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Progressive Corp. v. Peter ex rel. Peter

Supreme Court of Alaska

November 14, 2008

The PROGRESSIVE CORPORATION and Progressive Northwestern Insurance Company, Appellants,
v.
Samuel PETER, Jr., through his next friend, Samuel PETER, Sr., and Samuel Peter, Sr., Individually, Appellees.

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[Copyrighted Material Omitted]

Page 1085

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.

OPINION

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 attorney's fees. Progressive had made two unaccepted offers of judgment. The superior court held that the two offers were not valid, rejected Progressive's request for Alaska Civil Rule 68 attorney's fees, declared the Peters the prevailing parties under Alaska Civil Rule 82, and awarded them attorney's 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 attorney's 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.

Page 1086

While crossing the street shortly after exiting his mother's 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 mother's vehicle. The superior court denied Progressive's 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 attorney's fees. Progressive characterized its payment as " voluntar[y]." The superior court found that Progressive's payment " accurately represent[ed] the total amount payable to Samuel Peter Jr. under Progressive's [UIM] policy, plus prejudgment interest and attorney's 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 attorney's fees. Progressive asserted that it was the prevailing party because its two offers of judgment were successful; it therefore requested Alaska Civil Rule 68 attorney's 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 Progressive's 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 attorney's fees of $8,555.

Progressive appeals the rulings on the offers of judgment and the attorney's fees award to the Peters.

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III. DISCUSSION

A. The Superior Court Did Not Err by Holding Progressive's First Offer of Judgment To ...


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