Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions

Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.


You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Dearlove v. Campbell (5/31/2013) sp-6785

Dearlove v. Campbell (5/31/2013) sp-6785

        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, email  


KAREN DEARLOVE,                                    ) 

                                                   )    Supreme Court Nos. S-13772/13792 

                        Appellant and              ) 

                        Cross-Appellee,            )    Superior Court No. 3AN-08-08623 CI 


        v.                                         )    O P I N I O N 


PATRICIA CAMPBELL,                                 )   No. 6785 - May 31, 2013 


                        Appellee and               ) 

                        Cross-Appellant.           ) 


                Appeal from the Superior Court of the State of Alaska, Third 

                Judicial District, Anchorage, Eric A. Aarseth, Judge. 

                Appearances:       Gregory      R.  Henrikson,    Walker     &  Eakes, 

                Anchorage, for Appellant and Cross-Appellee.             Michael W. 

                Flanigan, Walther & Flanigan, Anchorage, for Appellee and 


                Before:      Carpeneti,     Chief   Justice,   Fabe,   Winfree,     and 

                Stowers, Justices.     [Christen, Justice, not participating.] 

                WINFREE, Justice. 


                A driver caused injury to the passenger of another car in a two-car accident. 

The passenger brought suit for damages, including her insurer's subrogated claim for 

medical expenses.  The driver made an early offer of judgment, which the passenger did 

not accept.   The driver's insurer then made a direct payment to the subrogated insurer, 

----------------------- Page 2-----------------------

thereby removing that amount from the passenger's potential recovery.   The driver then 

made a second offer of judgment, which the passenger did not accept.                  After trial both 

parties claimed prevailing party status; the driver sought attorney's fees under Alaska 

Civil Rule 68. The superior court ruled that the first offer of judgment did not entitle the 

driver to Rule 68 fees, but the second offer did. Both parties appeal, arguing the superior 

court improperly considered the subrogation claim payment in its Rule 68 rulings.  We 

conclude     that   the  subrogation    claim   payment     had   to  be  taken   into  account   when 

evaluating the first offer of judgment and affirm the decision that the driver was not the 

prevailing party based on the first offer of judgment.              But because the nature of the 

payment on the subrogation claim is not clear, we vacate the decision that the second 

offer of judgment entitled the driver to Rule 68 fees and remand for further proceedings 

on this issue. 


                This case arises from a two-car collision - Karen Dearlove was driving 

one vehicle and Patricia Campbell was a passenger in the other. Campbell sued Dearlove 

for   damages,   alleging   the   accident   was   caused   by   Dearlove's   negligence;   Dearlove 

denied liability and suggested the accident might be due to malfunctioning brakes on her 

vehicle.   Each party was insured by a State Farm insurance company:                  Campbell by a 

company       licensed   in  Minnesota     and   Dearlove    by   a  company     licensed   in  Alaska. 

Campbell's insurer paid the first $20,000 of Campbell's medical expenses under her 

policy's Personal Injury Protection (PIP) coverage.   Campbell's insurer therefore had a 

subrogated claim against Dearlove.1 

        1       Subrogation in this context is "[t]he principle under which an insurer that 

has   paid   a   loss   under   an   insurance   policy   is   entitled   to   all   the   rights   and   remedies 

belonging to the insured against a third party with respect to any loss covered by the 

policy."   BLACK 'S LAW DICTIONARY 1563-64 (9th ed. 2009). 

                                                  -2-                                               6785 

----------------------- Page 3-----------------------

                Campbell's insurer never directed her not to pursue its subrogation claim 

as part of her lawsuit against Dearlove.2        To the contrary, Campbell's insurer repeatedly 

called Campbell's attorney   for progress reports.             Campbell's counsel stated that the 

insurer "expected [him] to protect [its] subrogation interest in PIP benefits paid." 

                Dearlove made an early Rule 68 offer of judgment for $18,000, inclusive 

of   prejudgment   interest,   Rule   82(b)(1)   attorney's   fees,   and   Rule   79   costs;   the   offer 

required Campbell to satisfy her insurer's outstanding subrogation claim.  Campbell did 

not accept this offer of judgment. 

                When   Dearlove   was   deposed,   she   accepted   full   responsibility   for   the 

accident.  Dearlove later formally stipulated to liability, leaving damages the only issue 

for trial. 

                After Dearlove's deposition her insurer paid $20,000 directly to Campbell's 

insurer.   Dearlove then sought a ruling that Campbell could not recover the $20,000 in 

medical expenses originally paid by Campbell's insurer.                 Campbell did not oppose the 

motion, except to request recovery of attorney's fees and costs on the $20,000 payment. 

The superior court ruled Campbell could not include the medical expenses in her claim 

for damages at trial, but reserved the question whether Campbell could recover fees and 

costs on the $20,000 payment. 

                Dearlove subsequently made a Rule 68 offer of judgment for $5,000 plus 

prejudgment   interest,   Rule   82(b)(1)   attorney's   fees,   and   Rule   79   costs.     The   offer 

provided that Campbell would be "responsible for satisfying any and all accident-related 

liens and expenses with the exception of the [PIP] Lien of $20,000.00 which [Dearlove 

already had] satisfied."      Campbell did not accept this offer of judgment. 

        2       See O'Donnell v. Johnson, 209 P.3d 128, 132 (Alaska 2009) (explaining 

insurer may direct insured not to pursue subrogation claim (citing Ruggles ex rel. Estate 

of Mayer v. Grow, 984 P.2d 509, 512 (Alaska 1999))). 

                                                   -3-                                                6785 

----------------------- Page 4-----------------------

                 At   trial   the   jury   was   shown   an   exhibit   itemizing   Campbell's   medical 

expenses.       The     expenses     covered     by   Dearlove's     insurer's    $20,000     payment      to 

Campbell's insurer appeared in a separate column marked "PAID." The court instructed 

the   jury   that   "[a]   portion   of   the   expenses   for   [the]   medical   treatment   is   not   at   issue 

because it has been paid.        You are not to make an economic award for those expenses 

that   have   already   been   paid."    The   jury   returned   a   verdict   for   $2,370   in   economic 

damages and $1,500 in non-economic damages, for a total award of $3,870. Both parties 

claimed prevailing party status and moved for attorney's fees. 

                 The superior court reasoned that Dearlove's first Rule 68 offer of $18,000 

would have resulted in a net $2,000 loss to Campbell because under its terms Campbell 

remained   responsible   for   her   insurer's   $20,000   subrogation   claim.           From   this,   the 

superior court concluded that Dearlove was not entitled to fees under the first Rule 68 


                 The superior court then concluded that Dearlove was entitled to Rule 68 

fees under her second offer.         To compare Campbell's $3,870 recovery at trial with the 

$5,000 second offer   of judgment, the court made several preliminary rulings.                        First, 

because the second offer added prejudgment interest, attorney's fees, and costs to the 

offer   amount   -   as   would   a   judgment   after   the   jury's   verdict   -   the   superior   court 

concluded those add-ons did not change the comparison's outcome.3  Second, the court 

did not include the $20,000 subrogation payment in Campbell's total recovery when it 

compared the second offer to the verdict, because the subrogation claim had been paid 

before   the   second   offer   was   served.    Third,   because   the   $20,000   payment   was   not 

included in Campbell's verdict for purposes of assessing the second offer, it was not 

        3        See generally Andrus v. Lena, 975 P.2d 54, 57 n.3 (Alaska 1999) (citing 

Farnsworth v. Steiner , 601 P.2d 266, 269 n.4 (Alaska 1979)) (explaining method for 

comparing offer of judgment to ultimate recovery). 

                                                    -4-                                                 6785 

----------------------- Page 5-----------------------

included   in   the   calculation   for   prejudgment   interest,   attorney's   fees,   and   costs   that 

Dearlove      would    owe   Campbell   on     the  verdict.   Finally,   though    the  court   agreed 

Campbell was entitled to recover a proportional share of her own actual attorney's fees 

and costs incurred in the process of recovering the subrogation claim on her insurer's 

behalf,   the   court   concluded    this  obligation    was   owed    by  Campbell's     insurer,   not 


                Based   on   these   rulings,   the   superior   court   calculated   that   Campbell's 

recovery at trial ($3,870 plus interest, fees, and costs) was at   least five percent less 

favorable   than   the   second   offer   of   judgment   ($5,000   plus   interest,   fees,   and   costs). 

Accordingly, the court ruled that Dearlove was entitled to recover Rule 68 attorney's fees 

incurred after the second offer of judgment. 

                Dearlove appeals the superior court's decision regarding her first offer of 

judgment.     Campbell cross-appeals the superior court's decision regarding Dearlove's 

second offer of judgment. 


                We review de novo whether the superior court correctly applied the law in 

awarding attorney's fees.4        We exercise our independent judgment in   reviewing the 

superior court's interpretation of Rule 68,5 as well as in calculating a judgment's value 

to determine whether it exceeded an offer of judgment.6 

        4       Glamann v. Kirk, 29 P.3d 255, 259 (Alaska 2001). 

        5       Progressive Corp. v. Peter ex rel. Peter , 195 P.3d 1083, 1087 n.7 (Alaska 

2008) (citing Jackman v. Jewel Lake Villa One , 170 P.3d 173, 177 (Alaska 2007)). 

        6       Power Constructors, Inc. v. Taylor & Hintze , 960 P.2d 20, 34 (Alaska 


                                                  -5-                                               6785 

----------------------- Page 6-----------------------


        A.      The Subrogation Claim 

                A subrogation claim arises when an insurer compensates its insured for an 

injury caused by a third party and obtains the "right to proceed against [the] third party 

responsible for [the] loss which the insurer has compensated pursuant to its contractual 

obligation under [the] policy."7         An insurer with a subrogation claim "may pursue a 

direct action against the tortfeasor, discount and settle its claim, or determine that the 

claim should not be pursued."8         Unless the insurer objects, the insured may include the 

subrogation      claim    in  the  insured's    claim   against   a  third-party    tortfeasor.9    Here, 

Campbell's       insurer   indicated    that  it  wanted    Campbell     to  pursue     recovery    of  its 

subrogation   claim.      Consequently,   the   subrogation   claim   was   part   of   the   damages 

Campbell sought from Dearlove at the start of this litigation. 

        B.      Alaska Civil Rule 68 

                When there is a single defendant, Rule 68(b) provides in relevant part: 

                If   the   judgment   finally   rendered   by   the   court   is   at   least   5 

                percent less favorable to the offeree than the offer, . . . the 

                offeree   .   .   .   shall   pay   all   costs   as   allowed   under   the   Civil 

                Rules and shall pay reasonable actual attorney's fees incurred 

                by the offeror from the date the offer was made . . . . 

The offer of judgment must not be conditional or joint, though it can acknowledge the 

existence of a lien and require the party accepting the offer to pay the lien from the 

        7        16LEE R. RUSS & THOMAS F. SEGALLA , COUCH ON INSURANCE  222:2 (3d 

ed. 2005). 

        8       Ruggles ex rel. Estate of Mayer v. Grow , 984 P.2d 509, 512 (Alaska 1999). 

        9       Id. 

                                                   -6-                                                6785 

----------------------- Page 7-----------------------

settlement.10     Rule   68's   purpose   is   to   encourage   settlements   and    avoid   prolonged 

litigation,11 with earlier settlement offers entitling the offeror to a greater percentage of 

attorney's fees.12    In practice, the rule encourages parties to assess their litigation risks 

carefully and penalizes rejection of reasonable settlement offers. 

        C.      Dearlove's First Offer Of Judgment 

                Dearlove first offered $18,000 inclusive of interest, attorney's fees, and 

costs; this offer required Campbell to pay all outstanding medical liens.                The superior 

court reasoned that this offer would have resulted in a $2,000 net loss to Campbell after 

paying the $20,000 subrogation claim.            Because Campbell received $3,870 at trial, the 

court concluded that the jury award was more favorable than the first offer of judgment. 

                Dearlove argues the court erred by considering the $20,000 subrogation 

claim   when   it   assessed   the   value   of   her   first   settlement   offer. She   notes   that   on 

reconsideration the superior court speculated that had the jury considered the subrogation 

claim, it "likely would have awarded $23,800 in total damages."  She maintains that the 

correct comparison was between the $18,000 offer, standing alone, and the $3,870 award 

(plus interest, attorney's fees, and costs).       Although we agree it was error to compare a 

hypothetical net recovery to the offer, we reject Dearlove's argument that the $20,000 

payment to Campbell's insurer is irrelevant to the Rule 68(b) analysis. 

                We have refused to label an offer as "worthless" simply because it was for 

        10      Jaso v. McCarthy , 923 P.2d 795, 801-02 (Alaska 1996) (citing Grow v. 

Ruggles , 860 P.2d 1225, 1227-28 (Alaska 1993)). 

        11      Mackie v. Chizmar , 965 P.2d 1202, 1205 (Alaska 1998) (citing Pratt & 

Whitney Can., Inc. v. Sheehan, 852 P.2d 1173, 1182 (Alaska 1993)). 

        12      See Alaska R. Civ. P. 68(b). 

                                                   -7-                                               6785 

----------------------- Page 8-----------------------

less than the value of a subrogated claim.13          Simply put, a Rule 68 offer of judgment can 

be for less than the value of subrogated claims.               But contrary to Dearlove's broader 

position,   requiring   courts   to   consider   only   the   final   award   is   "an   overly   technical 

reading" of Rule 68.14  In Progressive Corp. v. Peter ex rel. Peter , the defendant offered 

the plaintiffs $52,501 plus prejudgment interest, costs, and fees, for a total value of just 

over $70,000.15     The plaintiffs did not accept the offer.16        The superior court subsequently 

ruled on a key liability issue against the defendant, and the defendant then voluntarily 

paid   a   little   more   than   $75,000   into   the   court   registry   for   the   plaintiffs'   benefit.17 

Because the plaintiffs did not recover additional damages and were awarded only $8,555 

in   attorney's    fees,   the  defendant     sought    Rule    68  fees,   claiming    that  "[v]oluntary 

payments and partial settlements are not the benchmark by which offers of judgment 

should be evaluated."18         The superior court disagreed, and   we affirmed the superior 

court's ruling.19     We looked to the total amount recovered rather than just the amount 

awarded at trial and held that the superior court did not err by including the defendant's 

voluntary payment in its calculation of the "judgment finally rendered."20 

        13       Jaso , 923 P.2d at 801-02. 

        14       Progressive Corp. v. Peter ex rel. Peter , 195 P.3d 1083, 1090 (Alaska 


        15       Id . at 1089. 

        16       Id. at 1086. 

        17       Id. 

        18       Id. at 1088 (emphasis in original). 

        19       Id. at 1090. 

        20       Id.  at 1089   ("Because the  amount recovered exceeded the amount that 


                                                     -8-                                                 6785 

----------------------- Page 9-----------------------

                Here     the  superior    court  should    have    included    Dearlove's    insurer's 

subrogation      payment     with   the  jury's  verdict   when    determining     the  total  amount 

Campbell recovered. We reach this conclusion because Campbell included her insurer's 

subrogation claim in the damages pursued in her lawsuit and Dearlove's first offer left 

Campbell responsible for the subrogation claim.   Dearlove's insurer's direct payment to 

Campbell's insurer on its subrogation claim therefore was a part of Campbell's total 

recovery,     and   it   should  have  been   considered    when    the  superior    court  compared 

Campbell's "judgment finally rendered" against the first settlement offer. 

                Under   Dearlove's   reading,   voluntary   pre-trial   payments   would   not   be 

included when assessing a preceding Rule 68 offer's success.   Rule 68's goals could be 

thwarted by such a narrow interpretation:           it would permit a party to make a Rule 68 

offer knowing the opposing party is unlikely to accept, make voluntary payments to 

remove part of the opposing party's claim from the issues at trial, and then seek Rule 68 

attorney's fees and costs based on the amount awarded in the final verdict. 

                Indeed, in Progressive we cautioned that abusive settlement tactics could 

result if trial courts were unable to consider partial recoveries not expressly included in 

the court's judgment.21      We agreed with the plaintiff that "[t]o 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." 22         We further observed 

        20      (...continued) 

would have been paid had the offer been accepted, the amount recovered was necessarily 

not 'at least' five . . . percent 'less favorable' to the [plaintiffs] than the offer." (emphasis 


        21      Id. at 1091. 

        22      Id. 

                                                  -9-                                              6785 

----------------------- Page 10-----------------------

that if trial courts could not consider voluntary pre-trial payments when determining 

whether to award Rule 68 fees, the "unconditional acceptance of an eve-of-trial payment 

could trigger an unexpected and ruinous penalty."23 

                Rule 68 is not intended to benefit an offeror who unilaterally satisfies a 

portion of the other party's claim in a way that is not reflected in the final verdict.24          As 

to Dearlove's first offer of judgment, the correct comparison is between her $18,000 all- 

inclusive offer and Campbell's recovery - Dearlove's $20,000 payment to Campbell's 

insurer plus the $3,870 Campbell recovered at trial (plus prejudgment interest, fees, and 

costs).    Dearlove's     first  offer  was  for  an  amount   less   than   Campbell's     recovery; 

accordingly, Rule 68 fees and costs were not available to Dearlove. 

        D.      Dearlove's Second Offer Of Judgment 

                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 


                                                 -10-                                             6785 

----------------------- Page 11-----------------------

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 

----------------------- Page 12-----------------------

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 

----------------------- Page 13-----------------------

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 


        29      See 51 AM . 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 


                                                  -13-                                                6785 

----------------------- Page 14-----------------------

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 plaintiff- 

insured   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. 


                We AFFIRM the superior court's ruling that Dearlove's first Rule 68 offer 

of judgment was unsuccessful. We VACATE the superior court's ruling that Dearlove's 

second     offer  of  judgment     was   successful    and   REMAND        for  further   proceedings 

consistent with this opinion. 

        29      (...continued) 

v. Weg & Meyers, P.C., 691 N.Y.S.2d 439 (N.Y. App. Div. 1999))). 

        30      See Sidney, 187 P.3d at 454. 

                                                 -14-                                              6785 

Case Law
Statutes, Regs & Rules

IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights