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

A Code of Civil Procedure 998 offer is a crucial legal tool for plaintiffs and defense attorneys. This provision outlines the process by which parties involved in a legal dispute can make settlement offers to one another, potentially affecting the outcome of the case. Let's delve into the details and implications of Section 998.

Section 998 of the Code of Civil Procedure allows parties in a lawsuit, whether a personal injury case or another legal matter, to extend a written offer to the opposing party to settle the dispute. This offer can be made at least 10 days before a trial or arbitration begins, mainly when the dispute is subject to arbitration as specified in Section 1281 or 1295.

In practical terms, if you're the injured party seeking compensation, your attorney can present a settlement offer to the insurance company representing the opposing party. For instance, you may offer to resolve your case for a specific sum, such as $100,000. The insurance company then has 30 days to respond to this offer: they can accept it by signing and returning it or simply choose not to respond, effectively rejecting the offer.

Now, what happens if the 998 offer is rejected? The consequences can be significant. If your case proceeds to trial and the jury ultimately awards you more than the amount specified in your 998 offer (in this case, $100,000), the insurance company will be required to cover additional costs. These expenses may include expert witness fees, deposition expenses, trial exhibit costs, and statutory interest from when the offer expires. These additional costs can be substantial, making it crucial for the insurance company to carefully consider the 998 offer.

Conversely, the insurance company may also make a 998 offer to the injured party. If they propose to settle the case for $75,000, and the injured party explicitly rejects it or allows it to expire without a response, there could be repercussions. If the eventual jury verdict awards the injured party even one dollar less than $75,000, the injured party may be responsible for paying the insurance company's expert fees, deposition expenses, and other costs incurred during the trial. For example, if the jury awards $20,000 in a case where the 998 offer was $75,000, there could be a 998 penalty cost of $35,000 deducted from the $20,000 the jury awarded, leaving the injured party owing $15,000 to the insurer despite the jury's award.

In essence, both parties must take Section 998 offers very seriously due to their potentially profound implications. It is often in the best interest of the injured party's attorney to make a 998 offer, especially when insurance company offers are perceived as unrealistic. The offer amount should be carefully chosen to strike a balance that makes the insurance company seriously contemplate its merits. If the offer is too high, it might be summarily rejected. In contrast, an offer that appears to be higher than the insurance company's preferred settlement but less than what a jury might award can exert significant pressure to accept it. Conversely, if the insurance company extends an offer that falls below the desired amount but still seems competitive based on the case's facts, it requires careful consideration by both the injured party and their attorney.