California Adopts New Restrictions On Time-Limited Settlement Demands

Effective January 1, 2023, new rules govern pre-suit time-limited settlement demands in California. Section 999, et seq. of the California Code of Civil Procedure governs time-limited settlement offers made to a tortfeasor with liability insurance for purposes of settling the claim within the limit of insurance.

Significantly, the new legislation applies only to demands made prior to the filing of a complaint or demand for arbitration to settle claims involving personal injury, property damage, bodily injury or wrongful death.

It applies to all civil claims covered under automobile, motor vehicle, homeowner and commercial premises liability insurance policies. It does not apply to claimants who are not represented by counsel.

A claimant’s failure to substantially comply with the terms of Section 999 means that the demand shall not be considered a reasonable offer to settle the claims for an amount within policy limits in the event of a subsequent lawsuit by a claimant (including as an assignee of an insured or by the insured for the benefit of the claimant) seeking extracontractual damages.