Understanding California’s Time-Limited Demand Laws

In the intricate world of insurance claims and liability, time-limited demands have emerged as a pivotal tool in California. These demands, while not a new concept, have gained renewed attention following recent legislative changes.

Understanding the nuances of time-limited demands is crucial in navigating the legal landscape of insurance settlements. Here’s what you need to know about these demands in California and how they may affect your insurance claim.

What Is a Time-Limited Demand in California Insurance Claims?

A time-limited demand in the context of insurance in California refers to a formal offer made by a claimant to settle a claim within the limits of the at-fault party’s liability insurance policy, subject to specific time constraints. This type of demand is made before the initiation of a lawsuit or a request for arbitration.

These documents have become the center of attention due to California’s new law for insurance claims, which took effect on January 1, 2023. The new law, Senate Bill (SB) 1155, introduces specific guidelines for pre-suit settlement demands involving liability insurance. The statute added Section 999 to the California Code of Civil Procedure Section 999, which governs “time-limited, policy-limit” demands made before the filing of a lawsuit or a request for arbitration.

SB 1155 applies to demands made on or after January 1, 2023. It covers actions and claims under automobile, motor vehicle, homeowner, or commercial premises liability insurance policies, encompassing property damage, personal or bodily injury, and wrongful death claims.

But what does Section 999 actually entail? Here are a few of the key features of the statute that directly apply to insured people:

• Written Demands: These demands must be in writing, labeled as a time-limited demand or reference section 999, and contain specific material terms.
• Settlement Period: It specifies a minimum period for acceptance, generally not fewer than 30 days if transmitted by email, facsimile, or certified mail, or not fewer than 33 days if sent by mail.
• Settlement Offer: There must be a clear and unequivocal offer to settle all claims within policy limits, including the satisfaction of all liens and an offer for a complete release from the claimant for the liability insurer’s insureds from all present and future liability for the occurrence.
• Detailed Information: The demand should include the date and location of the loss, the claim number (if known), a description of all known injuries sustained by the claimant, and reasonable proof to support the claim, which may include medical records or bills.
• Designated Addresses for Submission: The demand must be sent to either the email or physical address specified by the liability insurer for receipt of these demands (if provided to and made publicly available by the Department of Insurance) or to the insurance representative assigned to handle the claim, if known.

The new law also impacts insurers. Insurance companies can accept the demand by providing written acceptance of all the material terms outlined in the law. Attempts to seek clarification and additional information or requests for extensions due to the need for more information and investigation are not considered counteroffers or rejections of the demand.

Suppose an insurer does not accept the demand. In that case, they must notify the claimant in writing of their decision and its basis before the expiration of the letter, including any agreed-upon extension. This notification is relevant in any lawsuit alleging extracontractual damages against the tortfeasor’s liability insurer.

The law aims to provide a clear framework for insurers, insureds, and claimants to issue and respond to time-limited, policy-limit demands, clarifying matters for everyone involved.

Benefits of SB 115 for Insured People

California’s new time-limited demand law offers several benefits to insured individuals. These benefits primarily stem from the law’s intent to streamline the settlement process in liability insurance claims and to mitigate the risks of bad faith litigation. Here’s how the law benefits insured people:

• Clearer Settlement Demands: The law requires demands to be in writing, clearly labeled, and contain specific material terms. This clarity benefits insured individuals by ensuring that settlement demands made to their insurers are straightforward, reducing ambiguities that could lead to protracted negotiations or disputes.
• Standardized Response Timeframes: By mandating a minimum period (30 or 33 days, depending on the mode of transmission) for insurers to respond to a demand, the law provides insured individuals with a more predictable timeline for the resolution of their claims.
• Protection from Excessive Claims: The requirement for a clear and unequivocal offer to settle all claims within the policy limits, including the satisfaction of all liens, helps protect insured individuals from the risk of claims that exceed their policy limits. It is particularly important in cases where the actual damages might be significantly higher than the coverage limits.
• Reduction in Bad Faith Litigation Risks: The law’s guidelines help to reduce the likelihood of bad faith litigation against insurers. That is beneficial for insured individuals as such litigation can be costly and time-consuming, potentially impacting premium costs and the overall efficiency of the insurance system.
• Enhanced Accountability for Insurers: Insurers are required to provide a written explanation if they decide not to accept a time-limited demand. This requirement enhances the accountability of insurers in their decision-making process and promotes fairer and more transparent handling of claims.
• Expedited Settlement Process: By standardizing and clarifying the process for demand letters, the law aims to facilitate quicker settlements. This expedites the resolution of claims, which is beneficial for insured individuals who depend on timely settlements for financial stability, especially in cases of significant property damage or personal injury.

Seek Expert Legal Help for Insurance Settlement Demands

Time-limited demands in California insurance claims present a challenging yet vital aspect of liability law. The introduction of SB 1155 may benefit people filing demand letters against their insurers, but it is not enough to ensure a fair outcome.

As the law is put into practice, further litigation and legal interpretations are likely to shape its application and effectiveness. As the legal landscape continues to evolve, working with an experienced attorney will be key to successful navigation in the world of insurance litigation. The professional insurance attorneys at Oksenendler Law, P.C., can help. Schedule your consultation today to learn how.