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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. The Progressive Corporation v. Peter (11/14/2008) sp-6323

The Progressive Corporation v. Peter (11/14/2008) sp-6323, 195 P3d 1083

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.
                                   

            THE SUPREME COURT OF THE STATE OF ALASKA


THE PROGRESSIVE )
CORPORATION and ) Supreme Court No. S- 12552
PROGRESSIVE NORTHWESTERN )
INSURANCE COMPANY, ) Superior Court No. 3KN-97- 964 CI
)
Appellants, ) O P I N I O N
)
v. ) No. 6323 November 14, 2008
)
SAMUEL PETER, JR., through his )
next friend, SAMUEL PETER, SR., )
and SAMUEL PETER, SR., )
Individually, )
)
Appellees. )
)

          Appeal  from the Superior Court of the  State
          of  Alaska,  Third Judicial District,  Kenai,
          Sharon L. Gleason, Judge.

          Appearances:   Gary A. Zipkin  and  Susan  M.
          West,  Guess  &  Rudd, P.C.,  Anchorage,  for
          Appellants.   David Karl Gross, Birch  Horton
          Bittner and Cherot, Anchorage, for Appellees.

          Before:     Fabe,  Chief  Justice,  Matthews,
          Eastaugh, and Carpeneti, Justices.

          EASTAUGH, Justice.
I.   INTRODUCTION
          After  Samuel  Peter, Jr., a minor, was injured  in  an
accident, his father, Samuel Peter, Sr., for himself and  Samuel,
Jr. sued the Progressive Corporation and Progressive Northwestern
Insurance  Company (collectively, Progressive), the  family  auto
insurer.   Their  complaint  included a  claim  that  Progressive
wrongfully refused to pay the policy limits of their underinsured
motorist  (UIM)  coverage.  When Progressive  moved  for  partial
summary judgment, arguing that the UIM coverage did not apply  to
the  accident, the superior court denied the motion and held that
the  UIM coverage applied.  Soon after, Progressive paid the  UIM
policy  limits.   After  the court granted  summary  judgment  to
Progressive  on  most  other claims and  the  parties  agreed  to
dismiss  the  last  claim,  both  sides  sought  attorneys  fees.
Progressive  had  made two unaccepted offers  of  judgment.   The
superior  court held that the two offers were not valid, rejected
Progressives  request for Alaska Civil Rule  68  attorneys  fees,
declared  the  Peters the prevailing parties under  Alaska  Civil
Rule  82, and awarded them attorneys fees of $8,555.  Progressive
appeals.  Because the superior court did not err in declining  to
award  Progressive Rule 68 fees, did not abuse its discretion  in
determining  that  the Peters were the prevailing  parties  under
Rule 82, and did not award the Peters duplicative attorneys fees,
we affirm.
II.  FACTS AND PROCEEDINGS
          We  have discussed the facts of the underlying accident
in  this case three times.1  We therefore only set out the  facts
pertinent to this appeal.
          While  crossing  the street shortly after  exiting  his
mothers  vehicle near Soldotna, nine-year-old Samuel  Peter,  Jr.
was struck by another vehicle and seriously injured.  Progressive
insured  the  Peters  vehicle.  In  December  1997  Samuel,  Jr.s
father,  Samuel Peter, Sr., sued Progressive on behalf of himself
and  his son, Samuel, Jr.  The Peters asserted sixteen claims for
relief, including a claim that Progressive wrongfully refused  to
pay  them  the  policy limits of the UIM coverage in  the  policy
Progressive had issued to the Peters.
          In  February 1998 Progressive sent the Peters its first
offer  of  judgment, for  $5,000, inclusive of costs, prejudgment
interest, and fees, for all claims other than the UIM claim.   In
February   2002,  after  four  years  of  extensive   litigation,
Progressive  sent  the Peters its second offer of  judgment,  for
$52,501  plus prejudgment interest, costs, and fees.  The  Peters
did not accept either offer of judgment.
          Progressive  filed  a  motion for summary  judgment  in
March  2002, asserting that Samuel, Jr. was not entitled  to  UIM
benefits because his injuries did not arise out of the ownership,
maintenance,  or use of his mothers vehicle.  The superior  court
denied  Progressives motion by order of August 27, 2002,  holding
that  (1)  there was a causal connection between the use  of  the
Peters  vehicle and Samuel, Jr.s accident; (2) Samuel, Jr.s  exit
from   the  Peters  vehicle  was  not  necessarily  independently
significant;  and  (3) the Peters vehicle was used  to  transport
Samuel, Jr.  Progressive then filed a petition for review,  which
          we denied in October 2002.  In January 2003 Progressive paid
$75,681.27  into  the court registry for the Peters  benefit;  it
explained  that  this amount represented the UIM  policy  limits,
consisting  of  the  facial  UIM limit  of  $50,000,  prejudgment
interest,  and  attorneys  fees.  Progressive  characterized  its
payment   as   voluntar[y].   The  superior  court   found   that
Progressives  payment accurately represent[ed] the  total  amount
payable to Samuel Peter Jr. under Progressives [UIM] policy, plus
prejudgment  interest and attorneys fees.  But the  January  2003
UIM payment did not resolve the case because the Peters continued
to assert numerous other claims against Progressive.
            In  February 2004 the superior court stayed one cause
of  action  pending  resolution of an appeal involving  different
parties  but related issues, and granted partial summary judgment
and  a Civil Rule 54(b) judgment for Progressive on all remaining
causes  of  action.  In June 2005, after we decided  the  pending
appeal  in  a  manner favoring Progressive,2 the  superior  court
dismissed  the  Peters  last remaining claim  with  prejudice  by
stipulation of the parties.
           Each  side  then  moved for costs and attorneys  fees.
Progressive asserted that it was the prevailing party because its
two  offers  of judgment were successful; it therefore  requested
Alaska  Civil  Rule  68 attorneys fees of $622,594.75.   After  a
hearing   Superior Court Judge Sharon L. Gleason determined  that
the Peters would be the prevailing parties if there were no valid
offer  of  judgment.  The court also determined that Progressives
first offer of judgment was not valid because that offer did  not
contemplate  a  complete resolution of the case and  entry  of  a
final judgment on all issues.  The court tentatively ruled as  to
the  second offer of judgment, allowing the parties to brief  the
mathematics of the offer-to-recovery comparison and the issue  of
whether a ten-percent or five-percent comparison should be  used.
After  that supplemental briefing, the court concluded that there
had  been  multiple defendants when the second offer of  judgment
was  made  and  that  consequently,  per  AS  09.30.065(a),   the
judgment finally entered on the claim must be at least 10 percent
less  favorable to the offeree than the offer.   The  court  then
held  that the second offer of judgment was not valid.  The court
entered  final judgment awarding the Peters Alaska Civil Rule  82
attorneys fees of $8,555.
          Progressive  appeals  the  rulings  on  the  offers  of
judgment and the attorneys fees award to the Peters.
III.      DISCUSSION
     A.   The  Superior Court Did Not Err by Holding Progressives
          First Offer of Judgment To Be Not Valid.
          
          In considering the validity of Progressives first offer
of  judgment,  the  superior court reviewed Alaska  case  law  to
determine whether a party can pick out certain claims in an offer
of judgment and have that constitute a valid offer.  It concluded
that  to  be valid, an offer of judgment must include all  claims
and  contemplate complete resolution of the case and entry  of  a
final judgment on all issues.3  The court therefore held that the
first offer of judgment was not valid.
          Progressive argues that it was error not to enforce its
first offer of judgment.  It contends that this offer of judgment
satisfied Alaska Civil Rule 68 and that Progressive had prevailed
on  every  claim the offer covered.  Progressive acknowledges  on
appeal   that  the first offer of judgment did not address  every
cause  of action,4 but argues that the offer still satisfied  the
purpose and text of Rule 68 (the offer-of-judgment rule)  and  AS
09.30.065  (the offer-of-judgment statute).  Progressive  asserts
that  Rule 68 and AS 09.30.065 do not compel the superior  courts
conclusion that, per Fernandes v. Portwine,5 an offer of judgment
must  include all claims to be valid.6  Progressive  argues  that
Rule 68 and AS 09.30.065 intentionally use the word claim instead
of  action to allow for offers of judgment on individual  claims,
not  just  the  entire action.  Progressive  asserts  that  claim
refers  to  a cause of action but action refers to a totality  of
the claims.  Reading claim to refer only to individual causes  of
action,  Progressive  argues that its  first  offer  of  judgment
satisfied  the  rule and the statute and would have  dramatically
reduced the scope of the litigation.7
          Progressives argument is ultimately unavailing  because
Rule 68 and AS 09.30.065 require an offer to include every claim.
The  goal  of  Rule  68  is  to encourage  settlement  and  avoid
litigation.8  Both Rule 68 and AS 09.30.065 state that  an  offer
must allow judgment to be entered in complete satisfaction of the
claim.9   Both  the rule and statute implicitly require  that  an
offer  of judgment include all claims between the parties and  be
capable  of  completely resolving the case  by  way  of  a  final
judgment if accepted.10  As used in both the rule and the statute,
the  word  claim  refers  to  all litigated  claims  between  the
parties.  To read claim any other way would subvert the  goal  of
Rule  68  and AS 09.30.065 and permit piecemeal offers.   Because
Progressives first offer of judgment did not include every  claim
and  would  not  have  ended the entire  litigation  between  the
parties,  the superior court did not err in concluding  that  the
first offer of judgment was not valid.
     B.   The   Superior   Court  Did  Not   Err   in   Rejecting
          Progressives  Rule 68 Attorneys Fees Request  Based  on
          the Second Offer of Judgment.
          
          The  superior  court  rejected  Progressives  Rule   68
attorneys  fees  request after ruling that the  second  offer  of
judgment  was not valid.  It first found that because  Schumacher
Enterprises, Inc. was still a defendant when the second offer was
made, the ten-percent comparison (for offers made when there  are
multiple defendants) applied.11 It then compared the amount of the
second offer of judgment with the amount recovered. In concluding
that the offer was not valid, it implicitly found that the amount
recovered  was  not  at least 10 percent less  favorable  to  the
offeree than the offer.
          Progressive argues that it was error not to enforce its
second  offer  of  judgment.  It first asserts that  because  the
courts  two  judgments awarded the Peters  no  damages  and  only
awarded them $8,555 of attorneys fees, Progressives second offer,
for $52,501 plus add-ons, was at least ten percent more favorable
          to the Peters than the judgment finally rendered.12  (Emphasis
added.)   Addressing the UIM recovery, Progressive  reasons  that
[v]oluntary  payments  and  partial  settlements  are   not   the
benchmark  by  which  offers  of judgment  should  be  evaluated.
(Emphasis in original.)
          We  first  dispose of Progressives alternative argument
that,  even  if the UIM recovery may be compared with the  offer,
the amount offered was at least 5 percent more favorable than the
amount  recovered.   Progressives invocation of  Rule  68s  five-
percent  comparison  is  founded on its assertion  that  the  two
Progressive  entities should be treated as  a  single  defendant.
But,  as  we will see, the success of the second offer  does  not
turn  on the number of defendants.  Moreover, the superior  court
based   its   multiple-defendant  ruling  on  its  finding   that
Schumacher  Enterprises was also a defendant when the  offer  was
made.   Progressives  appeal does not assert  that  this  factual
finding  was  clearly  erroneous.  It has  therefore  waived  any
challenge  to  the  finding that underlies  the  superior  courts
conclusion that the ten-percent comparison applies.
          The  superior  courts ruling that the second  offer  of
judgment was not valid turns on an implicit factual finding  that
the  offer  was  not  large enough.  To  the  extent  Progressive
challenges that finding, we review it de novo.13  Progressive also
argues  that  for purposes of Rule 68(b) and AS 09.30.065(a),  it
was  error  to  treat the recovery as though it  was  a  judgment
finally rendered or entered by the court.  This argument raises a
legal  question  how to interpret the rule and the statute   that
we review exercising our independent judgment.14
          Rule  68(b) and AS 09.30.065(a) call for awards of fees
and  costs  against an offeree whose judgment is  at  least  five
percent  less  favorable  than  the  offer  (if  there   is   one
defendant),  or  is at least 10 percent less favorable  than  the
offer  (if there are multiple defendants).15  Progressives second
offer of judgment was for $52,501 plus prejudgment interest, Rule
82 fees, and Rule 79 costs.  According to the Peters calculations
on  appeal, prejudgment interest totaled $9,146.67, and  Rule  82
fees totaled $8,664.77.16  Including the $52,501 principal amount,
the total value of the second offer of judgment was approximately
$70,312.44.   But the total amount paid on the Peters  UIM  claim
was  $75,681.27.   This amount, as Progressive explained  in  the
superior  court,  represented  the facial  underinsured  motorist
limits  .  .  .  plus prejudgment interest and attorneys  fees.17
Because the amount recovered exceeded the amount that would  have
been  paid had the offer been accepted, the amount recovered  was
necessarily  not at least five or ten percent less  favorable  to
the Peters than the offer.18  This renders immaterial the parties
dispute   about  whether  there  were  multiple  defendants   and
therefore which percentage applies.
          The  dispute about the number of defendants nonetheless
highlights  a  nuance in the current Rule 68 and statute.   Since
its amendment in 1997, Rule 68 states that
          [i]f  the  judgment finally rendered  by  the
          court is at least 5 percent less favorable to
          the  offeree than the offer, or, if there are
          multiple defendants, at least 10 percent less
          favorable to the offeree than the offer,  the
          offeree  .  .  . shall pay reasonable  actual
          attorneys  fees incurred by the offeror  from
          the date the offer was made.[19]
          
Rule  68 previously required that the final judgment be less than
the  offer to trigger the rules penalty.20  The current rule thus
now  gives the offeree some leeway to recover somewhat less  than
the amount of the offer without suffering a Rule 68 penalty.  For
example,  under  the  current rule if the only  defendant  offers
$10,000,  Rule  68  will not be triggered unless  the  plaintiff-
offeree  fails  to  recover  more than  $9,500.21   Assuming  (as
Progressive  argues) there was only one defendant, to  avoid  the
penalty,  the Peters had to recover more than $66,796.82 (ninety-
five  percent  of  $70,312.44, the total amount  of  Progressives
second offer).  They did so.
          Progressive  raises a closer question by  arguing  that
the  second offer was greater than the judgments finally rendered
or  entered.  One judgment awarded no damages and the other  only
awarded   the  Peters  attorneys  fees  of  $8,555.   Progressive
relatedly   asserts   that  [v]oluntary  payments   and   partial
settlements  are  not  the  benchmark for  evaluating  offers  of
judgment.   This raises the question whether the superior  court,
in  denying  Progressives request for Rule 68  fees,  erroneously
considered  the UIM recovery.  Rule 68(b) speaks of the  judgment
finally rendered by the court and AS 09.30.065(a) speaks  of  the
judgment finally entered on the claim.
          For  several  reasons, we conclude  that  the  superior
court did not err in considering the UIM recovery.
          First,   Progressives  argument  rests  on  an   overly
technical  reading of the rule and the statute.  The  August  27,
2002   order   denying  Progressives  summary   judgment   motion
effectively  held that the UIM coverage applied to the  accident,
even though it did not reach UIM liability or damages issues.  As
the   Peters  argue,  the  entry  of  the  order  declaring  that
Progressives coverage dispute was unfounded, amounts to the entry
of  summary  judgment  in  favor  of  the  Peters.   Soon  after,
Progressive  interpleaded  $75,681.27 into  the  court  registry.
Progressive  did  so,  it  explained at  the  time,  because  the
superior  court has concluded that the injuries were sufficiently
caused  by  use  of  the insured vehicle to satisfy  the  policys
coverage  condition,  and because we soon thereafter  had  denied
Progressives   petition  for  review  on  the   coverage   issue.
Progressive described the interpleader amount as representing the
underinsured    motorist   contract    benefits.     Under    the
circumstances,  the  order  entered  August  27,  2002   may   be
considered  a  partial  judgment in favor  of  the  Peters.   The
superior  court,  in  considering Progressives  Rule  68  motion,
therefore  did not err in comparing the second offer of  judgment
with the amount Progressive paid to exhaust the UIM policy limits
after entry of the August 27, 2002 order.
          Second,  this  result is consistent with  an  analogous
Civil  Rule 82 case, Hillman v. Nationwide Mutual Fire  Insurance
          Co.22  The Hillman circumstances are comparable to those presented
here.  We there reversed an award of attorneys fees to Nationwide
and  remanded  for  a  fees award to the Hillmans  as  prevailing
parties.23    The Hillmans had sued their insurer, asserting  UIM
and  bad  faith claims.  After a judicial ruling held  that  they
were  covered  by their UIM insurance, arbitration of  their  UIM
claim  decided  fault,  causation, and damages  in  their  favor.
Their  insurer then paid them $50,000, the facial limits of their
UIM coverage.  The Hillmans then continued litigating in superior
court.  That court granted summary judgment to the insurer on the
Hillmans  bad  faith  claims,  entered  final  judgment  for  the
insurer,  and awarded the insurer Rule 82 prevailing party  fees.
Although we affirmed the summary judgment that rejected  the  bad
faith claims, we reversed the fees award, stating that Here . . .
plaintiff prevailed on the basic liability question and  received
an affirmative recovery based on its litigation of that question,
which  was substantial in amount.24  Even though we assumed  that
the Hillmans were no doubt disappointed that they did not receive
damages on their bad faith claims, we thought it controlling that
they  prevailed  against vigorous opposition on  their  claim  of
policy coverage and received $50,000 on that claim. This recovery
cannot  be classified as an incidental one unrelated to the  main
focus of the litigation in this case.25
            In  ruling as a matter of law that the Hillmans  were
the  prevailing parties, we looked at both their victory  on  the
coverage issue and the amount of their recovery.26  In effect, we
held  that  trial  courts  may  consider  non-judgment  financial
recoveries in determining who is the prevailing party under  Rule
82.27    We  quoted  as  follows from earlier  decisions:   [T]he
prevailing  party is the one who has successfully  prosecuted  or
defended  against  the action, the one who is successful  on  the
main  issue  of  the action and in whose favor  the  decision  or
verdict is rendered and the judgment entered.  28  Applying  that
standard, we held that the Hillmans were the prevailing  parties,
even  though  no  judgment  had been  entered  for  them  at  the
conclusion of the case.
          Third, no final judgment awarded damages to the Peters,
but  equivalent  circumstances justified the  superior  court  in
considering their recovery for purposes of Rule 68.   It  was  in
the best position to consider whether the circumstances warranted
treating the 2003 recovery as though it was either the result  of
the  August  27,  2002 order or was subsumed in  the  2006  final
judgment.   The  superior court therefore did  not  commit  legal
error  in  considering  the  recovery  in  deciding  Progressives
request  for Rule 68 fees.  Progressive asserts here, as  it  did
below,  that  the payment was voluntary or a partial  settlement.
The   superior   court  was  not  compelled   to   accept   these
characterizations or to think that they mattered.
          Fourth, a hypothetical example helps explain why it was
permissible to treat the recovery as part of the judgment.  In  a
lawsuit  seeking damages for an alleged breach of  contract,  the
defendant makes an unaccepted $100,000 offer of judgment.   After
continued  litigation  and shortly before  trial,  the  defendant
tenders  $80,000 to the plaintiff; the tender is not  conditioned
          on dismissal and denies liability.  Plaintiff accepts the money
and  proceeds  to trial seeking the rest of the alleged  damages.
Following trial, the judge finds for plaintiff and awards $40,000
in  undischarged  damages.  Arguing that  the  $40,000  award  is
substantially less than the $100,000 offer of judgment, defendant
seeks  a  Rule  68 award.  Unless the $80,000 prior  recovery  is
considered, defendant will recover a Rule 68 award.  In our view,
the  trial could validly decide that the pre-trial payment on the
contract  claim should be added to the trial award  on  the  same
claim  to  decide whether the judgment finally rendered is  large
enough  to  avoid  the Rule 68 penalty.  A similar  result  seems
appropriate  should the defendant unilaterally  pay  all  damages
before trial, requiring entry of a judgment of dismissal.
          Fifth,  abusive  offer-of-judgment  tactics  could   be
encouraged  if  a  trial court could not in  these  circumstances
consider a recovery not expressly awarded by the court.   As  the
Peters  argue,  To hold otherwise would be to create  a  loophole
allowing parties to either escape or create the punitive measures
of  an  offer  of judgment by simply making a gratuitous  payment
prior to the entry of a final judgment.  Such a loophole would  .
.  .  effectively  avoid  the rule.  We  are  not  implying  that
Progressive engaged in abusive tactics in making the second offer
of  judgment, in tendering the UIM policy limits payment,  or  in
seeking Rule 68 fees.  Indeed, its offer attempted to address the
UIM  claim, and sought to protect Progressive from very expensive
and  hard-fought litigation even though Progressive  misread  the
rule  and miscalculated its offer.  But the size of its requested
Rule  68 fees award, $622,594.75,  illustrates the potential  for
abuse,  and  how  unconditional  acceptance  of  an  eve-of-trial
payment could trigger an unexpected and ruinous penalty.
          The   superior   court  did  not  err  by   considering
Progressives  payment in deciding whether  the  second  offer  of
judgment  required  imposition  of  a  Rule  68  penalty.    This
conclusion  makes  it unnecessary for us to consider  the  Peters
alternative contention (raised for the first time on appeal) that
Progressives second offer was invalid because it was directed  at
more than one party.29
     C.   The  Superior  Court Did Not Abuse  Its  Discretion  by
          Determining that the Peters Were the Rule 82 Prevailing
          Parties.
          
          The  superior  court awarded the Peters  Rule  82(b)(1)
(contested  without trial) attorneys fees of $8,555.  Progressive
argues that it was error to award the Peters any attorneys  fees,
because  Progressive  was  actually  the  prevailing  party.   It
contends  that  the  Peters failed to win a  single  claim;  that
fourteen  of the Peters sixteen original claims were resolved  in
Progressives  favor; that one claim was voluntarily dismissed  by
the  parties;  and  that  Progressive  voluntarily  paid  on  the
remaining claim (for UIM benefits).  Progressive also argues that
no  money  judgment  was entered for the  Peters,  and  that  the
superior  court  only determined that the injury arose  from  the
mothers  ownership  of  the vehicle, but did  not  resolve  other
necessary  elements of the Peters UIM claim.30  It  also  asserts
          that the Peters recovery of UIM benefits represents only a tiny
fraction  of  the  Peters  lowest  settlement  demand  and   that
Progressive  was the prevailing party because it defeated  claims
of   great   potential  liability.   Progressive  contends   that
insurance  coverage was not the main issue of the litigation  and
that  the  Peters  large punitive damages request  was  the  main
reason  for the litigation.  If insurance coverage was  the  main
issue, Progressive questions why the Peters continued to litigate
for years following payment of the UIM benefits.31
          The  law governing the review of Rule 82 attorneys fees
decisions  is  well  established.   Rule  82  directs  that   the
prevailing  party shall be awarded attorneys fees.32  Determining
who  is the prevailing party is committed to the broad discretion
of  the trial court.33  We review for abuse of discretion a trial
courts   prevailing  party  determination.34   Prevailing   party
determinations  will  be overturned only if they  are  manifestly
unreasonable.35   The  prevailing  party  is  the  one  who   has
successfully prosecuted or defended against the action,  the  one
who  is  successful on the main issue of the action and in  whose
favor  the  decision  or  verdict is rendered  and  the  judgment
entered.36   A plaintiff may prevail even if he or she  fails  to
recover all the relief prayed for.37
          The   superior   court  based  its   prevailing   party
determination  on  Progressives payment to the Peters  after  the
court  denied  Progressives March 2002 summary  judgment  motion.
That  motion had argued that Samuel, Jr.s injuries did not result
from the use of an underinsured vehicle and that he was therefore
not  entitled  to  recover UIM benefits.  Had it  succeeded,  the
motion would have established as a matter of law that Samuel, Jr.
was  not  entitled  to  UIM  benefits and  that  Progressive  was
entitled  to summary judgment on that claim.  The superior  court
denied   Progressives  motion.   The  superior   court   analyzed
Progressives arguments under the three-factor test we adopted  in
Shaw  v. State Farm Mutual Automobile Insurance Cos. to determine
whether an accident arises out of the use of an automobile.38  The
superior  court concluded that (1) there was a causal  connection
between  the use of the Peters vehicle and Samuel, Jr.s accident,
(2) Samuel, Jr.s exit from the Peters vehicle was not necessarily
an   act  of  independent  significance  that  broke  the  causal
connection,  and  (3) the Peters vehicle was  used  to  transport
Samuel,  Jr.   Based  on these conclusions,  the  superior  court
denied Progressives motion.  The ruling effectively resolved  the
UIM  coverage  issue  against Progressive.  Progressive  filed  a
petition  for  review,  which we denied.  Soon  after  we  denied
Progressives  petition in October 2002, Progressive  interpleaded
$75,681.27  into  the  court registry  for  the  Peters  benefit.
Progressives  interpleader memorandum  stated  that  this  amount
represented  the facial limit ($50,000) of the UIM coverage  plus
prejudgment interest and attorneys fees.  Progressive  argues  on
appeal  that  the superior courts denial of its summary  judgment
motion  did not resolve whether coverage existed; it also  argues
that  no  money judgment was ever entered for the Peters  because
Progressives payment was not a money judgment.
          Progressives  arguments do not  persuade  us  that  the
          superior court abused its discretion in treating the Peters as
the prevailing parties.
          The  fact the Peters only recovered on one claim is not
controlling.   Recovery  does  not  guarantee  prevailing   party
status,  but  plaintiffs should not be penalized  for  recovering
less  than  what they originally sought.39  Parties  who  do  not
recover  on  every issue can still be regarded as  prevailing  if
they  nonetheless recover a significant damage award on the  main
issue.40  Even if a party prevails on only one of the main issues,
it  is  not  necessarily  ineligible  for  being  considered  the
prevailing party.41 The Peters sought a large recovery, and admit
on appeal that they were disappointed not to recover compensatory
and punitive damages related to their bad faith claims.  But they
recovered  the  full UIM policy limits and received  a  total  of
$75,681.27;  this  was not a de minimis recovery.42   The  Peters
recovered  a  significant  award  on  one  of  the  main   issues
litigated.
          We     are    also    unpersuaded    by    Progressives
characterization  of  its  payment as  voluntary.   Although  the
payment was voluntary in the sense that no judgment required that
it  be  paid,  it  defies credulity to suggest that  Progressives
payment  of the full value of the UIM claim was not a product  of
the   litigation.   We  are  also  unpersuaded  by   Progressives
contention  that the payment was a settlement.  A  settlement  is
[a]n agreement ending a dispute or lawsuit.43  The Peters gave up
nothing  to obtain Progressives payment.  There was no bargained-
for exchange.  The events leading up to the payment make it clear
that the payment was not a settlement.44
          We  have  held  that  the catalyst  theory  can  be  an
appropriate  method for determining prevailing party  status  for
attorneys fees purposes when a lawsuit brings about relief  in  a
manner  other than formal judgment.45  Under the catalyst theory,
to establish prevailing party status a party must demonstrate (1)
that it achieved the goal of the litigation by succeeding on  any
significant  issue which achieves some of the benefit  sought  in
bringing  the  suit,  and (2) that there is a  causal  connection
between the defendants action generating relief and the lawsuit.46
The  superior court did not make factual findings to support  the
catalyst theory, but that theory seems apt here.
          One  of  the  Peters claims sought payment of  the  UIM
policy limits.  The Peters eventually received the benefit of the
full  UIM  policy limits, and thus the full amount in dispute  on
that  claim.   Under the circumstances, the absence of  a  formal
judgment  for  the Peters on their UIM claim does  not  foreclose
prevailing party status.
          In  determining  that  the Peters were  the  prevailing
parties  the  superior court stated that it  was  guided  by  our
decision  in  Hillman v. Nationwide Mutual Fire  Insurance  Co.47
Hillman  broadly supports the conclusion that the superior  court
could,  in  its  discretion, treat the Peters as  the  prevailing
parties because their recovery was not incidental and was related
to the main focus of the litigation of the case.48   The superior
court did not err in relying on Hillman.
          In   short,   the  superior  courts  prevailing   party
          determination was not manifestly unreasonable and we affirm its
determination that the Peters were the prevailing parties.
     D.   The  Superior Court Did Not Award Duplicative Attorneys
          Fees.
          
             The  superior  court awarded the  Peters  $8,555  in
attorneys  fees  calculated  under the  Rule  82(b)(1)  contested
without trial schedule on Progressives $75,681.27 payment.49
          Progressive  argues that the superior  court  erred  by
awarding  attorneys  fees calculated on the  UIM  payment,  which
already  included  a sum for attorneys fees.50  The  interpleaded
amount,  $75,681.27, included an amount for contested with  trial
attorneys fees calculated under Rule 82(b)(1) on the total of the
UIM facial limits plus prejudgment interest.  Progressive asserts
that  the superior courts Rule 82 attorneys fees award duplicated
the attorneys fees component included in the interpleaded amount.
          Progressives  arguments  are  unpersuasive.   We  first
articulated the mirror image rule in State Farm Mutual Automobile
Insurance Co. v. Harrington, stating that policy limits are  what
an  insurance  company would have to pay under its policy  if  it
went to trial and received an adverse verdict.51  To calculate its
maximum  potential policy liability, an insurance company assumes
that  the  case  went  to trial and that an adverse  verdict  was
entered as of the date of the offer.52  To satisfy its contractual
duty to the Peters under the UIM coverage, Progressive had to pay
not  only the UIM facial limits and prejudgment interest on those
limits,  but  also Rule 82 attorneys fees on the total  of  those
limits  and  the  prejudgment interest because  the  Peters  were
represented.    Progressive  included  these   amounts   in   its
$75,681.27 payment.  Its payment therefore represented the policy
limits  Progressive  was  contractually  required  to  pay.   But
because  the  Peters  had to retain counsel to  enforce  the  UIM
contract  and obtain what the contract promised them,  they  were
entitled to a Rule 82 attorneys fees award to make them at  least
partially  whole  on  their contractual recovery.   The  superior
courts  Rule 82 award of attorneys fees on the $75,681.27 payment
to the Peters was not duplicative.
IV.  CONCLUSION
          The   challenged  orders  of  the  superior  court  are
therefore AFFIRMED.
_______________________________
     1     Peter  v.  Progressive Corp., Mem. Op. & J.  No.  1240
(Alaska,  February 22, 2006); Peter v. Schumacher Enters.,  Inc.,
22  P.3d 481 (Alaska 2001); Peter v. Progressive Corp., 986  P.2d
865 (Alaska 1999).

     2     We  issued  our opinion in that case  in  2005.   Govt
Employees Ins. Co. v. Graham-Gonzalez, 107 P.3d 279 (Alaska 2005)
(holding  that insurance companies must make mandated  levels  of
UIM coverage available to prospective customers, but that initial
form  informing customers of coverage is not required to  include
price for each level of coverage).

     3     In  reaching this conclusion the superior court relied
on  our  decision  in Fernandes v. Portwine, 56  P.3d  1  (Alaska
2002).

     4     Progressives  first  offer of judgment  stated:   [We]
hereby  offer to allow judgment with respect to all claims  OTHER
THAN THE UNDERINSURED MOTORIST CLAIM ADVANCED ON BEHALF OF SAMUEL
PETER,  JR.,  to  be  entered in favor of plaintiffs.   In  other
words,  had  the Peters been willing to settle the other  fifteen
claims for $5,000, the UIM claim still would have remained to  be
litigated.

     5    Fernandes v. Portwine, 56 P.3d 1 (Alaska 2002).

     6     For  cases filed on or after August 7, 1997,  Rule  68
provides in pertinent part:

               (a)   At  any  time more  than  10  days
          before  the  trial begins, either  the  party
          making a claim or the party defending against
          a  claim may serve upon the adverse party  an
          offer  to  allow judgment to  be  entered  in
          complete  satisfaction of the claim  for  the
          money  or property or to the effect specified
          in the offer, with costs then accrued. . . .
               (b)  If the judgment finally rendered by
          the   court  is  at  least  5  percent   less
          favorable to the offeree than the offer,  or,
          if there are multiple defendants, at least 10
          percent  less  favorable to the offeree  than
          the  offer,  the offeree, whether  the  party
          making  the  claim or defending  against  the
          claim  shall  pay all costs as allowed  under
          the  Civil  Rules  and shall  pay  reasonable
          actual attorneys fees incurred by the offeror
          from the date the offer was made . . . .
          
          Likewise, for cases filed on or after August  7,  1997,
AS 09.30.065 provides in pertinent part:

          (a)  At any time more than 10 days before the
          trial begins, either the party making a claim
          or  the  party defending against a claim  may
          serve  upon  the adverse party  an  offer  to
          allow  judgment  to  be entered  in  complete
          satisfaction  of the claim for the  money  or
          property  or to the effect specified  in  the
          offer, with costs then accrued. . . . If  the
          judgment finally entered on the claim  as  to
          which  an  offer  has been  made  under  this
          section   is  at  least  five  percent   less
          favorable  to the offeree than the offer,  or
          if  there are multiple defendants at least 10
          percent  less  favorable to the offeree  than
          the  offer,  the offeree, whether  the  party
          making  the  claim or defending  against  the
          claim  shall  pay all costs as allowed  under
          the Alaska Rules of Civil Procedure and shall
          pay  reasonable actual attorney fees incurred
          by  the  offeror from the date the offer  was
          made . . . .
          
     7     We exercise our independent judgment in reviewing  the
superior courts interpretation of Alaska Civil Rule 68.   Jackman
v.  Jewel  Lake  Villa  One,  170 P.3d  173,  177  (Alaska  2007)
([q]uestions concerning an offer of judgments meaning and whether
the  offer  complies with Rule 68 raise issues of law,  which  we
review independently); Cook Schuhmann & Groseclose, Inc. v. Brown
&   Root,   Inc.,  116  P.3d  592,  597  (Alaska   2005)   ([t]he
interpretation of Rule 68 is a question of law that [we] review[]
de novo (internal quotations omitted)); Thomann v. Fouse, 93 P.3d
1048, 1050 (Alaska 2004) (applying independent standard of review
to  compliance of offer of judgment and reviewing offer terms  as
reasonable  offeree  would have understood them  when  offer  was
made).  We apply the same standard in reviewing a superior courts
interpretation of AS 09.30.065.

     8    Fernandes, 56 P.3d at 9.

     9    AS 09.30.065; Alaska R. Civ. P. 68.

     10     Cf.  Johns Heating Serv. v. Lamb, 46 P.3d 1024,  1042
(Alaska 2002) (citing Taylor Constr. Servs., Inc. v. URS Co., 758
P.2d  99,  102  (Alaska 1988)) (requiring offer  to  include  all
relationships  among  parties  and their  conflicting  claims  to
trigger  Rule  68 penalties for offer made by joint  offerors  to
single offeree).

     11     AS 09.30.065(a); Rule 68(b).

     12     Progressive misreads Rule 68 when it argues that  the
second offer was successful because it was at least five (or ten)
percent  more favorable to the Peters than the amount  recovered.
(Emphasis added.)  The rule looks to whether the recovery  is  at
least  five (or ten) percent less favorable than the offer,   not
whether  the  offer  is  at  least five  (or  ten)  percent  more
favorable  than the recovery.  The phrases are not mathematically
identical.    To   make  a  successful  offer  of   judgment   in
anticipation  that the offeree may obtain a $50,000  judgment,  a
single defendant must offer not $52,501, as Progressive did here,
but  $52,631.58  (the  result of dividing $50,000  by  .95).   To
defeat a $52,501 offer, an offeree only has to recover more  than
$49,875.95 (the product of multiplying $52,501 by .95); a $50,000
award therefore defeats a $52,501 offer, assuming one defendant.

     13     Power Constructors, Inc. v. Taylor & Hintze, 960 P.2d
20,  34  (Alaska 1998) (Calculation of the value of a verdict  to
determine  if it exceeded an offer of judgment presents questions
of law, which we review de novo.).

     14      Cook  Schuhmann & Groseclose, Inc. v. Brown &  Root,
Inc., 116 P.3d 592, 597 (Alaska 2005) (The interpretation of Rule
68  is  a  question of law that [this court] review[s]  de  novo,
adopting  the  rule of law that is most persuasive  in  light  of
precedent, policy and reason.  (internal quotations omitted)).

     15     AS  09.30.065(a); Alaska R. Civ. P. 68(b);  see  also
Lowell v. Hayes, 117 P.3d 745, 761 (Alaska 2005) (stating Rule 68
requires the court to compare each individual offer to the  final
judgment).   The  legislature in 1997 amended AS 09.30.065(a)  to
require  awards  of  costs  and fees  against  an  offeree  whose
judgment  is at least five percent less favorable to the  offeree
than  the offer if there is one defendant, or at least 10 percent
less  favorable  to  the  offeree than the  offer  if  there  are
multiple defendants.   Ch. 26,  16, 17, SLA 1997.  Rule 68(b) was
also  amended  accordingly. Ch. 26,  52, SLA 1997.   The  amended
statute  and  rule  apply  here because the  Peters  filed  their
complaint  after the amendments became effective.  Ch.  26,   55,
SLA 1997; Note to Supreme Court Order 1281.

     16     Progressive did not calculate Rule 79  costs  in  the
superior   court  and  has  not  on  appeal.   The  omission   is
immaterial.    The   Peters  state  that  Rule   79   costs   are
indeterminable.

     17    This total does not include Rule 79 costs.  Because no
Rule  79  costs  were included in the offer or the  recovery,  we
compare the offer and the recovery without including any Rule  79
amounts.

     18     Progressive  seems  to assume that  the  add-ons  are
equivalent, and that therefore the principal amount of the offer,
$52,501,  should  be  compared with  the  UIM  facial  limits  of
$50,000.   Assuming the add-ons cancel each other out, a  $52,501
offer  is unsuccessful if the principal amount recovered  exceeds
$49,875.95  (the product of multiplying $52,501  by  .95).    See
supra note 12.

     19    Alaska R. Civ. P. 68(b).

     20    See former Alaska R. Civ. P. 68(b).

     21     See  Alaska R. Civ. P. 68(b).  ($10,000 minus  5%  of
$10,000  equals  $9,500.)   The  rules  penalty  applies  if  the
plaintiff  in the example recovers $9,500 or less, and  does  not
apply if plaintiff recovers any amount greater than $9,500.

     22     Hillman  v. Nationwide Mut. Fire Ins. Co.,  855  P.2d
1321, 1328 (Alaska 1993).

     23    Id. at 1328.

     24    Id.

     25    Id.

     26    Id.

     27    Id.

     28     Id. at 1327 (quoting Day v. Moore, 771 P.2d 436,  437
(Alaska 1989) (quoting Adoption of V.M.C., 528 P.2d 788, 795 n.14
(Alaska 1974) (emphasis added))).

     29    Cf. Pagenkopf v. Chatham Elec. Inc., 165 P.3d 634, 638
(Alaska   2007)  (In  applying  Rule  68,  we  have  consistently
emphasized that an enforceable offer must be unambiguous.).

     30    Progressive argues that for UIM coverage to apply, the
Peters  still  had to establish that Samuel Peter, Jr.s  injuries
resulted from his mothers negligence.

     31     Progressive  also briefly argues that  because  final
judgment was entered in its favor and affirmed on appeal, the law
of  the  case makes Progressive the prevailing party.  The  final
judgment  and  the subsequent appeal did not address,  much  less
resolve in Progressives favor, the UIM coverage issues considered
when  the superior court denied Progressives UIM summary judgment
motion  in 2002 and when Progressive paid the UIM coverage limits
in  January  2003.  It is not obvious how the  law  of  the  case
doctrine  could  benefit Progressive as to the  prevailing  party
issue,  and  Progressives  terse  mention  of  the  doctrine   is
unconvincing.

     32    Alaska R. Civ. P. 82(a).

     33     Hillman  v. Nationwide Mut. Fire Ins. Co.,  855  P.2d
1321, 1326 (Alaska 1993).

     34     Interior  Cabaret, Hotel, Rest. & Retailers  Assn  v.
Fairbanks N. Star Borough, 135 P.3d 1000, 1002 (Alaska 2006); see
Curran v. Hastreiter, 579 P.2d 524, 531 (Alaska 1978).

     35    Interior Cabaret, 135 P.3d at 1002.

     36     Hillman,  855 P.2d at 1327 (internal  quotations  and
citation omitted).

     37     Blumenshine  v. Baptiste, 869 P.2d 470,  474  (Alaska
1994) (citing Hillman, 855 P.2d at 1328).

     38     Shaw v. State Farm Mut. Auto. Ins. Cos., 19 P.3d 588,
592  (Alaska 2001) (adopting Minnesota three-factor test for  use
of  automobile:  (1) extent of causation between  automobile  and
injury;  (2)  whether  act of independent significance  occurred,
breaking   causal  link  between  use  of  vehicle  and  injuries
inflicted; and (3) what type of use of automobile was involved).

     39     Blumenshine,  869  P.2d at 474 (stating  a  plaintiff
should not be penalized for a small recovery).

     40    Id. (holding that party was prevailing party because he
recovered full damages for past medical expenses and $16,001  for
past  and future physical impairment and pain and suffering  even
though  he  did  not prevail on every issue in  case).   But  see
Hutchins  v. Schwartz, 724 P.2d 1194, 1204 (Alaska 1986) (holding
superior  court  did  not  abuse its  discretion  by  determining
defendant  was  prevailing  party  when  plaintiff   who   sought
$275,000 recovered less than $1,937.09).

     41     See  Day  v.  Moore, 771 P.2d 436, 437 (Alaska  1989)
(holding  that  plaintiff who succeeded in one of  three  similar
claims  and  defeated  counterclaim  was  prevailing  party);  W.
Airlines, Inc. v. Lathrop Co., 535 P.2d 1209, 1217 (Alaska  1975)
(holding that party was prevailing party when it succeeded on one
of  the  main  issues  of litigation even though  opposing  party
succeeded on another main issue of litigation).

     42    Cf. Hutchins, 724 P.2d at 1194.

     43    Blacks Law Dictionary 1404-05 (8th ed. 2004).

     44     We do not have to decide whether a party receiving  a
monetary  recovery   following  a  true  settlement  involving  a
bargained-for  quid pro quo exchange could ever be  a  prevailing
party.

     45     Interior  Cabaret, Hotel, Rest. & Retailers  Assn  v.
Fairbanks N. Star Borough, 135 P.3d 1000, 1008 (Alaska 2006); see
also DeSalvo v. Bryant, 42 P.3d 525, 530 (Alaska 2002).

     46    Interior Cabaret, 135 P.3d at 1008 (citing DeSalvo, 42
P.3d at 530) (internal quotations omitted).

     47    Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321
(Alaska 1993).

     48    Id. at 1328.

     49     Under  Rule  82s  contested without  trial  schedule,
attorneys  fees  are eighteen percent of the first  $25,000  plus
eight  percent  of the next $75,000.  For the $75,681.27  payment
this  equals  $8,555:   (25,000 x 0.18) + (50,861.27  x  0.08)  =
(4,500) + (4,055) = $8,555.

     50     We review a trial courts decision regarding attorneys
fees  for  abuse of discretion.  E.g., Fernandes v. Portwine,  56
P.3d 1, 3-4 (Alaska 2002).

     51    State Farm Mut. Auto. Ins. Co. v. Harrington, 918 P.2d
1022, 1026 (Alaska 1996).

     52     State Farm Mut. Auto. Ins. Co. v. Lestenkof, 144 P.3d
504,  508  (Alaska 2006) (citing Maloney v. Progressive Specialty
Ins.  Co.,  99 P.3d 565, 568-69 (Alaska 2004) (holding offer  was
for  policy limits even without Rule 82 attorneys fees  component
because litigant was unrepresented at time of offer)).

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