California Implements New Rules on Pre-Suit “Time-Limited” Settlement Demands
One critical aspect of motor vehicle accident cases is the time-limited demand, which allows plaintiffs to press for swift settlement of claims by insurers. California lawmakers recently recognized this approach to settlements by enacting Senate Bill 1155 (SB1155) during the 2021-2022 biennial legislative session, which added new sections of law to the California Code of Civil Procedure. If you or a loved one has been hurt in a California car, truck or motorcycle accident caused by the negligence of another driver, it’s worthwhile to review your claim with a Palmdale personal injury lawyer and learn how this new law could affect your claim.
What Are Time-Limited Demands?
A time-limited demand is a settlement offer made by an injured party (the claimant) to an insurance company with a specific deadline included in the offer. The purpose of making a time-limited demand is to create pressure on the insurer to settle the claim fairly and promptly. If the insurance company fails to respond within the given time frame, it could face potential bad faith litigation for acting unreasonably in its duty to settle.
The Significance of Sections 999-999.5 of the California Code of Civil Procedure
Effective January 2023, California passed new laws governing time-limited demands, which are found in Sections 999 through 999.5 of the California Code of Civil Procedure. These new laws standardize the process for time-limited demands in motor vehicle accident cases, including auto, truck and motorcycle accidents.
The key provisions of the law are as follows:
1. Scope and Applicability (Section 999)
The time-limited demand statutes apply specifically to claims arising out of motor vehicle accidents. This law is essential for injured motorists because insurers are sometimes thought to delay or undervalue claims from a plaintiff’s perspective, particularly when the injuries sustained are severe. By utilizing a time-limited demand, claimants can expedite the process.
The law covers both first-party and third-party claims. However, it’s crucial to note that the provisions only apply to claims made under motor vehicle insurance policies. Other types of personal injury claims or non-vehicle-related insurance disputes are excluded.
2. Requirements for a Valid Time-Limited Demand (Section 999.1)
For a time-limited demand to be considered valid under California law, several conditions must be met:
- Written Demand: The demand must be made in writing.
- Clear Terms: It must include a clear settlement offer that specifies the amount demanded, along with the deadline for the insurer to respond.
- Rationale for Settlement Amount: The demand must explain the basis for the settlement amount requested, including a summary of the injuries and damages sustained in the accident.
- Release Language: The demand must indicate that the claimant is offering to settle in exchange for a release of liability against the insured party.
- Proof of Medical Expenses and Damages: Documentation, such as medical records, bills, and other evidence supporting the claimed damages, must be included to justify the settlement amount.
A time-limited demand that fails to include these key elements may be considered invalid, providing the insurer with grounds to reject the offer without facing bad faith litigation.
3. Deadline and Response (Section 999.1, 991.3)
A crucial aspect of time-limited demands is the response period. Under Section 999.1, the insurer must be given at least 30 days from the receipt of the demand to respond. This timeline ensures that insurers have adequate time to evaluate the claim and make an informed decision.
If the insurance company agrees to settle within the stipulated period, they must notify the claimant of their acceptance in writing. Should they fail to respond within the deadline, the claimant may have grounds to pursue a bad faith claim against the insurer for failing to settle reasonably.
4. Bad Faith Litigation and Legal Recourse (Section 999.4)
The effect of an insurance company refusing to accept a time-limited demand for policy limits is that they could wind up on the hook for any amount above the policy limits awarded to the plaintiff if the case goes to trial. This is known as extra-contractual liability. Section 999.4 makes it clear that a time-limited demand must substantially comply with the terms of the new law in order to expose the defendant to extra-contractual liability.
When an insurance company does not respond to a valid time-limited demand or fails to make a reasonable settlement offer, the injured party may be able to pursue a bad faith claim. Under California law, insurers owe their policyholders a duty of good faith and fair dealing, which includes the responsibility to settle claims within policy limits when it’s reasonable to do so.
For motorists and passengers injured in a motor vehicle accident in California, this provision can be particularly advantageous. If an insurance company undervalues your claim or drags its feet in settlement negotiations, a time-limited demand offers a pathway to litigation if the insurer fails to meet its obligations.
However, bad faith litigation can be complex and requires careful documentation. Working with a skilled attorney is essential to ensure your time-limited demand meets all statutory requirements and provides you with the strongest possible case if litigation becomes necessary.
5. Extensions and Modifications (Section 999.3)
While the 30-day deadline is the default rule, parties can mutually agree to extend the deadline or modify the terms of the demand. This flexibility is important in situations where more time may be needed to evaluate damages or gather additional information.
For example, in cases involving catastrophic injuries, it may take longer for the insurance company to assess the long-term impacts of the accident, such as future medical expenses or lost earning capacity. In these instances, extensions or modifications may benefit both parties.
How Time-Limited Demands Benefit Injury Victims
Motor vehicle accidents often result in severe injuries, yet insurance companies may be thought to attempt to minimize payouts to injury victims. Time-limited demands, as outlined in Sections 999 through 999.5, provide a powerful tool to expedite claims and hold insurers accountable.
By submitting a properly executed demand, claimants can increase the likelihood of receiving fair compensation for their injuries, medical expenses, and other damages. Moreover, the threat of bad faith litigation encourages insurers to handle claims more efficiently, reducing the likelihood of protracted legal battles.
Contact Kistler Law Firm
Understanding and utilizing California’s time-limited demand laws can be a game-changer for those hurt in a crash. The protections afforded under Sections 999 through 999.5 of the California Code of Civil Procedure give injury victims leverage in settlement negotiations, helping to secure fair compensation.
If you or a loved one has been injured in a motorcycle accident, contact Kistler Law Firm for a free case evaluation to ensure that your rights are protected. Time-limited demands are a powerful tool, but they must be executed correctly to be effective.
