrom v. United States, 43 P.3d 162 (Alaska 2002).
f. Calculating Future Wage and Economic Loss
Pre-Tort Reform case law held that in calculating past wage losses (losses incurred up through the date of trial), a plaintiff should be awarded his probable lost earnings, and for future economic loss, a plaintiff should be awarded his "lost earning capacity." Alaska's 1986 Tort Reform statute may have altered the calculation of future earnings by limiting loss to "the amount of wages the injured party could have been expected to earn during future years." AS 09.17.040(b)(1). The courts have not yet interpreted this statutory change.
Income taxes are deducted from past wage loss; no tax deduction is made for future earning loss claims.

2. Wrongful Death
Alaska's wrongful death statute is AS 09.55.580. The statute provides significantly different measures of recovery depending on whether the decedent dies with or without a "spouse or children or other dependents." Id. 09.55.580(a).

a. No Statutory Beneficiaries
In cases where there is no statutory beneficiary, i.e., no spouse, wife, child, or "other dependent," the amount recovered for wrongful death "shall be limited to pecuniary loss," and the claim is by the personal representative on behalf of the estate. Alaska has adopted a net earnings theory or a net accumulation theory to determine loss to the estate. Loss to the estate is the probable value of the decedent's estate had he not prematurely expired, less the actual value of the estate at death. Osbourne v. Russell, 669 P.2d 550 (Alaska 1983). Net accumulations or savings are calculated by determining the decedent's future gross earnings and subtracting the percentage of those earnings that would constitute the decedent's personal consumption. Kulawik v. Era Jet Alaska, 820 P.2d 627 (Alaska 1991).
As in all tort cases, future tax liability may not be considered in calculating either future gross earnings or future personal consumption. Kulawik v. Era Jet Alaska, 820 P.2d 627 (Alaska 1991). Income taxes are considered in calculating past economic losses through the date of trial, but not future losses. Unless the parties agree otherwise, future economic damages are reduced to present value using a formula based on an assumption that present monies will be "invested at long-term future interest rates in the best and safest investments." AS 09.17.040(b).
As noted below, the estate may also make a claim for pre-death pain and suffering.
b. Statutory Beneficiaries
When a decedent leaves a statutory beneficiary, i.e. a spouse, child or "other dependent," a totally different set of standards apply. In such cases the claim must be brought by the administrator of the estate and all monetary judgments go to the statutory beneficiaries who are the real parties in interest. It is possible an adult, non-dependent child of a parent will be considered to be a statutory beneficiary, although the issue has not been addressed directly. See Kulawik v. Era Jet Alaska, 820 P.2d 627, 638 (Alaska 1991).
Courts have allowed a full spectrum of recovery to statutory beneficiaries. Recovery has included loss of expectation of pecuniary benefits, loss of contributions for support, loss of assistance or services, loss of consortium, loss of prospective training and education, and medical and funeral expenses. See AS 09.55.580(c). In addition, Alaska case law allows beneficiaries to recover for anguish, grief, and suffering. Tommy's Elbow Room, Inc. v. Kavorkian, 727 P.2d 1038 (Alaska 1986). A designated beneficiary can also recover "prospective inheritance" i.e., the inheritance he or she would have received if the deceased had not died prematurely. Kulawik v. Era Jet Alaska, 820 P.2d 627 (Alaska 1991).
c. Damages Allowed for "Other Dependents"
In addition to spouses and children, "other dependents" are statutory beneficiaries entitled to a full measure of damages under Alaska's wrongful death statute. A surviving parent can fit within this category, but only if the surviving parent can show actual dependency. Estate of Pushruk, 562 P.2d 329 (Alaska 1977). The category of "other dependent" also includes an unmarried partner or non-adopted stepchild where actual dependency is shown. See Greer Tank & Welding, Inc. v. Boettger, 609 P.2d 548 (Alaska 1980).
d. Parents May Sue for Injuries or Death of Child
A parent may maintain an action as plaintiff for the injury or death of a child below the age of majority. AS 09.15.010. Although a parent is not a statutory beneficiary under the wrongful death act, the Alaska courts have allowed a parent to sue for non-pecuniary damages including mental anguish, grief, and loss under AS 09.15.010. Gillespie v. Beta Construction Co., 842 P.2d 1272 (Alaska 1992).

3. Survival Actions
Alaska law allows a survival action for pre-death injuries caused by negligence or other tort. AS 09.55.570. The most common claims in survival action are for pre-death pain and suffering or pre-death medical expenses. Alaska generally allows recovery for pre-death pain and suffering which is consciously experienced. Sweeney v. Northern Lights Motel, 561 P.2d 1176 (Alaska 1977). Pain and suffering which occurs "substantially contemporaneous with death" is not compensable. Id.
4. Property Damage
The overriding principle governing recovery of damages in negligence cases is that the injured plaintiff is entitled to be restored to the position he or she would have occupied were it not for the defendant's negligence. Newberry Alaska, Inc. v. Alaska Constructors, 644 P.2d 224 (Alaska 1982). 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). When replacement of the damaged property is a less expensive alternative to repairing the property, the measure of damages will be the cost of a replacement unit less the trade in value of the damaged unit. Era Helicopters, Inc., supra, 518 P.2d 1062 n.13 (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. Id. at 1062.
When personal property is damaged to such an extent that it is a constructive total loss, the measure of damages is the fair market value of the item at the time of its destruction. State v. Stanley, 506 P.2d 1284, 1292 (Alaska 1973).
Similar principles would apply in cases of damage to real property. When the injury to real property is of a permanent nature, the proper measure of damages is the difference between the value of the land before and after the injury. GNA Contractors, Inc. v. Alaska Greenhouse, Inc., 517 P.2d 1379, 1386 n.9 (Alaska 1974). Restoration or repair damages have been approved in the case of destruction of real property, but only when the injury to real property is temporary in nature. Id. at 1386.
In at least one case, the Alaska Supreme Court has approved the inclusion of indirect administrative costs in a damage award based on the expense of repairing damaged property. Overhead costs for the processing of the claim against the defendant must be fair and reasonable, however. Golden Valley Electric Assoc. v. Revel, 719 P.2d 263 (Alaska 1986); Kurt's Trucking Co. v. City of Anchorage, 578 P.2d 975, 979 (Alaska 1978).
The Alaska Supreme Court has consistently awarded lost income damages for loss of use of income producing property or property essential to the operation of a commercial enterprise. In such cases, a plaintiff is entitled to be compensated for the fair value of the use of the item of property during the period either reasonably necessary to fix it or reasonably necessary to replace the property. State v. Stanley, 506 P.2d 1284, 1293 (Alaska 1973); Burgess Construction Co. v. Hancock, 514 P.2d 236, 238 (Alaska 1973); Bridges v. Alaska Housing Authority, 375 P.2d 696, 700 (Alaska 1962).

B. Punitive Damages

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 an exclusion, punitive damages may be deemed covered. State Farm v. Lawrence, 26 P.3d 1074 (Alaska 2001).

1. Standard for Recovery
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).
2. Punitive Damages Allowed
A plaintiff may recover punitive damages in a wide variety of cases. For example, the Alaska Supreme Court has affirmed awards of punitive damages in cases involving product liability, wrongful repossession, intentional interference with contract, intentional infliction of emotional distress, fraudulent misrepresentation and tortious breach of the implied covenant of good faith and fair dealing. Sturm, Ruger & Co., Inc. v. Day, 594 P.2d 38, 46-47 (Alaska 1979) (punitive damage award affirmed in product liability case). Cf. Ross Laboratories v. Thies, 725 P.2d 1076 (Alaska 1986) (insufficient evidence of prior knowledge or of similar incidents or of other outrageous conduct); Murray v. Feight, 741 P.2d 1148, 1158 (Alaska 1987); Alaska Statebank v. Fairco, 674 P.2d 288 (Alaska 1983) (punitive damages affirmed for wrongful repossession); Oaksmith v. Brusich, 774 P.2d 191 (Alaska 1989) (punitive damages affirmed for intentional infliction of emotional distress); Great Western Savings Bank v. George W. Easley Co., J.V., 778 P.2d 569 (Alaska 1989) (punitive damages affirmed for fraudulent misrepresentation); State Farm Fire and Casualty Co. v. Nicholson, 777 P.2d 1152 (Alaska 1989) (punitive damages affirmed for breach of implied covenant of good faith and fair dealing).
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).
3. Employer Liability for Damages
Under the doctrine of respondeat superior, an employer is liable for the negligent acts or omissions that his employee committed within the scope of his employment. Under the "independent contractor rule" the doctrine of respondeat superior does not apply to acts of independent contractors. Because an employer normally does not control the work of the independent contractor, he is not held liable for the torts of the contractor and its employees. Powell v. Tanner, 59 P.3d 246, 248-49 (Alaska 2002); Parker Drilling Co. v. O'Neill, 674 P.2d 770, 775 (Alaska 1983).
In 1986, the Alaska Supreme Court embraced the rule set forth in the Restatement (Second) of Agency which states that employers are vicariously liable for punitive damages when tortious acts are committed by their managerial employees acting within the scope of employment. Alaskan Village, Inc. v. Smalley, 720 P.2d 945 (Alaska 1986). In 1999, the Alaska Supreme Court broadened the scope of an employer's liability by eliminating the requirement that an employee be "managerial" in order for vicarious liability to attach. Veco, Inc. v. Rosebrock, 970 P.2d 906, 911 (Alaska 1999) ("Alaska case law has eliminated the requirement that the employees be managerial"). The Alaska Supreme Court reiterated their commitment to extensive employer liability by affirming the Veco holding in Norcon, Inc. v. Kotowski, 971 P.2d 158 (Alaska 1999) (employer will be held liable for punitive damages caused by the acts of non-managerial employees), and Laidlaw Transit, Inc. v. Crouse, 53 P.3d 1093 (Alaska 2002) (bus company liable for actions of employee who drove bus under the influence of marijuana). In Laidlaw, the Alaska court left open the door to adopting the complicity rule in a future case, which places limits on employer's responsibility for actions of its employees, where the issue was properly presented.
House Bill 214, passed in 2003, now restricts punitive damages to acts by managerial agents. By adopting the complicity rule by legislation, this bill will make it more difficult to hold employers liable for punitive damages. A managerial agent is a person with some power to set policy for the employer.
It is clear a partner will be held vicariously liable for the tortious acts of another partner. Murray v. Feight, 741 P.2d 1148 (Alaska 1987).
Under the 1997 tort reform statute's scheme of several liability, an employer may not be vicariously liable for an employee's percentage of fault when claims are made for negligent hire or supervision, but will be liable for its own independent negligence. Kodiak Island Borough v. Roe, 63 P.3d 1009 (Alaska 2003) (dicta).
The 1997 amendments to the tort reform statute removed language that "the trier of fact may determine that two or more persons may be treated as a single person. . . . ." Although there is an apparent conflict between the statute's several liability scheme and an employer's vicarious liability under the doctrine of respondeat superior, to date no court has moved away from respondeat superior liability for employers.

C. Interest and Attorney Fees

1. Prejudgment Interest
Alaska courts award prejudgment interest as a measure of damages. Under Alaska's current 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 2009 is 3.5%. 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).
2. Postjudgment Interest
Alaska awards postjudgment 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, in contract cases negotiation of a higher or lower rate is allowed so long as the rate is specified within the contract.
3. 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). In other words, the prevailing party is the party who was successful with regard to the main issues in the action. Id. It should be noted there is no "prevailing party" in child custody or divorce proceedings and Alaska R. Civ. P. 82 does not apply to those types of cases.
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:

Judgment and, if awarded,
Prejudgment Interest Contested With Trial Contested Without Trial Non-Contested

First $ 25,000 20% 18% 10%

Next $ 75,000 10% 8% 3%

Next $400,000 10% 6% 2%

Over $500,000 10% 2% 1%

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). A court may adjust attorney fees upward or downward depending on a number of equitable factors such as length and complexity of the litigation, length of trial, reasonableness of the hourly rate and other factors the court deems relevant. See Alaska R. Civ. P. 82(b)(3).
In certain cases filed after August 7, 1997, an offer of judgment pursuant to Alaska R. Civ. P. 68 may trigger an enhanced attorney fee award of 30% to 75% of the prevailing party's actual attorney fees. The operation of Rule 68 offers of judgment is discussed in more detail in Section VII (B) (5) above.
In automobile liability policies, prejudgment interest and Rule 82 attorney fee coverages are supplemental to the face limits when the policy provides statutory minimum (50/100) coverage. Hughes v. Harrelson, 844 P.2d 1106 (Alaska 1993). A policy need not require payment of prejudgment interest if the limits are above statutory minimums. Farquhar v. Alaska National Insurance Co., 20 P.3d 577 (Alaska 2001). For almost all policies, unless a policy properly restricts its Rule 82 attorney fee coverage, the insurer will be liable for attorney fees based on a percentage of the plaintiff's total damages, rather than as a percentage of the face limits of the policy. Bohna v. Hughes Thorsness, 828 P.2d 745 (Alaska 1992). See 3 AAC 26.500 (regulations on form of Rule 82 endorsement).
There are limitations on the recovery of attorney's fees against plaintiffs in wrongful death cases. The personal representative is a nominal party only, and not liable for fees. Likewise, the beneficiaries are not parties to the litigation and may not be liable. Zaverl v. Hanley, 64 P.3d 809 (Alaska 2003); In re Soldotna Aircrash Litigation, 835 P.2d 1215 (Alaska 1992).

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