Effective January 1st, a new California Statute will govern claimants’ demands that an at-fault party’s liability insurer pay by a specific deadline the limits of its policy to settle claims against the at-fault-party.
California code of civil procedure section 999 will govern so-called ‘Time-limited, policy-limit’ demands made before the filing of a lawsuit or a demand for arbitration and will apply to demands issued on or after January 1st.
The new law provides a framework for insurers, insureds, and claimants, to issue and respond to time-limited, policy-limit demands, thus possibly reducing so-called bad faith “set ups” of insurers.
Effective Jan. 1, California will join the growing number of states that have passed laws governing demands made by claimants that an at-fault party’s liability insurer pay by a specific deadline the limits of its policy to settle claims against an at-fault party.
California Code of Civil Procedure Section 999 will govern so-called ‘time-limited, policy-limit’ demands made before the filing of a lawsuit or a demand for arbitration. The section will apply to demands made on, or after, Jan. 1, 2023, and will apply to causes of action and claims covered under automobile, motor vehicle, homeowner, or commercial premises liability insurance policies for property damage, personal or bodily injury, and wrongful death claims.
What Must The Demand Include?
The new law requires a time-limited demand to be in writing, labeled as a time-limited demand or reference section 999, and contain material terms, which include the following:
(1) The time-period in which the demand must be accepted shall be not fewer than 30 days from date of transmission of the demand, if transmission is by email, facsimile, or certified mail; or not fewer than 33 days, if transmission is by mail.
(2) A clear and unequivocal offer to settle all claims within policy limits, including the satisfaction of all liens.
(3) An offer for a complete release from the claimant for the liability insurer’s insureds from all present and future liability for the occurrence.
(4) The date and location of the loss.
(5) The claim number, if known.
(6) A description of all known injuries sustained by the claimant.
(7) Reasonable proof, which may include, if applicable, medical records or bills, sufficient to support the claim.
To Whom Must The Demand Be Sent?
The demand must be sent to:
(1) The email address, or physical address, designated by the liability insurer for receipt of time-limited demands for purposes of the law if an address has been provided by the liability insurer to the Department of Insurance, and the Department of Insurance has made the address publicly available. The Department of Insurance shall post on its website the email address, or physical address, designated by a liability insurer for receipt of time-limited demands for purposes of this chapter.
(2) The insurance representative assigned to handle the claim, if known.
How Must The Insurer Respond?
The recipients of a time-limited demand may accept the demand by providing written acceptance of the material terms outlined in the law in their entirety.
The new law also states that an attempt to seek clarification or additional information, or a request for an extension due to the need for further information or investigation made during the time in which to accept a time-limited demand, shall not, in and of itself, be deemed a counteroffer or rejection of the demand.
Under the law, if, for any reason, an insurer does not accept a time-limited demand, the insurer shall notify the claimant, in writing, of its decision and the basis for its decision. This notification shall be sent prior to the expiration of the time-limited demand, including any extension agreed to by the parties, and shall be relevant in any lawsuit alleging extracontractual damages against the tortfeasor’s liability insurer.
What Happens if the Demand Does Not Comply with the Statute?
Under the law, in any lawsuit filed by a claimant, or by a claimant as an assignee of the tortfeasor, or by the tortfeasor for the benefit of the claimant, a time-limited demand that does not substantially comply with the terms of this chapter shall not be considered to be a reasonable offer to settle the claims against the tortfeasor for an amount within the insurance policy limits for purposes of any lawsuit alleging extracontractual damages against the tortfeasor’s liability insurer. However, this section of the law does not apply to a claimant not represented by counsel.
The new law provides a framework for insurers, insureds, and claimants to issue and respond to time-limited, policy-limit demands, and hopefully, will reduce so-called bad faith “set ups” of insurers by establishing time periods for the insurer to respond to the demands, and the information that must be included in the demands.
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