Statutory Offer to Compromise - Stick or Carrot
What is a 998 demand? It is a statutory offer to compromise that serves both as a stick and a carrot to assist in settlement of a litigation before trial. Understanding the consequences of acceptance or rejection are critical to ensure your rights are protected.
Q. What is a 998 offer?A: It is a carrot and a stick - It is a tool allowed under the Code of Civil Procedure that reads: “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. . . Any acceptance of the offer . . . shall be in writing and shall be signed by counsel for the accepting party or, if not represented by counsel, by the accepting party.”
In plain English - your attorney can send an offer to the insurance company offering a specific amount (say $50k – the policy limit) and the insurance company has 30 days to accept it by signing it and returning it or doing nothing (rejecting the offer). If they accept, the case is settled for the amount in the 998 offer. (The carrot)
Q. What if the 998 offer is rejected?A: If it is rejected and the case goes to trial and the jury gives you more than the amount on the 998 offer (i.e. $50,001), the insurer will need to pay additional costs. This include expert witnesses fees, deposition costs, trial exhibit expenses, and interest between the date of the offer’s expiration and trial. (The Stick)
Q. What is the importance of a 998?A: Any party that receives a 998 must take a good look at the case and the risks associated with not accepting the offer. Additionally, an offer that is accepted becomes a judgment against the defendant in the case. Another issue to consider.