To combat a perceived litigation tactic by plaintiffs counsel of using settlement demands within policy limits to set up insurers for bad faith, insurance company associations lobbied for statutory clarification to avoid uncertainty around insurers’ duties when faced with time-limited demands.
The result was the enactment of California Code of Civil Procedure Chapter 3.2, Sections 999–999.5, titled “Time-Limited Demands,” which goes into effect Jan. 1, 2023.
Claimants’ time-limited settlement demands often seek the available policy limits and are usually referred to in the industry as “policy limits demands,” though theoretically they could be for an amount below limits. The demands must be reasonable in order to subsequently impose extracontractual liability on an insurer for bad faith failure to settle.
For certain types of claims and policies, Section 999 imposes several new criteria that a presuit demand must comply with to be considered a reasonable offer to settle within policy limits. We’ll call these “Section 999 demands.”