California Civil Code Section 998 – The Settlement Code

By Eric Ganci

California Code section 998 is a tool to promote settling cases.  Albeit deep and nuanced, there are several aspects of section 998 that I want to discuss and how they play out in two court decisions: the 2019 decision in Licudine v. Cedars-Sinai Medical Center, 30 Cal.App.5th 918); and Khosravan v. Chevron from the Court of Appeals of California, Second District, Division Seven.

To start: in a civil lawsuit either party can issue a 998 offer on the other party. If the party who received the 998 offer rejects it to later have a Jury award a verdict over the rejected 998, the party who rejected the offer may need to pay the costs of the other party from the point of the rejected 998 offer.

Follow that? Here’s how this can play out.

You’re unfortunately involved in a car crash because someone else was negligent and hit you. You value your injuries at $400,000 but in an attempt to settle with the Defendant’s Insurance Company, you serve a 998 offer to settle on them for $350,000. Defendant rejects that offer, you try the case in front of a Jury and the Jury awards you $500,000.

This means that the Court may require Defendant to pay the costs you fronted (eg. Expert witness fees, deposition fees) to prep for trial from the point of the rejected 998.

But how do you execute a 998?

A 998 must be served when the parties have the ability to evaluate the case liability and damages (see the California Supreme Court 2019 decision Licudine v. Cedars-Sinai Medical Center, 30 Cal.App.5th 918). The direct quote from Licudine regarding this is whether “the 998 offer [is] within the ‘range of reasonably possible results’ at trial, considering all of the information the offeror knew or reasonably should have known[.]”

Are all 998 offers valid?

What happens when a Defendant serves the 998 with requirements, as in the recent Khosravan v. Chevron? Here, the Defendant, Chevron served a 998 on Plaintiff with the requirement that Plaintiff “indemnify the Chevron defendants against all future claims asserted by nonparties based on the allegations in the complaint.”

The issue here was whether this was a valid 998. From Khosravan (and other cases) the general rule is “[a] valid section 998 offer may include terms requiring the release of all claims (by parties or nonparties) arising from the injury at issue in the lawsuit.”

Ok, but what about this requirement to indemnify “all future claims asserted by nonparties”? The Court here holds in favor of Plaintiff and says, “Chevron defendants against claims by nonparties renders the offers difficult to value and potentially costly to the Khosravans.”