A 1992 survey by the United States Department of Justice found that about 75% of tort cases in large counties settled before trial. Of all the tort cases involved in the survey, 92% of them involved personal injuries. It is still true that most personal injury cases settle before trial, and that is because reaching a fair and reasonable settlement is usually better than incurring the costs of a trial that is - by definition - uncertain. That said, every personal injury lawyer should prepare his or her case for trial because there is no guarantee that both parties will agree to a fair and reasonable settlement.
In California, the legislature enacted California Code of Civil Procedure § 998 to encourage pre-trial settlements. Section 998 works by giving courts and arbitrators the discretion to penalize parties who do not accept reasonable settlement offers that conform to the requirements of § 998. [Section 998 offers can be made as late as 10 days before trial and they remain open for 30 days or until the trial begins or until revoked by the offeror, whichever comes first.]
The reasonableness of a § 998 offer offer is based on the trial verdict or arbitration award. For example, if a defendant's § 998 offer was $X and the verdict or award turned out to be $X or less, then the defendant's offer was reasonable under § 998. If a plaintiff's § 998 offer was $Y and the verdict or award turned out to be $Y or more, then the plaintiff's offer was reasonable under § 998.
A party who rejects a reasonable § 998 offer may - at the discretion of the court or arbitrator - have to pay the other party's post-offer expert witness fees, which could exceed $25,000 per witness. If the defendant made a reasonable § 998 offer, then other trial costs may be added to the bill and the plaintiff will lose the right to recover any post-offer costs or statutory attorney fees. If the plaintiff made a reasonable § 998 offer, then pre-judgment interest (10% per year) starting from the time of the offer may be added to the bill.
Often times parties make multiple § 998 offers throughout the pre-trial process as new facts come to light. A recent decision by the California Supreme Court entitled Martinez v. Brownco Construction Company, Inc. held that as long as a party's multiple § 998 offers are all reasonable, the clock starts ticking as of the first reasonable § 998 offer. The Court's rationale was that, since the purpose of Code § 998 is to encourage pre-trial settlements, a party should not be discouraged from making an additional § 998 offer after the expiration of a previous one.
Even though most personal injury cases settle before trial, there are some cases where the only way to get justice is through a trial verdict or arbitration award. Just because a party makes a § 998 offer does not necessarily mean that party plans to settle. Sometimes a § 998 offer can be used strategically to increase the value of a favorable trial verdict or arbitration award. Because the stakes can be so high, both parties should seek the counsel of their lawyers to weigh the options of making, accepting, or rejecting a § 998 offer.