Zero Damages Constitutes Prima Facie Evidence That Offer of Settlement was Reasonable
Post 4954
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Wild Chang and Kenneth Lo appealed from a post judgment order denying their motion to strike or tax costs. The trial court awarded costs to defendants Fire Insurance Exchange and Stacy Chern (collectively, insurance defendants) after the trial court granted their motion for terminating sanctions and entered judgment in their favor.
In Wild Chang et al. v. Fire Insurance Exchange et al., B334217, California Court of Appeals (December 19, 2024) an offer of settlement rejected by plaintiffs requires plaintiffs to pay costs and expert witness fees after case dismissed with terminating sanctions.
FACTUAL BACKGROUND
Plaintiffs’ Insurance Claim and Consolidated Actions
An insurance claim plaintiffs submitted for losses caused by a fire in their home in 2014. In 2016, Fire Insurance Exchange offered $19,925.91 in structural repairs, which plaintiffs rejected. In 2017, plaintiffs Chang and Lo sued Farmers Insurance Company, Inc. (Farmers), Fire Insurance Exchange, Stacy Chern Insurance Agency, and Chern.
In May 2019, the insurance defendants made settlement offers of $14,242.56 each to Chang and Lo pursuant to Code of Civil Procedure section 998. The offers each stated: “This offer expires the earlier of 30 days from the date hereof, or at the commencement of trial.”
In January 2021, plaintiffs Chang, Lo, and Chang Jr. sued Farmers, Fire Insurance Exchange, Chern, and defendants’ counsel, Woolls Peer in a second action. The lawsuits were consolidated and the operative third amended complaint deemed filed in July 2021. Farmers demurred to the third amended complaint on numerous grounds, which the trial court sustained, and the California Court of Appeals affirmed on appeal. (Chang v. Farmers Insurance Company, Inc. (June 16, 2023, B321411)
As the matter neared trial, the trial court issued several discovery orders with which Chang and Lo did not comply. In November 2022, the trial court granted a motion for terminating sanctions filed by the insurance defendants (the only remaining defendants) and entered judgment against Chang and Lo on the remaining causes of action (for breach of the covenant of good faith and fair dealing, breach of contract, unfair business practices against Fire Insurance Exchange, and professional negligence against Chern).
The Trial Court’s Award of Costs to the Insurance Defendants
Plaintiffs moved to strike or tax costs on multiple grounds, including that the expert witness fees were not recoverable because the matter was never tried, no invoices were attached, and expert witness fees are generally not recoverable as costs.
The trial court entered an order granting $14,849.75 in costs to the insurance defendants.
DISCUSSION
Section 998 allows for recovery of expert witness costs in certain circumstances when an offer of settlement is not accepted and there is a judgment less than the amount of the offer.
The Costs Award Was Not Erroneous or an Abuse of Discretion – Expert Witness Fees as Costs
The statutory basis for the trial court’s award of expert witness fees was section 998. Once the offeror shows the section 998 offer is valid, the burden shifts to the offeree to show the offer was not made in good faith. An offer is made in good faith if it is realistically reasonable under the circumstances of the particular case – that is, if the offer carries with it some reasonable prospect of acceptance.
Plaintiffs made no argument that the section 998 offers they received were invalid. The insurance defendants obtained a judgment in their favor on all the remaining causes of action brought by Chang and Lo.
An award of zero damages generally constitutes prima facie evidence showing the offer was reasonable and the offeror is eligible for costs as specified in section 998. Plaintiffs do not challenge the reasonableness of the expert witness fees that the insurance defendants sought, or that such fees were all incurred after the expiration of the section 998 offers.
Rather than addressing whether the expert fees were proper under section 998, plaintiffs instead raised a number of other arguments.
Plaintiffs had the burden to establish the insurance defendants’ offer was invalid or not in good faith. Chang and Lo did not make any such showing. Accordingly, the Court of Appeals concluded the criteria for an award of post offer expert witness costs under section 998 were satisfied.
The post judgment order awarding costs was affirmed. Fire Insurance Exchange and Chern are entitled to recover their costs on appeal.
ZALMA OPINION
California’s Section 998 is a tool available to defendants to encourage settlement. The insurers made a viable offer of settlement which the Plaintiffs refused. After the case was dismissed by the court the Defendants were entitled to their costs including expert witness fees incurred after the offer was rejected. To appeal this issue is a clear act of desperation and is contumacious conduct. I doubt, without a writ, that Farmers will be paid the costs ordered.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Interpleader Protects All Claimants Against Life Policy and the Insurer
Who’s on First to Get Life Insurance Proceeds
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Interpleader Protects All Claimants Against Life Policy and the Insurer
In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview
This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).
Key Points
Plaintiff-in-Interpleader’s Application:
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A Claim by Any Other Name is not a Claim
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It is Imperative that Insured Report Potential Claim to Insurers
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In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
A Claim by Any Other Name is not a Claim
Post 5182
It is Imperative that Insured Report Potential Claim to Insurers
Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.
In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.
Case Background:
This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...
Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...
APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER
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It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence
In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...
