Existing law provides for liability insurance to protect against loss resulting from liability for an injury suffered by a person or for damage to property. Existing case law establishes obligations liability insurers have to the insured, including the duty to indemnify and the duty to defend. Existing law limits damages for a breach of contract to damages proximately caused by or likely to result from the breach and requires these damages to be ascertainable in both their nature and origin. Existing law provides that stipulations that are necessary to make a contract reasonable or conformable to usage but are not contrary to the contract’s manifest intention are implied. Existing case law allows for extracontractual damages for a breach of the implied covenant of good faith and fair dealing where an insurer unreasonably refused to accept a settlement offer within the policy limits against the insured. Existing law allows any party to serve an offer to allow judgment to be taken or an award to be entered in accordance with specified terms and conditions. If an offer made by the plaintiff is not accepted by the defendant and the defendant fails to obtain a more favorable judgment or award, the court or arbitration may require the defendant to pay a reasonable sum to cover plaintiff’s postoffer expert witnesses’ services, as specified, in addition to plaintiff’s costs.

This bill would provide a framework for parties to settle a liability claim using a “time-limited” demand, as specified. The bill would define “time-limited” demand as an offer to a tortfeasor to settle a cause of action or claim for personal or bodily injury, property damage, or wrongful death within the tortfeasor’s liability insurance policy limits prior to the filing of a complaint or demand for arbitration. The bill would require a time-limited demand to be accepted not fewer than 30 or 33 days from the date of transmission, as specified, and to contain specified information, including a clear and unequivocal offer to settle all claims within policy limits, a description of all known injuries sustained by the claimant, and reasonable proof to support the claim. The bill would require a claimant to send their time-limited demand to the email address or physical address designated by the liability insurer for receipt of time-limited demands, if available, or the insurance representative assigned to handle the claim, if known, and would require the Department of Insurance to post a liability insurer’s designated email address or physical address on the department’s internet website. The bill would allow a recipient of a demand to accept the demand in writing or to seek clarification or additional information or a request for extension. If an insurer does not accept a time-limited demand, the bill would require the insurer to notify the claimant of its decision and the basis of its decision prior to the expiration of the time-limited demand. The bill would specify that this notification is relevant in any lawsuit alleging extracontractual damages against the tortfeasor’s liability insurer.

Under this bill, a “time-limited” demand would not be considered a reasonable offer for purposes of a lawsuit alleging extracontractual damages against the liability insurer if the demand did not substantially comply with these provisions. The bill would make these provisions inapplicable to an unrepresented claimant. The bill would state that, in the event a court determines that these provisions conflict with the Civil Discovery Act, that act will prevail. The bill would make these provisions applicable to time-limited demands transmitted on or after January 1, 2023.

This bill would become operative only if SB 1107 of the 2021–22 Regular Session is enacted and takes effect on or before January 1, 2023.