CCP Section 998 Offer to Compromise is named after the California Code of Civil Procedure Section 998 that defines the function of an offer to compromise. A CCP Section 998 Offer to Compromise can be a valuable tool to try and settle a lawsuit.
The purpose of a 998 Offer to Compromise is to shift the costs from the prevailing party in a lawsuit to the non-prevailing party as a penalty for not accepting a reasonable settlement offer. Below are two typical scenarios involving a 998 offer to Compromise.
Plaintiff Beats HIs/Her 998 Offer to Compromise Issued to Defendant
The first example is a situation where the Plaintiff makes a 998 Offer to Compromise to Defendant for $100,000.00. Now, if the Defendant accepts Plaintiff’s offer to compromise of $100,000.00, the lawsuit is over.
In the event that the Plaintiff obtains a judgment in excess of $100,000.00, the Defendant could be responsible to pay all the expert witness costs Plaintiff incurred in prosecuting his or her case from the date that the Plaintiff issued the 998 Offer through verdict. So, in an automobile accident, the Plaintiff has to retain medical experts to testify at trial about the Plaintiff’s injuries, these costs can easily exceed $20,000.00. If the Plaintiff obtains a judgment in excess of the $100,000.00, the Defendant would be responsible for these expert witness costs.
In addition, if the auto insurance policy had a liability limit of $100,000.00 and the Defendant insurance company rejected Plaintiff’s 998 Offer of $100,000.00, the insurance company could be responsible for the judgement amount in excess of $100,000.00.
So as you can see, by obtaining a verdict in excess of the 998 Offer amount, the Plaintiff not only receives the judgement amount, but also does not have to pay for any of the expert witness costs incurred in obtaining the judgment. This can lead to a windfall by the Plaintiff of tens of thousands of dollars.
Defendant Beats Its Offer to Compromise Issued to Plaintiff
If a Plaintiff rejects a 998 Offer to Compromise issued by Defendant and fails to obtain a verdict for more than the 998 Offer, Plaintiff could be responsible for Defendant’s expert witness costs as well as court costs, deposition costs and copying costs. In addition, even if the Plaintiff obtains a favorable verdict, which would normally entitle Plaintiff to recover certain court costs pursuant to CCP sections 1032 and 1033.5 from Defendant, if the verdict amount did not exceed Defendant’s 998 Offer, Plaintiff may be denied the recovery of certain costs from Defendant.
Accordingly, if Defendant issued a 998 Offer in the amount of $150,000.00 and Plaintiff obtained a verdict for $100,000.00, the Plaintiff could end up owing Defendant money if the Defendant’s costs exceed $100,000.00.
A 998 Offer to Compromise must be in writing, made in a timely manner and be clear, specific and calculable to the offeree.
A 998 Offer to Compromise can be made at any time up to ten (10) days before trial. The offer is deemed withdrawn after 30 days or the start of trial/arbitration.
Lastly, the offer must be reasonable. Reasonableness really comes down to whether at the time that the offer was made, did the party receiving the offer have enough information to determine whether the offer to compromise was reasonable. This determination will come down to whether the parties had an opportunity to learn about the facts underlying the lawsuit to adequately assess whether the offer to compromise was reasonable.
A court will likely find that the party did not have an opportunity to determine the reasonable of the offer to compromise if the offer is made within weeks after the lawsuit started. It is important for the parties to develop the facts before issuing a 998 Offer to Compromise.
If you have any questions regarding this matter or have a general legal question, please feel free to contact the attorneys at The Rinka Law Firm, PC at 310-556-9653.