What is a 998 offer and should it be made in every case?

Q. What is a 998 offer and should it be made in every case? What are the consequences if either side fails to do better than the 998 offer?

A. A Code of Civil Procedure 998 offer is an important tool in every Plaintiff and Defense attorney toolbox. Here is what, it part, Section 998 Reads:

Not less than 10 days prior to commencement of trial or arbitration (as provided in Section 1281 or 1295) of a dispute to be resolved by arbitration, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. Any acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party or, if not represented by counsel, by the accepting party.

What that means, in plain terms, is that if you are the injured party, your attorney can send an offer to the insurance company

Offering to settle your case for a given amount (Say $100,000) and the insurance company has 30 days to accept it by signing it and returning it or doing nothing. (i.e. rejecting the offer). If they accept, the case is settled for the amount in the 998 offer.

If it is rejected (either explicitly or because they do nothing)then certain consequences may happen. If your case goes to trial and the jury gives you more than $100,000 in the verdict, the insurer will need to pay certain additional costs that your side has had to pay to take the case to trial. This may include costs of expert witnesses, deposition fees, trial exhibits as well as statutory interest from the date the offer expired. In many cases, these amounts can be substantial so the insurer is forced to take the 998 offer seriously.

On the other hand the insurer may make the injured party a 998 offer. If they make you an offer to fully settle your case for $75,000 and you either explicitly reject it or let it expire, and if the jury later brings back a verdict for even a penny less than $75,000, you, the injured party will need to pay the insurance companies expert fees, deposition fees and so forth subtracted from the award the jury gives you.

So if the Jury only awards you $20,000 on a case and this is less than the 998 offer you received, there may be 998 penalty costs of $35,000 that the insurer is entitled to receive which would be deducted from the $20,000 the jury awarded. In that case, you would owe $15,000 to the insurer even though the jury awarded you $20,000 on the case,

Needless to say, both parties must really look at Section 998 offers seriously as they have serious consequences.

Almost always it’s beneficial to the injured party’s attorney to make a 998 offer because insurance company offers on the case are so unrealistic. The number picked should be ideally one that the insurance company will need to think long and hard about as realistic. If it’s way too high, the insurance company will reject it out of hand. But if they think its higher than they want to pay, but a jury might conceivably give you a verdict in excess of that, there will be a lot of pressure to accept it.

If you get an offer from the insurance which is lower than you want, but considering all the facts in the case, a jury might award less than the offer, you and your attorney will need to consider that very carefully as well.

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