Opinion ID: 873585
Heading Depth: 2
Heading Rank: 4

Heading: Dearlove’s Second Offer Of Judgment

Text: Dearlove’s second offer was for $5,000 plus prejudgment interest, Rule 82 attorney’s fees, and Rule 79 costs, and it expressly noted the subrogation claim had been satisfied. In concluding that Dearlove was entitled to Rule 68 fees from this offer, the superior court did not consider the $20,000 payment because, according to the superior court, Dearlove had “settled the [PIP] lien” before making the second offer. The court noted that Campbell’s insurer was entitled to settle its subrogation claim and that the settlement had removed $20,000 from Campbell’s claim against Dearlove by the time the second offer was served. The court did not consider the impact of prejudgment interest, attorney’s fees, or costs, because both the $3,870 verdict and the $5,000 offer of judgment included these add-ons separately; the court concluded the add-ons would not make a significant difference in the comparison. Campbell appeals the court’s 23 Id. at 1092. 24 See generally Mackie v. Chizmar, 965 P.2d 1202, 1205 (Alaska 1998) (discussing Rule 68’s goals, including encouraging settlement and avoiding prolonged litigation). -10- 6785 decision not to include either the entire $20,000 payment — or at least prejudgment interest to the time of payment, Rule 79 costs, and Rule 82 attorney’s fees associated with the payment — in calculating total recovery. We examine each argument in turn. The superior court correctly excluded the $20,000 payment from Campbell’s total recovery when considering the second offer. As stated above, Rule 68’s goals are to encourage settlement and avoid protracted litigation.25 By the time the second offer of judgment was served, Campbell’s claim had changed because the face amount of Campbell’s insurer’s medical payments had been paid. Campbell could no longer have expected to recover the $20,000 in medical expenses at trial. The superior court’s review of the second offer of judgment correctly compared the jury award on Campbell’s remaining claims with the $5,000 offer. The question of add-ons is more difficult because the nature of the $20,000 payment from one State Farm company to the other is not clear from the record. In her motion for partial summary judgment, Dearlove variously told the superior court that her insurer had “reimbursed” Campbell’s insurer, that the defense had purchased the medical payment lien, and that Campbell’s insurer had settled the subrogated claim. Campbell responded that she was entitled to costs and attorney’s fees on the $20,000 paid to her insurer. After trial, Dearlove told the court her insurer had “purchased [the] lien,” thereby extinguishing it. She also told the court that Campbell’s insurer “had a right to settle this claim whether [Campbell] wanted it to or not” and that Campbell “did not have authority to block the settlement of the med pay lien.” But Dearlove provided no evidentiary support for any of her varying descriptions of the transaction, and the only relevant document before the superior court was a copy of a receipt from Campbell’s insurer noting the payment was a “reimbursement.” The superior court considered the transaction a settlement extinguishing the 25 Id. -11- 6785 subrogation claim. Campbell maintains there was insufficient evidence that her insurer actually compromised the claim, so the superior court’s analysis incorrectly characterized the payment as a settlement. We agree with Campbell and therefore remand for further proceedings on the attorney’s fees award — different transaction types would require different analyses to determine prevailing party status for the second offer of judgment. If there were in fact a settlement — a compromise and release of the claim and not simply a payment on the account — then the superior court was correct in its analysis. Campbell argues that because her insurer did not collect costs and attorney’s fees in addition to the $20,000, she was still pursuing that portion of the original subrogation claim. But the subrogation claim belonged to Campbell’s insurer, and so did the prejudgment interest, costs, and attorney’s fees associated with that claim. An insurer can “discount and settle its claim” if it chooses to do so.26 If Campbell’s insurer in fact discounted and settled its claim, Dearlove had no further liability to Campbell or the insurer for the $20,000 in medical expenses or for any associated prejudgment interest, costs, or attorney’s fees. But the analysis changes if the $20,000 payment merely reimbursed Campbell’s insurer without any conditions, as suggested by the payment receipt in the record. If the $20,000 were only an advance payment, Dearlove still owed prejudgment interest (through the date of payment), Rule 79 costs, and Rule 82 attorney’s fees on that amount because Campbell recovered the money as part of her lawsuit.27 Under this analysis, the superior court should include those amounts when calculating the amount 26 Ruggles ex rel. Estate of Mayer v. Grow, 984 P.2d 509, 512 (Alaska 1999). 27 Cf. Progressive, 195 P.3d at 1089 (treating voluntary payment as part of recovery). Under this analysis the relevant prejudgment interest, fees, and costs should be a part of Campbell’s judgment, even though the insurer owned the claim, because Campbell secured payment through her litigation efforts. Any dispute over entitlement to the money would have to be resolved separately between Campbell and her insurer. -12- 6785 of Campbell’s final judgment for comparison to Dearlove’s second offer of judgment. A third possibility is that the subrogation claim was purchased from Campbell’s insurer, as Dearlove stated in some of her superior court pleadings. If the subrogation claim were purchased and actually extinguished, the Rule 82 fees and Rule 79 costs analysis would be the same as if Campbell’s insurer compromised and released the claim. And if the subrogation claim were purchased but not extinguished, the Rule 82 fees and Rule 79 costs analysis would be the same as if Dearlove’s insurer simply had made an advance payment. But a purchase transaction would also require consideration of common fund fees and costs as well as Rule 82 fees and Rule 79 costs. The superior court recognized that, pursuant to our decision in Sidney v. Allstate Insurance Co.,28 Campbell’s insurer owed Campbell and her attorneys common fund attorney’s fees and costs on the $20,000 they caused the insurer to receive. Dearlove also recognizes that Campbell’s insurer benefitted from Campbell’s attorneys’ litigation efforts and as a result might be liable for common fund fees and costs, but disclaims any responsibility for the common fund fees and costs. The common fund fees and costs are distinct from Rule 82 fees and Rule 79 costs; they have a different origin and are owned by different parties. Campbell’s insurer owed common fund fees and costs; it did not own them as it did the Rule 82 fees and Rule 79 costs associated with its subrogation claim. If Campbell’s insurer transferred its interest in the common fund (the subrogation claim), it also transferred obligations related to that interest29 (unless the 28 187 P.3d 443, 454 (Alaska 2008) (holding injured party entitled to recover from insurer pro rata share of expenses incurred in obtaining recovery to insurer’s benefit). 29 See 51 A M . JUR . 2D Liens § 18 (2011) (“[A] subsequent holder of property that is encumbered by an equitable lien takes it subject to the rights of the equitable lienor, including the right of restitution to the extent of the lien.” (citing Bank of India (continued...) -13- 6785 parties to the transaction agreed otherwise). Thus because Campbell prosecuted the action leading to payment of the claim, Campbell and her attorneys would be entitled to recover pro rata costs and attorney’s fees from the purchaser of the subrogation claim under the common fund doctrine.30 If, as suggested in some of Dearlove’s superior court papers, the subrogation claim was purchased on Dearlove’s behalf, then Dearlove may be liable to Campbell and her attorneys for the common fund fees and costs. We note that nothing in the present record suggests collusion by the two insurers. Collusion in a subrogation claim settlement prejudicing the plaintiff with respect to a previous Rule 68 offer of judgment might require a different analysis. And even in the absence of collusion, a subrogation claim settlement prejudicing the plaintiffinsured with respect to a previous Rule 68 offer of judgment might implicate the insurer’s duty of good faith and fair dealing towards its insured. We do not need to address these issues here. We remand to the superior court for a determination of the specific nature of the insurers’ transaction and for a renewed determination of prevailing party status with respect to Dearlove’s second offer of judgment.