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December 23, 2024
Expert Fees Owed Because Plaintiffs Failed to Accept Settlement Offer

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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00:09:20
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May 01, 2026
Zalma’s Insurance Fraud Letter – May 1, 2026

Happy Law Day

ZIFL – Volume 30, Issue 9 – May 1, 2026

Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

ZIFL – Volume 30, Issue 9 – May 1, 2026

Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.

DOJ Creates National Fraud Enforcement Division

Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort

On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...

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April 30, 2026
The Efficient Proximate Cause Doctrine Saves a Claim

When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment

Post number 5345

Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.

In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.

FACTS

American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...

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April 29, 2026
Breach of a Specific Condition Precedent Is a Complete Defense

Breach of a Specific Condition Precedent Is a Complete Defense

See the video at and at and at https://zalma.com/blog plus more than 5300 posts.

In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.

Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).

After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...

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13 hours ago

It is Fraud to Make the Same Claim Twice

Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.

Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages

Post number 5347

No One is Entitled to be Paid for the Same Loss Twice

In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.

BACKGROUND

In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.

PROCEDURAL HISTORY

State Farm filed motion for summary...

post photo preview
13 hours ago

It is Fraud to Make the Same Claim Twice

Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.

Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages

Post number 5347

No One is Entitled to be Paid for the Same Loss Twice

In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.

BACKGROUND

In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.

PROCEDURAL HISTORY

State Farm filed motion for summary...

post photo preview
April 30, 2026
Investigation of First Party Property Claims

What Must be Done after Notice of a Claim is Received by the Insurer

Read the full article at https://lnkd.in/gzvvdkMZ and at https://zalma.com/blog.

Below you will read from this post until you reach the the end of this blog post as the free part of an Excellence in Claims Handling post. To read the full article and receive all articles for members of Excellence in Claims Handling you should consider joining as a paid member to get full access to articles for members only, to our news, analysis, insurance coverage, claims, insurance fraud and insurance webinars, by clicking at the subscription link below.

A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...

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