What Is a California Code of Civil Procedure Section 998 Offer to Compromise?
If you’ve been involved in a California personal injury lawsuit, you may hear your attorney mention a “998 Offer” or an “Offer to Compromise.” Although the name sounds technical, it is one of the most powerful settlement tools available in California civil litigation.
A properly timed and strategically drafted Code of Civil Procedure section 998 Offer to Compromise can encourage settlement, reduce litigation costs, and significantly affect the financial consequences of proceeding to trial.
Whether you are the injured plaintiff or the defendant, understanding how a Section 998 offer works is essential before deciding whether to accept or reject one.
What Is a Section 998 Offer?
A Section 998 Offer to Compromise is a formal written settlement offer authorized by California Code of Civil Procedure section 998. Either the plaintiff or the defendant may serve a written offer proposing to resolve the lawsuit before trial or arbitration.
Unlike informal settlement discussions, a Section 998 offer carries important legal consequences if it is rejected.
The purpose of the statute is simple: encourage parties to settle reasonable cases without requiring a costly trial.
How Does a 998 Offer Work?
The process generally follows these steps:
Step 1 – A Written Offer Is Served
One party serves a written settlement offer on the opposing party.
The offer must comply with the requirements of Code of Civil Procedure section 998, including setting forth the terms of the proposed judgment or settlement and providing a method for accepting the offer in writing.
Step 2 – The Receiving Party Evaluates the Offer
The receiving party must carefully consider:
- the strength of the evidence;
- the likelihood of success at trial;
- the potential value of the case; and
- the financial consequences of rejecting the offer.
Because the decision may have significant cost implications, this analysis should be undertaken with experienced legal counsel.
Step 3 – Acceptance or Rejection
If the offer is accepted, the parties complete the settlement or allow judgment to be entered according to the terms of the offer.
If the offer is not accepted within 30 days, or before trial begins (whichever occurs first), the offer is deemed withdrawn and generally cannot be presented as evidence during trial.
However, the legal consequences of rejecting the offer may continue long after the offer expires.
Why Is a 998 Offer So Important?
The real significance of a Section 998 offer lies in its cost-shifting provisions.
California law is designed to encourage reasonable settlements by imposing financial consequences on a party who rejects a reasonable offer and later fails to obtain a more favorable result at trial.
In many situations, rejecting a reasonable 998 offer can expose the unsuccessful party to significant litigation costs, including recoverable expert witness fees authorized by the statute.
For that reason, a Section 998 offer often changes the settlement dynamics of a case.
An Example
Suppose an injured plaintiff serves a Section 998 offer to settle a case for $150,000.
The defendant rejects the offer.
The case proceeds to trial, and the plaintiff ultimately obtains a judgment of $175,000.
Because the plaintiff achieved a result more favorable than the rejected offer, the plaintiff may become entitled to recover additional litigation costs permitted under Section 998, depending upon the circumstances of the case.
Conversely, if the plaintiff had recovered less than $150,000, the rejection of the offer could have significant financial consequences for the plaintiff.
Every case is different, and the analysis often depends on the precise terms of the offer and the ultimate judgment.
Timing Matters
A Section 998 offer cannot be served at the last minute.
Generally, the statute requires that the offer be served at least ten days before trial or arbitration begins.
Experienced litigators often spend considerable time deciding when to make a Section 998 offer.
Serving the offer too early may reduce its effectiveness if discovery has not been completed.
Serving it too late may eliminate important strategic advantages.
Timing is frequently as important as the dollar amount of the offer itself.
Is Every Settlement Offer a 998 Offer?
No.
Parties negotiate settlements throughout litigation.
A Section 998 offer is different because it is a statutory settlement offer governed by California law.
An informal email or telephone settlement discussion generally does not trigger the cost-shifting consequences provided by Section 998.
Should You Accept a 998 Offer?
There is no universal answer.
Every case presents different legal issues, evidence, damages, risks, and trial considerations.
Before accepting or rejecting a Section 998 offer, your attorney should carefully evaluate:
- liability issues;
- available evidence;
- witness credibility;
- medical evidence;
- future damages;
- jury appeal;
- litigation costs;
- potential expert witness expenses; and
- the likelihood of obtaining a better result at trial.
A decision based solely on the settlement amount—without considering the potential statutory consequences—may prove costly.
Strategic Considerations
For plaintiffs, a properly drafted Section 998 offer can create meaningful settlement leverage while protecting the client’s interests if the defendant chooses to proceed to trial.
For defendants, a well-timed offer may significantly reduce future litigation exposure and encourage realistic settlement negotiations.
When used thoughtfully, Section 998 serves not only as a settlement mechanism but also as an important litigation strategy.
Final Thoughts
California’s Code of Civil Procedure section 998 is much more than a settlement statute—it is a strategic litigation tool that can substantially influence the outcome and cost of a lawsuit.
Because the consequences of accepting or rejecting a Section 998 offer may extend well beyond the settlement amount itself, parties should never make that decision without understanding the legal and financial implications.
If you have received—or are considering making—a Section 998 Offer to Compromise, consulting with an experienced California litigation attorney can help you evaluate your options and develop a strategy tailored to the facts of your case.