In Rouland v. Pacific Specialty Insurance Co. the California Court of Appeal for the Fourth Appellate District decided an interesting case under California’s cost shifting provision, Code of Civil Procedure Section 998.
The Plaintiffs sued their insurer, Pacific Specialty Insurance Company (Pacific), for breach of contract after the insurer refused to cover damages incurred in a landslide.
Prior to trial, Pacific served the Plaintiffs with separate offers to settle pursuant to Code of Civil Procedure Section 998. The offer directed them to respond with an “Offer and Notice of Acceptance” with the trial court within 30 days of the offer date. The Plaintiffs ignored the 998 offers.
Then a jury returned a verdict in favor of Pacific. The trial court entered judgment against the Plaintiffs and Pacific sought $331,000 in expert fees incurred in discovery and trial.
The Plaintiffs argued that a 998 award was improper as the offer did not “strictly comply” with requirements of 998. The trial court did not award Pacific any expert fees. The insurance carrier appealed.
The court of appeal reversed the decision of the trial court. The court of appeal noted that Section 998 allows a defendant to recover reasonable expert fees where the plaintiff fails to timely accept a 998 award, and then loses at trial.
The court noted that for a Section 998 offer to be valid, it must be in writing and include a statement containing the terms and conditions of an award as well as a simple statement of acceptance.
The court of appeal noted that Pacific’s offers directed the plaintiffs to file an “Offer and Notice of Acceptance.” The court noted that the offer was in substantial compliance with the statute. For this reason the court ruled that the trial court erred in not awarding the carrier the expert costs.
This case is a cautionary one for counsel and a reminder that a technical variance in a 998 offer can preclude an award of costs.