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CA Bicycle Litigation Tip: “998 Offers”

Anytime a claim for damages is brought against a negligent driver on behalf of an injured cyclist, one of the most essential tools to be used is California’s Statutory Offer to Compromise under Civil Code section 998, commonly known as a “998 offer.”

A 998 offer is much like any other offer to settle that a cyclist can make during a claim for damages. The cyclist must choose a dollar amount, and if the defendant driver/insurance company accepts the offer, the case is dismissed and the defendant pays the cyclist the amount of the offer. However, the importance of a 998 offer, as opposed to an ordinary settlement offer, is that it uses the law of California to place extra pressure on the defendant to settle the case.

The consequences of failing to accept an valid 998 offer can be significant. For defendants who reject a plaintiff’s offer and then suffer a verdict or judgment that his higher than the value of the 998 offer, they may be required to not only pay the amount of the verdict/settlement, but also the plaintiff’s litigation costs, including the plaintiff’s expert witness costs.  Moreover, the defendants who rejected a valid 998 offer will also be liable for prejudgment interest.

A case example can help understand the workings of a 998 offer. Take, for example, the case of a cyclist who was injured by a careless driver. The cyclist sends a 998 offer in the amount of “$15,000” to the defendant driver (and the driver’s insurance company). In other words, the cyclist is offering to dismiss the case in exchange for $15,000 paid by the driver’s insurance company.  The defendant rejects the offer and the litigation continues.  The case proceeds to trial and the jury returns a verdict in favor of the cyclist in the amount of $16,000.  At first, this does not seem too harsh of a consequence for the insurance company because it is only $1,000 more than the amount of the settlement offer.  However, because this is more than the amount of the 998 offer, the penalties in section 998 come into play.

If the litigation costs and expert witness costs expended by the cyclist and/or the cyclist’s attorney amount to, for example, $10,000, then $10,000 can be added to the amount of the verdict, pursuant to section 998.  In addition, if the prejudgment interest applied in this example amounts to $3,000, then an additional $3,000 can also be added to the amount of the verdict.

Thus, in this example, the defendant can end up paying much more than the $16,000 verdict.  Instead, the defendant can end up paying $29,000 (the $16,000 verdict, plus the $10,000 in litigation costs, plus the $3,000 in prejudgment interest).  The defendant insurance company in this case example made a big mistake by turning down the $15,000 998 offer.