Yes, it is somewhat responding to that "sorry," but more so to the overall tension of the conversation. Dave apologizes for saying Olivia looks like her cousin and instead says that she looks like her dad. She responds with a sarcastic "Thanks!", indicating that she is not happy with what Dave said. Dave responds with a justification for saying she looks like her dad that sounds like a compliment. So, when Olivia responds "that's alright," she is almost saying, "Okay, that is an acceptable reason to say I look like my dad." She is showing that she feels less offended by the comment now. The tone of this conversation is sarcastic and light-hearted.