California Code of Civil Procedure Section 998 allows a party to serve a pre-trial settlement offer and provides certain penalties if the offer is not accepted and the offering party obtains a better result at trial. Less commonly known is California Probate Code Sections 550 through 555 that authorize actions “to establish [a] decedent’s liability for which the decedent was protected by insurance” and limits the liability of the decedent’s insurer liability to covered damages within policy limits. Such suits are brought nominally against the estate of a decedent, but served upon and defended by the decedent’s insurer.
The California Court of Appeal recently addressed the interplay between these statutes in Meleski v. Estate of Hotlen, No. C080023, 2018 WL 6241504 (Cal. Ct. App. Nov. 29, 2018) and held that an insurer defending a suit brought under Probate Code Section 550 can be subject to penalties arising from the failure to accept a settlement offer under Section 998.
The plaintiff in Estate of Hotlen was injured in a car accident with the decedent/insured and brought suit against the decedent’s estate under the Probate Code, which the decedent’s insurer defended. The decedent’s insurer rejected a 998 offer for one dollar less than its policy limits and the jury awarded plaintiff a greater amount at trial. Notwithstanding, the trial court refused to award the plaintiff costs under 998 reasoning that although Section 998 was applicable, the liability of the decedent’s insurer was capped at its policy limits by the Probate Code and the 998 costs would have exceeded that cap.
Plaintiff appealed arguing the decedent’s insurer was obligated to pay an award of costs under Section 998 and applying the Probate Code’s damages cap to costs awarded under Section 998 conflicts with the intent of the statute.
The Court of Appeal agreed. It found that the decedent’s insurer was a party for purposes of Section 998 and rejected the insurer’s argument that the Probate Code’s damages cap applied to costs under Section 998. The Court distinguished “damages” to which the cap applied from “costs” to which it found the cap did not apply.
The decision underscores the distinction between amounts awarded as costs and those awarded as damages and, as a practical matter, reminds insurers that California courts are likely to view them as the real party in interest in suits under the Probate Code.