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    New California Law Creates Statutory Scheme For “Time-Limited Settlement Demands”

    After suffering an injury, claimants often send a settlement demand to the offending party and demand a response by a certain time. When an insurance company receives such a demand, and it is within their client’s policy limit, the interests of the insurance carrier and their client may diverge. The client may want to settle to avoid personal liability and quickly resolve the dispute, whereas the insurer may want to challenge the claim in order to pay less.

    In 1959, the California Legislature enacted the Unfair Insurance Practices Act (“UPA”), Cal. Ins. Code § 790, et seq. The UPA requires insurance companies to attempt in good faith to effectuate prompt and fair settlements when liability for a claim is reasonably clear. An unreasonable refusal to settle may subject the insurer to liability for the entire amount of the judgment rendered against their client, including any portion in excess of the policy limits, as well as bad faith breach of contract claims.

    Last year, consumer groups lobbied for protection from unreasonable rejections of valid settlement offers. In response, insurance companies complained that time-sensitive settlement demands provided undue pressure to settle the case before the insurer had time to investigate the claim. The California legislature passed SB 1155, now California Code of Civil Procedure sections 999, 999.1, 999.2, 999.3, 999.4, and 999.5, which became effective as of January 1, 2023.

    Changes Under the New Law

    Section 999 defines “Extracontractual damages” and “Time-limited demand.” Extracontractual Damages are damages that exceed the insured’s available policy limits. “Time-limited demand” is an offer to settle within the policy limits, provided prior to commencing an action, that must be accepted within a specified period of time.

    Section 999.1 outlines the form and requirements for time-limited demands. First, they must be in writing, and labeled to inform the recipient that it is a demand intended to conform with the new requirements. Second, it must contain the following elements: 1) a time to respond within 30 days from the date of transmission of the demand, if by email, fax, or certified mail, or within 33 days, if 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 for all present and future liability; 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; and 7) reasonable proof, which may include, if applicable, medical records or bills, sufficient to support the claim.

    Section 999.2 requires claimants to send the demand to the email address or physical address designated by the liability insurer for receipt of time-limited demands if an address has been provided by the liability insurer and made publicly available to the Department of Insurance. This information can now be found at This section also allows the claimant to send the demand to the insurance representative assigned to handle the claim, if known.

    Section 999.3 allows the recipients of a time-limited demand to accept the offer through written acceptance of all of the material terms. It also permits insurance companies to seek clarification, additional information, or request an extension to further investigate the claim during the time it has been given to respond, without deeming these requests a counteroffer or rejection of the demand. If an insurer does not accept a time-limited demand, this section requires the insurer to notify the claimant, in writing, of its decision and the basis for its decision, prior to the expiration of the time-limited demand, and the rejection letter will be relevant in any lawsuit alleging extracontractual damages against the insurer.

    Section 999.4 deems a time-limited demand, drafted by counsel only, that does not substantially comply with the requirements outlined in the previous sections not to be a reasonable offer to settle.

    Finally, Section 999.5 limits the new law to 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.

    Opponents of SB 1155 were concerned that requiring a significant amount of information, some of which may be irrelevant to the demand or protected by privacy laws, was especially unfair to consumers. Supporters argued that the law will simply require certain information and documentation be included in a plaintiff’s time-limited demand, increasing the efficiency of the carrier’s review of the claim. Time will tell whether the law will perform as the drafters intended, but parties sending and receiving such demands will need to follow these new requirements.

    Hunt Ortmann is ready to assist you with your insurance law needs and navigating these changes under the new law.

    JoLynn Scharrer is a Shareholder at Hunt Ortmann and leads the Firm’s Labor & Employment and Insurance Law Practice. She can be reached at for further information and assistance.

    Emil Rogstad is an Associate at Hunt Ortmann and his practice areas include Construction Disputes & Litigation, Construction Agreements, Contractor Licensing, and Public Works. He can be reached at


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    JoLynn M. Scharrer