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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
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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