Offers of Judgment in Arizona Bad Faith Cases

In Stafford v. Burns, — P.3d —, 2017 WL 164310 (Ariz.App. January 17, 2017), a medical malpractice and wrongful death case arising from emergency medical care rendered after a methadone overdose, the Arizona Court of Appeals “decline[d] to impose a requirement that Offers of Judgment be deemed reasonable before sanctions are imposed under Rule 68(g).”

Rule 68

In Arizona, Rule 68 requires mandatory shifting of post-offer expert fees and double taxable costs if an Insurer, or any defendant, subsequently beats the Offer of Judgment at trial.  Rule 68 states, “If the offeree rejects an offer and does not later obtain a more favorable judgment…the offeree must pay, as a sanction, reasonable expert witness fees and double the taxable costs…incurred by the offeror after making the offer…” ARCP 68(g).

Good Faith Requirement in Offers of Judgment

In Stafford,the Court of Appeals rejected a “good faith” requirement in Offers of Judgment for two primary reasons.

First, “Arizona courts have uniformly held, consistent with the rule’s plain language, that sanctions imposed by Rule 68(g) are both mandatory and punitive.”

Second, adding a “good faith” requirement would undermine rather than serve the purpose of Offers of Judgment—“to promote settlement and avoid protracted unnecessary litigation.”  The Court of Appeals reasoned that a “reasonableness requirement would only increase the cost of litigation by inviting the expenditure of time to resolve an offer’s validity [i.e. reasonableness and/or good faith], driving the parties’ settlement positions further apart.” (emphasis in original).

What is the primary takeaway for insurers in Arizona bad faith cases?  Arizona continues to enforce Offers of Judgment that encourage settlement and Stafford makes it 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. See“How Insurers Can Shift the Risks of Attorney Fees, Expert Fees, and Costs in Arizona Bad Faith Cases.”

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About the Author: Nathan D. Meyer is a Partner at the Phoenix law firm of Jaburg Wilk. One of his specialties is insurance coverage and bad faith. Nate advises and represents insurance clients in coverage, bad faith, contribution and liability matters.