In Orosco v. Maricopa County Special Health Care District, (2017 WL 469690) (Ariz. App. February 2, 2017), a medical malpractice case in which the jury’s $4.25 million verdict exceeded two offers of judgment made by plaintiffs, the Arizona Court of Appeals held “a subsequent offer of judgment does not extinguish the effect of an offeree’s failure to accept a prior offer when the judgment is less favorable to the offeree than both offers” and consequently ruled that a plaintiff was entitled to pre-judgment interest from the date of the first offer of judgment.
Under Arizona’s offer of judgment rule, Rule 68, if an offeree rejects an offer of judgment and “does not obtain a more favorable judgment,” then the offeree must pay sanctions of:
(1) Reasonable post-offer expert witness fees,
(2) Double the post-offer taxable costs, and
(3) “Prejudgment interest on unliquidated claims accruing from the date of the offer.” See ARCP 68(g).
In Orosco, the Arizona Court of Appeals held a subsequent offer of judgment does not extinguish the effects of an offeree’s failure to accept an initial offer of judgment for three primary reasons.
(1) The weight of authority from other jurisdictions allows an offeror to collect sanctions from a first offer of judgment.
(2) “A contrary outcome might deter a plaintiff from making an early offer of judgment or from later adjusting an earlier demand.”
(3) Recovery from the first offer of judgment is consistent with Rule 68’s “purpose to encourage the settlement of lawsuits before trial” and to “avoid protracted litigation.” “Permitting an offeror to make additional offers of judgment encourages the parties to continue to evaluate their cases as the litigation proceeds and thereby generally fosters settlement.”
What are the primary takeaways for insurers in Arizona bad faith cases (or any Arizona litigant)?
(1) Arizona insurers should treat offers of judgment like Chicago voting and make them “early and often” to shift the risks of attorney fees, expert fees, and costs.
(2) An insured/plaintiff’s early offer of judgment could substantially increase an insurer’s exposure on a large claim.
(3) Arizona continues to enforce offers of judgment that encourage settlement and Orosco makes it even more likely that Arizona will enforce a “Conditioned Offer of Judgment,” i.e. an Offer of Judgment conditioned on no entry of judgment, execution of a Settlement Agreement, and filing a Stipulation to Dismiss.
Nate is a partner at Jaburg Wilk in Phoenix, Arizona. His practice focuses on insurance coverage, bad faith litigation, commercial litigation, general liability litigation and professional liability litigation. He represents insurance companies, contractors, policy holders, global corporations, insurance adjusters, business owners, insurance agents and professionals. If you have questions about insurance law contact Nate at 602-248-1032 or firstname.lastname@example.org