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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The Professional Claims Handler
Post 5218
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Post 5217
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An Excellence in Claims Handling program begins with a statement in the insurer’s claims manual or statement of professionalism that it is dedicated to providing excellence in claims handling to every insured who presents a claim.
The excellence in claims handling program should include, at a minimum:
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A definition of insurance.
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Post 5216
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-5-barry-zalma-esq-cfe-jde8c, see the full video at https://rumble.com/v70q4x8-the-zalma-philosophy-of-claims-handling-part-5.html and at https://youtu.be/6b9tZQsEkB4, and at https://zalma.com/blog plus more than 5200 posts.
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry.
Standards to be a Professional Claims Adjuster
The Insurance claims professional should be a person who:
1. Can read and understand the insurance policies issued by the insurer.
2. Understands the promises made by the policy.
3. Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
4. Are competent investigators.
5. Have empathy and recognize the difference between empathy and sympathy.
6. ...
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Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
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Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
