Legal Question in Civil Litigation in California

No. You can settle for any amount of money. Make sure the settlement agreement states that each party bears his or her own fees and costs. Also make sure it contains a mutual general release and waiver of Civil Code section 1542. Once you settle on these terms, there is no future liability.

Once the other side has had enough time and infiormation to be able to properly evaluate the case, a Section 998 offer can be made [before that, it has no negative effect in rejecting it as it is premature]. Once it is rejected, it can no longer be accepted. A new offer can then be made as though the old one does not exist. The purpose of the section is to encourage settlements and if you were forever bound by an initial offer then you might not make one. but once you make an offer the other side tends to look up it as showing a figure youare always willing to settle for. Attorney fees are not part of the recoverable costs; attorney fees are only awardable when the section directly states they are or the contract involved provides either side with that right of recovery.

I would first speak with opposing counsel and see if you can get a feeling as to what they would settle for before you make another demand. If it applies, find out what the insurance policy limits are, as normally they will not offer anything above that. If a policy limit demand is made, they must look very closely at the case as later there is a judgment greater than the limits they might be subject to a bad faith lawsuit by their client for not setttling so thathe/she has no liability [often the plaintiff "buys" the bad faith action in return for not executing on the amount above the policy limits].

not proof read

1. You misunderstand section 998 offers. It never matters to you if you do better or worse than YOUR offer. It only matters that you do better than an offer made TO YOU.

2. Section 998 only comes into play if there is a trial or arbitration resulting in a judgment.

3. Section 998 only comes into play if the plaintiff wins at trial or arbitration.

4. Section 998 offers essentially put a points spread on the litigation. If the plaintiff does not do better at trial than the last rejected defense offer, even though they win, they do not recover their costs and instead have to pay the defendant's costs. If the defendant does not do better than the last rejected plaintiff's offer, there is little consequence, since the plaintiff gets their costs if they win anyway, but if it is a personal injury action the plaintiff gets prejudgment interest, which you normally do not get in personal injury cases.

5. Section 998 has no effect on allocation of attorneys fees, unless there is a contractual provision that expressly calls for them to be awarded to the prevailing party as an item of costs for section 998 purposes.

I agree with most of Mr. McCormick's answer, but not part 3. If the plaintiff loses after the defendant made a valid 998 offer, the defendant will be entitled to seek costs under that section.