Daily Blast October 7, 2013

Today, the California Court of Appeal, Second Appellate District, Division Eight (LA) issued an opinion in Reid v. Mercury Insurance Company (Oct. 7, 2013, B241154) ___ Cal.App.4th ___, analyzing “whether the insurer, in the absence of any demand or settlement offer from the third party claimant, must initiate settlement negotiations or offer its policy limits, and if so how quickly it must do so, to avoid a claim of bad faith failure to settle.” (Slip opn., p. 2.) The Court of Appeal held that “[an] insurer’s duty to settle is not precipitated solely by the likelihood of an excess judgment against the insured. In the absence of a settlement demand or any other manifestation the injured party is interested in settlement, when the insurer has done nothing to foreclose the possibility of settlement, . . . there is no liability for bad faith failure to settle.” (Ibid.)

Defendant’s offers stated, “you accept this offer, please file an Offer and Notice of Acceptance in the above-entitled action prior to trial or within thirty (30) days after the offer is made.” (Slip opn., p. 7.) The plaintiffs contended this statement failed to satisfy section 998’s acceptance provision requirement for two reasons: (1) it had no line for them to accept the offers by signing them “as included in Judicial Council form CIV 090”; and (2) it “had no language . . . which stated that shall accept the by signing a statement that the offeraccepted.” (Id. at pp. 7-8.)

The court concluded that defendant’s offers satisfied the 998 acceptance requirement because they informed the plaintiffs how to accept the offers (file an “‘Offer and Notice of Acceptance’” with the trial court) and the identified means of acceptance satisfied the statute’s requirements for a valid acceptance (a writing signed by the plaintiffs’ counsel). According to the court, “statute merely requires the section 998 offer to identify a manner of acceptance that complies with the statute’s additional requirement of a signed acceptance by the party or its counsel.” (Slip opn., p. 2.) Although the offers did not expressly require a written acceptance signed by the plaintiffs’ counsel, that requirement was implicit in the identified means of acceptance because any acceptance the plaintiffs sought to file with the court necessarily would have to be in writing and signed by their counsel. (Id. at p. 9.) Further, the court noted that although the California Judicial Council has approved a form entitled “Offer to Compromise and Acceptance Under Code of Civil Procedure Section 998,” it is not a mandatory form. (Id. at p. 8.) As a practice pointer, the Judicial Council Form should be used to avoid any uncertainty as to the acceptance requirement.

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