Opinion ID: 2363683
Heading Depth: 2
Heading Rank: 3

Heading: Ferrellgas's Cost Award

Text: Under Colorado's offer of settlement statute, section 13-17-202, C.R.S. (2010), a defendant who serves an offer of settlement on a plaintiff more than fourteen days prior to trial is entitled to actual costs incurred after the offer if the plaintiff rejects the offer and does not recover a final judgment in excess of the offer. § 13-17-202(1)(a)(II). Here, Ferrellgas timely offered to settle Yeiser's claims for $197,000 inclusive of costs and interestsan offer which Yeiser refused. After trial, Ferrellgas requested costs since Yeiser's $102,251.27 post-setoff judgment was less than the settlement offer; the trial court agreed and awarded Ferrellgas $30,841.62. The court of appeals reversed the cost award, holding that the proper amount to consider with respect to the final judgment for purposes of the settlement statute was not the $102,251.27 post-setoff judgment, but rather the $314,323.21 pre-setoff verdict amount. Because the latter amount was more than Ferrellgas's $197,000 settlement offer, the court of appeals held that Ferrellgas was not entitled to recover costs under the settlement statute. The court of appeals primarily rested its holding on the principle articulated in Rubio v. Farris, 51 P.3d 992, 994 (Colo.App.2002), that the [final] judgment and offer must be considered in a like manner for the purposes of the settlement statute. In particular, the court of appeals focused on Ferrellgas's failure to explicitly articulate whether its $197,000 offer was inclusive of or in addition to the $172,657.55 that Ferrellgas had already paid Farmers, reasoning that because the settlement offer did not explicitly account for the setoff of that payment, the final judgment should likewise not include the setoff. We find the court of appeals' reasoning unpersuasive. It implies that Ferrellgas's $197,000 settlement offer was, in reality, an offer for $197,000, minus the $172,657.55 that Ferrellgas already paid Farmers and her contractorsa mere $24,342.45. But prior to making its settlement offer, Ferrellgas had already indicated its intention to seek post-verdict setoff of the entire amount that Farmers had paid Yeiser$212,071.94. Under the court of appeals' reasoning, Ferrellgas's actual offer could have been $197,000 less $212,071.94a negative net offer. To read such an unlikely possibility into an otherwise straightforward settlement offer, absent any supporting evidence, violates our principle of deference toward the encouragement of settlement. See Zufelt, 880 P.2d at 1185. Moreover, doing so would undermine the very foundation of Colorado's settlement framework, which relies on the conceptualization of settlement offers as ironclad, irrevocable promises to pay the offered settlement amount in exchange for the guarantee that the matter will be resolved and judgment will be entered. See Centric-Jones Co. v. Hufnagel, 848 P.2d 942, 947 (Colo.1993). Furthermore, the court of appeals' reliance on Rubio is misplaced. Rubio stands for the narrow and sensible proposition that a settlement offer explicitly including costs ought to be compared to a final judgment adjusted to reflect the same costs for the purposes of the settlement statute. 51 P.3d at 994-95. Litigation costs are not an inherent part of the underlying factual dispute between parties, but rather arise as a result of the dispute actually proceeding to litigation. Because settlement is directed at precluding those costs, there is no reason to assume that a settlement offer would include the costs absent an explicit statement of inclusion. Novak v. Craven, 195 P.3d 1115, 1121 (Colo.App.2008) (establishing as a corollary to Rubio that a final judgment for the purposes of the settlement statute should not be adjusted to include costs if they are not explicitly included in the settlement offer). On the other hand, if a settlement offeror strategically chooses to include costs in his offer, it is only fair for the trial court to include those costs when determining whether accepting the settlement would have proven a more cost-effective and efficient option than proceeding to trial. The post-verdict setoff of a settled subrogation claim fundamentally differs from litigation costs with respect to the settlement statute, because such a setoff is part and parcel of the damages stemming from the claim disputed by the parties. A subrogation settlement setoff is inherently and impliedly a part of the jury's determination of damages, mechanically excluded by legal artifice from the jury's determination and imposed after the verdict only to ensure that the jury's factual determination is an accurate measure of damages untainted by confusion over the legal propriety of the setoff. [6] To exclude such a setoff from the final judgment for purposes of the settlement statute would effectively exclude part of the verdict itself. Accordingly, we hold that a settlement offer should be presumed to impliedly include the amount of any post-verdict subrogation setoff. For the foregoing reasons, we reverse the court of appeals' holding that Ferrellgas's settlement offer should be compared to the pre-setoff verdict amount for the purposes of the settlement statute. On remand, the trial court should compare Ferrellgas's settlement offer of $197,000 to the $314,323.21 verdict amount minus the $212,071.94 amount that Farmers paid Yeiser and her contractors. Because Ferrellgas's settlement offer was inclusive of interest, the trial court should also add to the post-setoff verdict amount all pre-judgment interest incurred prior to, but not after, the settlement offer. § 13-17-202(2); Rubio, 51 P.3d at 995.