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Litigation & Arbitration,

Jan. 9, 2023

2023 brings a new set of rules for making settlement demands

One of the most notable changes required by SB 1155 is the time an insurance company must be given to act on a pre-litigation, time-limited demand.

Casey R. Johnson

Aitken Aitken Cohn

3 MacArthur Place
Santa Ana , CA 92707


In California, hundreds of new laws are enacted on the first day of each new year. 2023 is no exception. However, one new law should be of interest to practitioners attempting to resolve claims for injured clients before litigation.

Passed as part of a package that will increase mandatory automobile insurance limits in 2025 as negotiated between casualty insurers and the Consumer Attorneys of California, SB 1155 (Caballero) was signed into law by Gov. Gavin Newsom on Sept. 28, and created California Code of Civil Procedure (CCP) section 999 et seq., which sets forth new requirements for making a pre-litigation, time-limited settlement demand.

For decades, California courts have looked in part as to whether a reasonable offer to settle had been made within the policy limits in assessing whether an insurance company that rejected or ignored such an offer could ultimately be held liable for damages in excess of the insurance policy limits. (Crisci v. Security Ins. Co. of New Haven, Conn. (1967) 66 Cal.2d 425; Johansen v. California State Auto. Association Inter-Ins. Bureau (1975) 15 Cal.3d 9; Graciano v. Mercury Gen. Corp. (2014) 231 Cal.App.4th 414.) In the context of demand letters sent by attorneys before filing a lawsuit, CCP section 999.1 now provides attorneys with a roadmap of conditions that should be substantially complied with to make a presumptively "reasonable" pre-litigation, time-limited settlement demand.

One of the most notable changes required by the statute is the time an insurance company must be given to act on a pre-litigation, time-limited demand. The reasonableness of the time provided was previously a question of fact to be decided on a case-by-case basis. (Coe v. State Farm Mut. Auto Ins. Co. (1977) 66 Cal.App.3d 981, 994.) Now, pursuant to CCP section 999.1, an insurance company must be given at least 30 days to respond to a demand if the demand is transmitted by email, facsimile, or certified mail, and at least 33 days if the demand is transmitted by mail. (CCP 999.1(a).)

In addition, a pre-litigation, time-limited demand letter must be labeled as a "time-limited demand" or specifically reference CCP section 999.1. (CCP 999.1(a).) The new statute further requires that the demand letter contain:

1. The date of the loss.

2. The location of the loss.

3. A description of all known injuries sustained by the claimant.

4. The claim number, if known.

5. An offer for a complete release from the claimant for the liability insurer's insureds.

6. An unequivocal offer to settle all claims within the policy limits, including the satisfaction of all liens.

7. Reasonable proof. (CCP section 999.1(b) - 999.1(g).)

The new statute also dictates where the time-limited demand letter must be sent - either to the insurance representative assigned to the claim, if known, or to the email or physical address designated by the liability insurer for receipt of time-limited demands if available on the Department of Insurance website. (CCP section 999.2(a).)

As indicated throughout, the new statute's requirements apply only to settlement demand letters that are time-limited and sent before the filing of a complaint or demand for arbitration for personal injury, property damage, bodily injury or wrongful death. (CCP section 999(b)(2).) Careful considerations were taken during the negotiations of the statute's language to ensure that the well-developed law surrounding statutory CCP section 998 Offers to Compromise was not impacted.

The new statute applies only to causes of action and claims covered under automobile, motor vehicle, homeowner, or commercial premises liability insurance policies. (CCP section 999.5(a).) There are several potential injury claims for which pre-litigation, time-limited settlement demands would not appear to be subject to the statute's requirements, including, but not limited to, claims covered under a professional liability insurance policy.

While the new statute creates specific requirements for attorneys representing injured clients, the statute only applies to represented parties. (CCP section 999.4(b).) Thus, by its express terms, CCP 999 et seq. does not apply to unrepresented parties seeking to resolve claims independently.

Among other notable changes implemented by the new statute, CCP 999.3(a) clarifies that an insurer's attempt to seek clarification, additional information or an extension of time for further information or investigation made during the time within which to accept the demand is not deemed a counteroffer or rejection of the demand. While nothing in the statute requires the claimant's attorney to provide clarification, additional information, or additional time to respond, insurers now know that they're merely asking cannot be deemed a rejection of the demand.

So, what is the impact of failing to comply with the new statute? If counsel fails to substantially comply with the terms of CCP 999 et seq., the demand "shall not be considered to be a reasonable offer to settle the claims against the tortfeasor for an amount within the insurance policy limits" in any subsequent bad faith lawsuit. (CCP section 999.4(a).)

The new statute's requirements also codify obligations on the insurers' part. According to CCP 999.3(c), if an insurer does not accept a time-limited demand, the insurer must notify the claimant in writing of its decision and its basis. The insurer must send this notification before the time-limited demand expires (including any extensions provided). In addition, this notification will be relevant in any subsequent bad faith litigation.

As with any new statute, nuances in interpretation will surely be litigated in the courts during the coming years. Nevertheless, CCP 999 et seq. appears to provide practitioners with numerous unambiguous guidelines that should take some of the uncertainty out of whether or not a viable bad faith case exists following an insurer's rejection of a pre-litigation, time-limited demand. Thus, the statute should ultimately benefit claimants, insurers and even the courts.


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