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By: Tim Kenna & Kristin Ingulsrud
In personal injury practice, the claimant’s attorney will sometimes serve a statutory offer to compromise in tandem with service of the summons and complaint. This strategy has a two-fold impact on the case. The first is that if the plaintiff obtains a better result at trial, it may seek costs and prejudgment interest at 10%. The second is that the 998 be relied upon as a policy limit demand. In both cases, the running of the defendant’s time to accept the 998 triggers the consequences of a failure to settle. An insurer’s rejection of a valid policy limit demand can result in extracontractual exposure. Licudine v. Cedars-Sinai Medical Center, No. BC499153, 2019 Cal. App. LEXIS 2*, directly addresses the requirement that an early 998 is only valid if the offer is reasonable under the totality of the facts. The relevant factors are (1) how far into the litigation the 998 offer was made, (2) the information available to the offeree prior to the lapse of the 998 offer, (3) whether the offeree let the offeror know it lacked sufficient information to evaluate the offer, and (4) how the offeror responded. The court struck plaintiffs request for millions in prejudgment interest following a verdict far in excess of the 998 on the ground that it was premature because Cedars had not had an adequate opportunity to evaluate damages.
Licudine is relevant to the 998 used as a policy limit demand. The factors considered by Licudine also apply to the determination of the validity of conditional policy limit demands in general. See Critz v. Farmers Ins. Group (1964) 230 Cal.App.2d 788, 798 (insurer should request additional time to respond to policy limit demand if further investigation of facts needed). Following trial, the results of a motion to tax costs could determine whether the 998 was valid as a policy limit demand. In either event, the case is critical of the premature demand for settlement designed to “game the system.”
If you have any questions or would like more information please contact Tim Kenna at firstname.lastname@example.org and Kristin Ingulsrud at email@example.com.