Court Upholds Offer to Compromise Following Motor Vehicle Collision Lawsuit; Defendant’s Changed Terms Re-Opened a Completed Negotiation That was not Enforceable under California Law

In a lawsuit following a motor vehicle collision, the injured plaintiffs were awarded compensation for their medical costs, lost wages from work, and general damages. At the time of the collision, the plaintiffs had been acting in the course of employment, and were also awarded workers’ compensation benefits. The main issue in this appeal concerned a settlement offer between the defendant and the employer’s insurance company. On appeal, the court emphasized the role of intention in a written agreement, and particularly when one party is assigning legal rights.

California Code of Civil Procedure section 998 provides an Offer to Compromise, which is often used in personal injury cases in order to reach an agreement in a dispute before trial. In this case, the defendant responsible for causing the automobile accident had appealed a trial court order enforcing a Section 998 Offer. He contended there had not been a meeting of the minds regarding agreed terms of settlement.

The facts of the underlying lawsuits indicate that plaintiffs brought separate lawsuits against defendant for their injuries, and their employer’s insurer filed a complaint in intervention, in order to recover the costs of their workers’ compensation benefits they had paid to plaintiffs. Defendant then attempted to settle the insurer’s complaint through a Section 998 Offer, which was accepted, and filed with the court. Then, defendant sent insurer an agreement with an assignment of plaintiffs’ workers’ compensation lien rights to defendant, which was a modification of the original offer. At the time, the insurer held $161,322.05 in lien rights between the two plaintiffs. Because the Section 998 Offer had not included this assignment of rights, the insurer responsed by sending its draft of the settlement agreement without the assigned rights.

Settlement agreements, according to the California Court of Appeal, are a form of contract that is subject to contract law principles. Once written, the intention of the parties is determined by looking at the writing alone. In this case, defendant argued that one of the terms within the Section 998 Offer was the notarized execution and transmittal of a written settlement agreement and general release.

The court made clear that after the insurer accepted the Section 998 Offer, defendant prepared a proposed settlement agreement, but had assigned the insurer’s workers’ compensation liens to himself. This materially changed the bargaining and the insurer did not agree to the new term. While defendant claimed that this showed the insurer did not agree on anything in the first instance, the court stated that, in fact, the insurer refused to re-open a completed negotiation.

According to the appellate court, the trial court could have found that when the insurer had unconditionally accepted the Section 9987 offer, there had been a binding and enforceable contract. Additionally, the court could have found that assigning lien rights was not to be part of the contract. When defendant wrote the Section 998 Offer, it had clear terms, and did not invite further negotiation. The court stated that there was substantial evidence supporting a finding of an enforceable settlement contract.

Turning to whether the court properly denied defendant’s motion to reduce judgment, the court stated that his argument was that enforcing the Section 998 settlement resulted in double recovery for plaintiffs. Here, the trial court had determined a double recovery had not taken place, and had found that plaintiff did not meet his burden of showing that enforcing the settlement would lead to double recovery.

The court found that plaintiff failed to provide evidence showing the jury’s calculation of plaintiff’s damages award, or details concerning reimbursement payments made by the insurer. In order to compare what the insurer awarded the plaintiffs to what the jury awarded plaintiffs, these details must be included. For example, the court stated that while there is a record of the jury receiving information on the amount of medical expenses the insurer covered, and the fact that the insurer put a lien on plaintiff’s recovery, the evidence did not show whether the jury deducted those amounts from plaintiff’s’ recovery when they calculated damages. There was not enough information to determine how the jury made its calculations, and without more information, it cannot be determined whether plaintiffs received a double recovery. Here, defendant failed to show error.

The court affirmed the judgment.

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