California’s New Insurance Policy Limit Demand Statute Goes Into Effect January 2023

The California legislature has enacted legislative changes that will impose requirements on a claimant issuing a time-limited demand, taking effect on Jan. 1, 2023.

The enactment of California Code of Civil Procedure sections 999-999.5 (Senate Bill 1155) will provide a more equitable playing field for both sides and ensure that cases worthy of early resolution receive such attention based on the facts and evidence.

Senate Bill 1155 sets forth statutory requirements for the use of time-limited demands within policy limits for settling civil claims covered under automobile, motor vehicle, homeowner, or commercial premises liability insurance policies for property damage, personal or bodily injury, and wrongful death claims. A time-limited demand is defined as “an offer prior to the filing of the complaint or demand for arbitration to settle any cause of action or a claim for personal injury, property damage, bodily injury, or wrongful death made by or on behalf of a claimant to a tortfeasor with a liability insurance policy for purposes of settling the claim against the tortfeasor within the insurer’s limit of liability insurance, which by its terms must be accepted within a specified period of time.” C.C.P 999 § (b)(2).

The statute will require the demand to be:

• Written,
• Labeled as a time-limited demand (or reference the statute),
• Provide at least 30 days to accept if the demand is transmitted by email or 33 days to accept if transmitted by mail,
• Include a clear and unequivocal offer to settle all claims within policy limits, including the satisfaction of all liens,
• Offer for complete release from the claimant for the liability insurer’s insured from all present and future liability for the occurrence,
• Provide the date of the loss, the location of the loss, and the claim number, if known,
• Provide a description of all known injuries sustained by the claimant, and,
• Provide reasonable proof of the claim and damages, which may include, if applicable, medical records or bills sufficient to support the claim.

After this statute takes effect, the insurer, upon receiving a time-limited demand, can seek clarification, additional information, or request an extension to obtain further information. Such a request “shall not, in and of itself, be deemed a counteroffer or rejection of the demand.” (Section 999.3(b)). In the event the insurer chooses to reject a time-limited demand, the claimant must be notified in writing prior to the expiration of the demand, and the writing must provide the basis for the insurer’s decision to reject the demand.