The California Legislature has enacted SB 1155 relating to “Time Limited Demands,” which goes into effect on January 1, 2023. In California, if a claimant makes a reasonable settlement demand within the limits of a liability insurance policy and the insurer unreasonably refuses to accept the demand, the insurer may be liable for a judgment which exceeds the policy limits. The question is always, what constitutes a reasonable demand and an unreasonable refusal to accept the demand? SB 1155, codified in Code of Civil Procedure section 999 et seq, was intended to provide some clarity and protection for insurers, but it does little to accomplish that goal. Here are some of the points, but the entire statute should be reviewed for clarity and context:
If the pre-litigation settlement demand is made in writing, it is sent by U.S. mail, email, facsimile, or certified mail to an email or physical address designated by the insurer and/or provided to the Department of Insurance, it includes a release of all claims from all present and future liability for the occurrence, it releases all insureds potentially liable and it provides “reasonable proof, which may include, if applicable, medical records or bills, sufficient to support the claim”, then the insurer must be allowed at least 30 days from the date of transmission if by email, facsimile or certified mail, or 33 days if by regular mail to either request more information or additional time to respond, or reject the demand and provide the basis for the denial.
The insurer’s request for more information or additional time to respond does not, in and of itself, act as a “counteroffer” or a “rejection of the demand.” If the demand does not “substantially comply” with the statute, it “shall not be considered to be a reasonable offer to settle the claims against the tortfeasor for an amount within the insurance policy limits.”
However, the statute does not apply to an unrepresented claimant, it only applies to pre-suit demands, it applies only to “automobile, motor vehicle, homeowner, or commercial premises liability insurance policies for property damage, personal or bodily injury, and wrongful death claims”, it does not address the situation where there are multiple claimants and less then all make a demand, the demand is effective upon sending, not receipt, and there is no mechanism to confirm or guarantee receipt.
While the statute was an attempt to protect insurers from bad faith lawsuits based on ill-timed or ill-prepared settlement demands, it appears that the statute merely creates a road map for claimants to achieve a bad faith result, rather than give insurers a safe harbor from them.
Written by: John O’Meara, Partner
If you are interested in having a BWB&O team member host a webinar for your company, or you want to learn more about this subject, please contact John O’Meara at email@example.com.