Arizona Court of Appeals Division Two Holds Medical Liens Not Considered in Comparing Rule 68 Offer of Judgment to Final Judgment.

Abel Cuellar sued Megan Vettorel for injuries Cuellar sustained in a car accident.  Vettorel made a $10,000 offer of judgment for Cuellar’s claims.  The offer of judgment required Cuellar to assume the outstanding medical liens for which Vettorel might otherwise have been liable.  Cuellar rejected the offer of judgment.  Following trial, the jury found in favor of Cuellar but awarded him only $5,310.90 in damages.  Pursuant to Rule 68(g) of the Arizona Rules of Civil Procedure, which requires a court to impose sanctions against a party who rejects an offer of judgment and fails to obtain a more favorable judgment at trial, the trial court awarded Vettorel twice her taxable costs and her expert witness fees.  Cuellar appealed, arguing that the sanctions award was in error because the trial court should have reduced the offer of judgment amount by the amount of medical liens Cuellar was required to assume.  Reducing the offer of judgment by the amount of the medical liens, Cuellar contended, made the offer of judgment less than the final judgment.

The appellate court rejected this argument and affirmed the sanctions award to Vettorel.  It applied an “apples to apples” comparison to the offer of judgment and final judgment, which meant comparing the $10,000 offer of judgment to the lower $5,310.90 final judgment.  The court noted that Rule 68 provides only for comparison of specifically stated sums, and the court declined to impose an additional provision for subtracting medical liens before making the comparison.  In so ruling, the court distinguished an Alaska case that increased an offer of judgment by the amount of a prior subrogation payment that the defendant’s insurer made to the plaintiff’s insurer.  The court noted that the Alaska case’s subrogation payment was added back to the offer of judgment to prevent parties from creating a loophole for Rule 68 sanctions by merely making a gratuitous payment prior to final judgment.  That was not a risk in this case.  Finally, the court held that even if it were appropriate to reduce Vettorel’s offer of judgment by the medical liens, to ensure an “apples to apples” comparison the final judgment would have to be similarly reduced.  This equal reduction would make it unlikely that the final judgment exceeded the offer of judgment. 

Judge Kelly authored the opinion, and Judges Howard and Vásquez concurred.