When can you file a demand to settle against the other party?

By Eric Ganci

Timing is such a crucial part of life. Yes, a very broad, very general statement. But it connects with everyone.

Let me narrow it down a touch: timing can be crucial when serving a demand to settle against another party. Here’s a general example from the type of law we practice: another driver hits you, and you suffer a traumatic brain injury. At some point, it may be smart to offer to settle your case against the Insurance Company of the Defendant Driver.

I blogged recently about this, as one benefit if you may be able to lift the lid or pop the policy from Defendant’s Insurance policy if the Insurance chooses to not settle based on your demand. If the policy if lifted, if you go to trial and if the Jurors award you a verdict over Defendant’s policy, Defendant’s Insurance may be liable for the verdict amount over the policy.

Back to timing: the timing of serving a demand can be an art, and as you may expect there are lots of rules and case law decision to explain and decipher when the timing is appropriate (legally) to serve on the other side.

The California Court of Appeals, Second District, Division 7, decided Covert v. FCA USA, LLC in January 2022, which gives wonderful explanation and insight into when to serve a demand. The case deals with a breach of warranty under the Song-Beverly Consumer Warranty Act, which I will not get deep into. Instead, I’ll just enjoy and toss out some general statements of law regarding demands to settle.

In Covert, one side filed a demand to settle 63 days after the complaint was filed—specifically the demand to settle was a California Code of Civil Procedure 998 demand. I’ve blogged about 998 offers. You can read that here. As you might suspect, I love this stuff.

With the timing, the Court explains the other side must have enough information to evaluate the claims. The direct quote is “[w]hether a section 998 offer has a reasonable prospect of acceptance is a function of two considerations, both to be evaluated in light of the circumstances ‘ “at the time of the offer” ’ and ‘ “not by virtue of hindsight.” Specifically, “did the offeror know that the offeree had sufficient information, based on what the offeree knew or reasonably should have known, to assess whether the ‘offer [was] a reasonable one,’ such that the offeree had a ‘fair opportunity to intelligently evaluate the offer’?”

Another part of a valid 998 offer is the range of “reasonably possible results at trial”, and the question is “was the 998 offer within the ‘range of reasonably possible results’ at trial, considering all of the information the offeror knew or reasonably should have known?”

In Covert, this Court held the 998 offer in this case was valid.

One more quick point: one party argues unless the party offering the 998 states a timeline to pay the settlement, the 998 offer is invalid. Ah, interesting. But the Court says this argument “cites no authority for his contention that an offer to pay money in exchange for a dismissal without a payment date renders the offer invalid.” So, it’s a swing and a miss. But it may be an important part to add a demand to settle, whether it’s a general demand or a 998 demand.