OPINION
FABE, Justice.
I. INTRODUCTION
Today we resolve two questions certified to us by the United States Court of Appeals for the Ninth Cireuit:
| 1. Does Alaska law prohibit enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (8) the claims are later determined to be excluded from coverage under the policy?
2, If the answer to Question 1 is "Yes," does Alaska law prohibit enforcement of a policy provision entitling an insurer to re- . imbursement of fees and costs incurred by the insurer defending claims under a res- . ervation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (8) it is later determined that the duty to defend never arose under the policy because there was no possibility of coverage? [
]
The answer to both questions is "yes."
II FACTS AND PROCEEDINGS
The facts of this case are not in dispute for the purpose of resolving the certified questions.
Ingaldson Fitzgerald is an Alas
ka law firm. Attorneys Liability Protection Society, Inc, (ALPS) is a Montana insurance company and risk-retention group. From April 29, 2007, to April 29, 2008, ALPS insured Ingaldson Fitzgerald.
Ingaldson Fitzgerald's insurance policy with ALPS insured the firm against claims arising from "an act, error or omission in professional services that were or should have been rendered by [Ingaldson Fitzgerald]." The policy expressly excluded from coverage any claims arising from conversion or disputes over fees. The policy also contained a provision providing that Ingaldson Fitzgerald would reimburse ALPS for fees and costs ALPS incurred in defending non-covered claims.
' In 2008 the bankruptcy trustee for the bankrupt estate of a former client of Ingald-son Fitzgerald, in conjunction with a separate former client of the firm, brought a claim against the firm in the U.S. Bankrupt-ey Court for the District of Alaska. The suit concerned Ingaldson Fitzgerald's actions in disbursing from and withdrawing fees and costs against a retainer. The former client and the trustee sought recovery of that retainer,
and asserted claims against Ingald-son Fitzgerald for, among other things, restitution, disgorgement, and conversion.
Ingaldson Fitzgerald notified ALPS of the underlying suit, ALPS responded by accepting Ingaldson Fitzgerald's tender of the defense in the underlying suit, but with the caveat that ALPS "reserved 'all rights'"
In its reservation of rights letter, ALPS explained that the underlying suit made allegations of activities that "d[id] not appear to implicate the provision of services or activities by [Ingaldson Fitzgerald] as an attorney in an attorney-client relationship," and thus "d[id] not appear to be professional services within the Policy's coverage." The letter also asserted that the claims in the underlying suit sought restitution that was not within the policy's definition of covered "damages" and that the policy did not cover claims related to disputes over fees, dishonest or criminal acts, or the conversion of trust account funds. ALPS's reservation of rights letter also specifically included the right to be reimbursed for the portion of fees incurred in the defense of claims that were deemed not covered under the policy.
Ingaldson Fitzgerald then retained independent counsel to defend against the former client and the trustee's claim, and ALPS paid the fees incurred by that attorney.
During adversary proceedings in the underlying suit, the bankruptey court in the District of Alaska twice granted partial summary judgment against Ingaldson Fitzgerald.
The trustee then dismissed the remaining cause of action, sought entry of final judgment, and moved for attorney's fees and costs.
In September 2011 ALPS filed suit against Ingaldson Fitzgerald in the United States District Court for the District of Alaska,. ALPS sought declarations that its policy did not cover the underlying claims and that it was not obligated to furnish an appeal bond, as well as a monetary award reimbursing it for the cost of defending Ingaldson Fitzgerald. The district court determined that Ingaldson Fitzgerald did not meaningfully contest either of the first two requests for declaratory relief and thus granted ALPS its desired declarations on summary judgment.
But Ingaldson Fitzgerald did
contest ALPS's claim for reimbursement of the cost of defense in the underlying suit, and it moved for partial summary judgment on this point ALPS opposed Ingaldson Fitzgerald's motion and cross-moved for summary judgment.
The district court granted Ingaldson Fitzgerald's motion for partial summary judgment.
The district court noted that the policy provided ALPS with a right to reimbursement
but concluded that the reimbursement provision was not in compliance with Alaska insurance law and that the provision was therefore unenforceable.
Specifically, the district court concluded that the reimbursement provision was inconsistent with AS 21.96. 100(d), which provides that in furnishing the insured with independent counsel, an insurer "shall be responsible only for the fees and costs to defend those allegations for which the insurer either reserves its position as to coverage or 'accepts coverage."
The district court also determined that "Alaska law prohibits the inclusion of a right to reimbursement in insurance policies in the state and does not allow ALPS to provide insurance policy coverage that con-tradiets this prohibition."
The district court therefore granted Ingaldson Fitzgerald partial summary judgment on ALPS's claim for reimbursement.
ALPS appealed to the Ninth Circuit.
The Ninth Circuit certified two questions to this court, distinguishing between situations in which an insurer has a duty to defend but ultimately faces no lability and situations in which the duty to defend never arises.
We granted the Ninth Cireuit's request that we answer the certified questions. The parties provided full briefing of the issues, and the Alaska Division of Insurance filed an amicus brief at our request. Oral argument was held before this court on December 15, 2015.
III. STANDARD OF REVIEW
Alaska Appellate Rule 407(a) permits us to accept certified "questions of law of this state which may be- determinative of the cause then pending in the certifying court and as to which it. appears to the certifying court there is no controlling precedent in [this court's] decisions." We have explained that "in deciding a certified question of lat, we must 'stand in the shoes of the certifying court, yet exercise our independent judgment.'"
This entails “selecting the rule of law that is most persuasive in light of precedent, reason, and policy.
We interpret statutes "according to reason, practicality, and common sense, considering the meaning of the statute's language, its legislative history, and its purpose."
We "use a sliding seale approach to statutory interpretation, in which 'the plainer the statutory language is, the more convine-ing the evidence of contrary legislative purpose or intent must be," "
IV." DISCUSSION
A. When An Insurer Has A Duty To Defend, Alaska Law Prohibits Enforcement Of A Policy Provision Entitling That Insurer To Reimbursement Of Fees And Costs Incurred. During The Defense Of Claims Under. A Reservation Of Rights,
Answering the first certified question requires us fo answer two sub-questions.
First, does Alaska law generally require insurers to pay defense costs, without reimbursement, when they reserve rights? And second, if so, does Alaska law bar attempts to contract around this requirement? The answer to both questions is yes, even in cireum-stances where (1) an insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the 'defense subject to the reservation of rights, and (8) the claims are later determined to be excluded from coverage under the policy.
1. Alaska case law
Before turning to the text of AS 21.96.100, we first survey the common law context in which the statute was passed. Our examination of an insurer's options in policy defense situations begins with Continental Insurance Co. v. Bayless & Roberts, Inc.
In Continental an insured was sued, and its insurer became convinced that the insured had breached the insurance contract
The insurer informed the insured that it would only continue to defend the case subject "to a reservation of [the insurer's] right to later deny liability on the ground of the alleged breach."
We rejected this approach and held that in policy defense situations "the insured has a right to demand an unconditional defense."
We further recognized three options for an insurer seeking to meet this right: "affirm the policy and defend unconditionally," "repudiate the policy and withdraw from the defense," or "offer its insured the right to retain independent counsel to conduct his [or her] defense, and agree to pay all the necessary costs of that defense."
We elaborated upon our conclusion in Continental when we decided CHI of Alaska, Inc. v. Employers, Reinsurance Corp. in 1993.
In CHI an insured was sued under multiple theories, and its insurer agreed to defend on all claims, "conditional on reserving its rights to disclaim coverage" with respect to one of the: claims that it believed might be excluded undér the policy.
'Because the reservation of rights created a conflict of interest, the insured demanded that the insurer pay for independent counsel.
The insured then syed for a declaration that it was entitled to select independent counsel and have that counsel defend both the claim as to which the insurer had reserved its rights and the claims as to which the insurer had accepted coverage.
In CHI we held that the same rights and options that existed in policy defense situations under Continental also applied in coverage defense situations.
.In so doing, we explicitly held that where the injured third party's allegations state a claim within an exception to policy coverage, but facts known or ascertainable to the insurer also disclose a claim within or potentially within the policy's coverage, the insurer must still provide the insured with independent counsel.
We have therefore confirmed an insurer's obligation to provide and "pay all the:necessary
costs of" independent counsel when reserving the right to assert a later coverage defense.
2. Statutory text
Soon after we issued our decision in CHI, the Alaska Legislature passed a statute that codified the requirements that bind insurers as set out in Continental and CHI. The text of that statute, AS 21.96.100, reads in relevant part as follows:
Subpart (a) provides:
If an insurer has a duty to defend an insured under a policy of insurance and a conflict of interest arises that imposes a duty on the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to the insured unless the insured in writing waives the right to independent counsel:
Subpart (c) requires:
[I]f the insurer reserves the. insurer's _rights on an issue for which coverage is denied, the insurer shall provide independent counsel to the insured as provided under [subpart] (2) of this sectlon
Subpart (d) specifies that if the msured selects independent counsel, the insurer may require that the independent counsel have adequate experience and may limit the independent counsel's rates to the rate the insurer would pay an attorney in a similar case. It also stipulates:
In providing independent counsel, the insurer is not responsible for the fees and costs of defending an allegation for which coverage is properly denied and shall be responsible only for the fees and costs to defend those allegations for which the insurer either reserves its position as to coverage or accepts coverage. The independent counsel shall keep detailed records allocating fees and costs accordingly.
Finally, subpart (f) provides that an insured may waive the right to select independent counsel if the insured signs a waiver that includes, among other things, a section reading, "I have been advised of my right to select independent counsel to represent me in this lawsuit and of my right under state law to have all reasonable expenses of an independent counsel paid by my insurer."
As the Ninth Cireuit recognized, this statute "does not squarely address whether the insurer can later seek reimbursement of fees assumed under a reservation of rights" where "the parties agreed to a policy that allows reimbursement, and the insurer reiterated the possibility it would seek reimbursement in its reservation of rights letter."
- Thus, the question before us is whether the statute is correctly read as a prohibition on reimbursement. To resolve this question, we take a "sliding-scale approach [to statutory interpretation] where [tlhe plainer the statutory language is, the more convincing the evidence of contrary. legislative purpose or intent must be""
A review of the statutory text indicates that reimbursement is prohibited, and because there is no evidence of, contrary legislative purpose or intent, we conclude that the statute prohibits reimbursement provisions.
Language in subsections (a) through (d) of the statute leads us to this conclusion. The discussion throughout those subsections focuses on the mandatory requirement that insurers pay for the cost of independent counsel, The statute details the cireum-stances under which "the insurer shall provide independent counsel."
It discusses what happens when the insurer provides "independent counsel at the insurer's expense.
And it articulates the parameters of "the obligation of the insurer to pay the fee."
Thus, the statute regulates the relationship between insurer and insured when
independent counsel is provided and- dearly allocates to the insurer the responsibility to pay the fees and costs of such counsel. Any effort by the insurer to shift such expenses to an insured would violate the allocation that the statute requires and would therefore be invalid.
ALPS reads those clauses to mean that an insurer can fulfill its statutory obligations Jby paying fees and costs, while explicitly reserving the right to recoup money for those payments should the claims turn out to be uncovered claims under the policy. But that reading is inconsistent with the legislature’s general approach- to insurance regulations. The insurance industry is a “highly regulated industr[y].”
In a number of other contexts, we have held unenforceable insurance policy provisions that have run afoul of applicable regulations-or statutes. For example, we have invalidated policy provisions that were not in compliance with applicable regulations and had not been approved by the Division of Insurance;
provisions that were not in compliance with applicable statutes but
had
been approved by the Division of Insurance;
and provisions that unambiguously attempted to modify a statutorily mandated accrual date.
In light of that history, the statute’s silence on the question of reimbursement is instructive: There is no provision suggesting that AS 21.96.100 permits reimbursement, so we must conclude that the statutory scheme prohibits reimbursement.
And subsection (f), the waiver provision, further clarifies that to enforce a reimbursement provision would be inconsistent with the-purpose of the-statute. Subsection (f) specifies that “[a]n insured may waive the right to select independent counsel by signing a statement” that includes, among other things, acknowledgment that the insured understands his or her “right under state law to have all reasonable expenses of an independent counsel paid by my insurer.” Nowhere in the waiver provision is the possibility of reimbursement mentioned. It is difficult, to believe that the legislature would have drafted a' waiver provision that did not at least mention the
possibility
of a contractual right to' reimbursement if the legislature had contemplated a scenario in which an insurance policy could obviate the' insured’s' right to have all reasonable expenses of independent counsel paid for.
We -have previously held that insurance policies are contracts of adhesion and must be interpreted according to the reasonable expectations of the insured.
“In other words, ‘[t]he objectively reasonable expectations of ... beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations.’ ”
In AS 21.96.100(f), the legislature provided detailed waiver language that informs an insured’s expectations. And it is objectively reasonable for an insured party to base its expectations on that language. That the waiver provision omitted any discussion of the insured’s possible liability for reimbursement of attorney’s fees is yet another compelling- indication that the statute precludes reimbursement.
Contrary to this interpretation, ALPS argues that we should adopt the position taken by the California Supreme-Court. California has similarly imposed “limits on'the ability of liability insurers to control third-párty litigation against the insured” through both “case and statutory law.”
And California ap
pears to be the only jurisdiction with an independent counsel statute to have evaluated insurers' ability to seek reimbursement for the costs of defending claims that are ultimately excluded from coverage. ALPS therefore urges us to follow the path set by Buss v. Superior Court, in which the California Supreme Court rejected the argument that enforcement of contractual reimbursement rights conflicted with California's statute.
But as the Division of Insurance, argues in its amicus brief, Buss is inapposite because the California statute "contains no equivalent to the language in AS 21.96 100(d) that states the insurer 'shall be responsible only for the fees and costs to defend those allegatlons for which the insurer either reserves its position as to coverage or accepts coverage." ALPS maintains that Buss remains instructive be-'eause AS 21.96.100(d) does not actually address. reimbursement at all, so provisions within the policy contract may fill the gaps on the reimbursement issue. But unlike our statute, the California statute is not silent on the issue of reimbursement. To the contrary, the California statute prowdes that "[tlhis subdivision does not mvahdate other different or additional policy provisions pertaining to attorney's fees or providing for methods of settlement of disputes concerning those fees."
The Alaska Statutes contain no similar provision, so Buss does not assist us.
8. Legislative histbry
Legislative history bolsters our conclusion that the statute allocates responsibility fo pay for independent counsel to the insurer when the insurer reserves rights. In 1994 the legislature considered two bills with identical provisions relating to the appointment of independent counsel, and those provisions largely tracked the language now found in AS ~21.96;100.
The minutes of the House Rules Committee indicate that the Commissioner of the Department of Commerce and Economic Development described those provisions as "codification[s] of a court case ... in which the policyholder is entitled [to] rep-Ijésentation [by independent counsel], proposed by the insurer defending the case on behalf of the insured."
Neither bill passed, but in 1995 the legislature considered a bill that an officer of the Division of Insurance descr'ibéd' as "the successor bill" to those 'failed bills,
An assistant attorney general testified before the House Labor and Commerce Committee that the independent counsel prowsmh "implements an Alaska Supreme Court decision from 1993, which is called CHI of Alaska v. Employers Reinsurance," and he characterized CHI as standing for the proposition that "a purchaser of insurance has a unilateral right to select independent counsel to represent them, and they can do that at the insurance compan[y's] expense,"
The legislature's understanding of the statute's effects was illuminated two years later, when -the statute was amended.
As originally enacted, the statute did not include the following two sentences that are currently incorporated in the text of AS 21.96.100(d): "In providing independent counsel, the insurer is not responsible for the fees and costs of defending an allegation for which coverage is properly denied and shall be responsible only for the fees and costs to defend those allegations for which the insurer either reserves its position as to coverage or accepts coverage. The independent counsel shall keep detailed récords allocating fees and costs according
1y."
The sponsoring Representative, Brian S. Porter, explained that he had proposed the amendment in an effort to clarify that insurers were not responsible for fees and costs to defend those allegations for which it denied claimg.
Representative Porter's discussion of the amendment provides insight into his understanding that insurers were "required to provide a defense" for covered claims, and "where they had a reservation of right[s], they were also required to provide a defense,"
In other words, the. amendment did not seek to abrogate what one testifying attorney deseribed as a rule from "the Supreme Court and the legislature" that "individuals who have purchased insurance are entitled to independent counsel when there was a [rles-ervation of [rlights letter submitted,"
Importantly, the same testifying attorney described the amendment as an attempt to clarify that insurers were not responsible for the defense of non-covered claims as imposing a "fiscal check" on insured parties, who would "act reasonably" now that they "hald] to pay their attorney."
- If reimbursement had been generally available when reserved-right situations turned out to involve non-covered clams, then msured partles would already be subject to the "fiscal check" the amendment sought to impose. This further suggests that the legislature understood the requirement impoged by AS 21.96.100(a)-(d) that insurers reserving rights "shall provide" and "be responsible .,.. for the fees and costs" of independent counsel not to include an implied right of reimbursement.
4. : The position of the Division of Insurance
The Divigion of Insurance has authority to regulate insurance' forms under Title 21 of the Alaska Statutes.
Although we interpret statutes using our independent judgment,
we also afford "some weight” to an agency's interpretation of the statute, "especially where the ageticy mterpretatmn is longstanding."
The Division has "approved some - policies contammg reimbursement provisions, but .'.. has not specifically considered whether they conflict with AS 21.96.100.
The Division contends that these past approvals are "not dispositive" and maintains that, contrary to its past practice, "[a] policy provision entitling an insurer to reimbursement of fees and costs for defending claims under a reservation of rights
when the claims are ultimately denied would be counter to ... AS 21.96.100."
We agree that the past practice of the Division is not dispoditive: In Ennen v. Integon Indemmity Corp., we held that in a bad-faith action, an insurance company was not entitled to rely on the Division's approval of policy language when that language did not comply with applicable insurance statutes.
We come to the same conclusion in this case, particularly because the Division has effectively disavowed its past practice in favor of the more considered interpretation it advances in its amicus brief, We therefore do not afford any welght to the Division's past practice.
Instead, we afford some deference to the interpretation of AS 21.96.100 that the Division has advanced in its
The Division, noting that AS 21.96.100 recognizes an "Inherent conflict of interest between an insured and [an] insurer defending under a reservation of rights and resolves it by requiring an insurer to provide independent counsel and pay for it," concludes that “‘[a] policy provision allowing for reimbursement of these costs would undermine the statutory requirement that the insurer pay them in the first place." The Division therefore concludes that "under AS 21.96.100, if an insurer has a duty to defend and elects to reserve its rights on an issue, it is obligated to provide and pay for independent counsel."
Because all evidence of statutory purpose and legislative intent aligns with the Division's interpretation of the statute, we must conclude that the reimbursement provision in this-case is unenforceable. Thus, the answer to the first question is "yes": When an insurer has a duty to defend, Alaska law prohibits enforcement of a policy provision entitling that insurer to reimbursement of fees and costs incurred during the defense of claims under a reservation of rights, We come to this conclusion even in cases where, as is true here, (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (8) the claims are later determined to be excluded from coverage under the policy. '
B. Alaska Law: Prohlblts Enforcement Of A Policy Provision Entitling An Insurer To Reimbursement Of Fees And Costs Incurred During The Defense Of Claims Under A Reserva~tion Of Rights Even When It Is Later Determined That There Was No Possibility Of Claim..Coverage.
The duty to defend and the duty to indemnify are independent obligations.
In CHI we articulated the scope of the duty to defend in cirenmstances where an insurance company contests coverage: The duty arises "if the complaint on its face alleges facts which, standmg alone, give rise to a possible finding of lability covered by the policy or, if the complaint does not contain such allegations, where 'the true facts are within, or potentially within, the policy coverage and are known or reasonably ascertainable to the insurer"
In other words, the
duty to defend attaches, if at all, on the basis of the complaint and known or reasonably ascertainable facts at the time of the complaint.
Even if coverage is ultimately denied, and even if it were later determined that there was no possibility of coverage, that denial has no retroactive effect on the duty to defend,
But what about a cireumstance, ALPS asks, in which "the insurer, in an abundance of eaution, provides independent defense counsel regardless of whether the insurer has a duty to defend?" This "abundance of cantion" hypothetical only underscores the importance of preserving the balance we struck in Continental: An insurer may "affirm the policy and defend unconditionally[,] ... repudiate the policy and withdraw from the defense," or reserve rights and "offer its insured the right to retain independent counsel to conduct his [or her] defense, and agree to pay all the necessary costs of that defense."
To allow insurance companies to disavow the duty to defend but provide independent defense counsel out of "an abun-danee of caution" gives the insurer an incentive to automatically reserve rights in hopes of obtaining reimbursement for attorney's fees and to protect itself from claims of bad faith or breach that could result from a repudiation of the policy. Such a result is inconsistent with AS 21.96.100; Under the statute the determinative event giving rise to the insurer's duty to pay independent counsel is not the often-difficult determination as to the possibility or impossibility of coverage, but the objective act of the insurer taken when reserving its position as to coverage. And it is certainly inconsistent with our previous decisions on this issue. We conclude that Alaska law prohibits reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, even in circumstances where it is later discovered that there was "no possibility of coverage" under the policy. The answer to the second certified question is therefore "yes."
v. CONCLUSION
The answer to both certified questions is "yes": Alaska law prohibits enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (8) the claims are later determined to be exeluded from coverage under the policy; and, Alaska law also prohibits enforcement of a policy provision entitling an insurer to reimbursement of fees and costs incurred by the insurer defending claims under a reservation of rights, where (1) the insurer explicitly reserved the right to seek such reimbursement in its offer to tender a defense provided by independent counsel, (2) the insured accepted the defense subject to the reservation of rights, and (8) it is later determined that the duty to defend never arose under the policy because there was no possibility of coverage.
WINFREE and MAASSEN, Justices, not participating.