An insurer covered its policyholder's legal bills, then refused to pay for the settlement those lawyers were working toward, a new lawsuit alleges.
That standoff sits at the heart of a complaint filed August 12, 2026, in Alaska federal court. Natives of Kodiak, Incorporated and four affiliated Koman companies are suing Evanston Insurance Company and its claim administrator, Markel Service, Incorporated, alleging the insurer owes them indemnity for a settlement and wrongly walked away from it.
The dispute grows out of what the complaint calls the "Underlying Action" - a federal whistleblower (qui tam) case brought in Texas by two former Koman Construction employees. According to the filing, that case pressed alleged False Claims Act and Anti-Kickback violations against the insureds, along with alleged retaliation and other employment wrongdoing. Those claims are unproven allegations in the separate Texas case, not in this one.
For coverage professionals, the policy structure is the story. According to the complaint, Evanston issued, for the March 1, 2023 to March 1, 2024 period, an Environmental Common Policy with Professional Liability coverage (a $1,000,000 Each Claim limit and $2,000,000 Aggregate); a For Profit Management Liability Policy with separate D&O and Employment Practices parts, each carrying a $1,000,000 limit; and a Commercial Excess Liability Policy with a $5,000,000 limit.
A Regulatory Endorsement anchors the dispute. The complaint says it carries a $1,000,000 sublimit and rewrites the professional-services exclusion so it "shall not apply to any Claim or that portion of any Claim, made against any Insured for an actual or alleged violation of the False Claims Act (31 U.S.C. §§ 3729-3733), any amendment thereto or any similar or related federal or state statute..." The insureds read that language as affirmative coverage for False Claims Act exposure.
The filing also alleges the insurer's own letters recognized coverage. According to the complaint, an October 29, 2024 Coverage Determination from Markel said the False Claims Act allegations triggered the D&O part and the retaliation allegations triggered the Employment Practices part, with the Professional Liability part acknowledged later.
Then the ground shifted, the complaint alleges. It says that starting in June 2026, and only after being asked to join mediation, the insurer claimed for the first time that the Management Liability Policy was "eroded," exhausted, and "closed." On or about July 24, 2026, according to the filing, Evanston's outside counsel disclaimed any duty to indemnify, relying mainly on a "Knowingly Wrongful Acts" exclusion.
The detail likely to land hardest with adjusters: on or about August 7, 2026, according to the complaint, Evanston agreed to pay defense fees and costs but said it "will not be making any indemnity payments on behalf of the Insureds." The insureds allege they then had to redirect those reimbursed defense dollars, plus their own funds, to pay for the settlement.
The suit alleges breach of contract over the duty to indemnify, seeks a declaratory judgment that coverage is owed, and alleges bad-faith breach of the covenant of good faith and fair dealing against both defendants. Citing Alaska law, the complaint alleges the insurer took "shifting, inconsistent, and contradictory coverage positions over a period of nearly three years" and put its own interests ahead of the insureds'. The insureds put their covered loss at no less than $5,000,000 and seek compensatory, consequential, and punitive damages.
The allegations have not been tested in court. Evanston and Markel have not filed a response, and no court has ruled on the merits.
