Settlement Demand Letter (California)

CALIFORNIA CONFIDENTIAL SETTLEMENT DEMAND LETTER

Pre-Send California Practice Checklist

☐ Mark the letter "FOR SETTLEMENT PURPOSES ONLY — INADMISSIBLE UNDER CAL. EVID. CODE § 1152." California Evidence Code § 1152 bars admission of settlement offers to prove liability, but the rule is narrower than FRE 408. Mark aggressively.

☐ Mediation privilege (Cal. Evid. Code § 1119). If the parties are in mediation or will be, settlement communications are absolutely privileged and confidential under § 1119 and Cassel v. Superior Court, 51 Cal. 4th 113 (2011). This privilege cannot be waived by conduct; only by express written agreement per § 1122.

☐ Cal. Civ. Code § 1542 release language. Any general release of unknown claims requires an express written waiver of § 1542 in substantially the statutory form.

☐ Cal. Code Civ. Proc. § 998. Consider pairing this letter with a separate § 998 statutory offer of compromise — only the § 998 offer carries formal cost-shifting consequences, including expert fees.

☐ Prejudgment interest. For personal injury actions, Cal. Civ. Code § 3291 allows 10% prejudgment interest from the date a § 998 offer was served if the plaintiff obtains a more favorable judgment.

☐ Insurance bad faith. For first-party insurance claims, a time-limited demand (policy-limits demand) triggers Comunale v. Traders & General Ins. Co., 50 Cal. 2d 654 (1958) / Crisci v. Security Ins. Co., 66 Cal. 2d 425 (1967) bad-faith exposure for the insurer. Third-party bad faith private right of action was eliminated by Moradi-Shalal v. Fireman's Fund Ins. Cos., 46 Cal. 3d 287 (1988).

CONFIDENTIAL SETTLEMENT COMMUNICATION
FOR SETTLEMENT PURPOSES ONLY
INADMISSIBLE UNDER CAL. EVID. CODE §§ 1119 AND 1152

[LAW FIRM LETTERHEAD]

Date: [__/__/____]

[OPPOSING PARTY / COUNSEL NAME]
[ADDRESS]

Re: Settlement Demand — [MATTER / CLAIM DESCRIPTION]
Our Client: [CLIENT NAME]
[If applicable] Claim No. [____________________]

Dear [NAME]:

This firm represents [CLIENT NAME] ("Claimant") in connection with the claims described below. This letter is a confidential settlement communication subject to Cal. Evid. Code § 1152 and, to the extent made in connection with mediation or mediation consultation, is also absolutely privileged and inadmissible under Cal. Evid. Code §§ 1115–1128 as interpreted by Cassel v. Superior Court, 51 Cal. 4th 113 (2011). This letter is not a statutory offer of compromise under Cal. Code Civ. Proc. § 998 and shall not be construed as such absent a separately issued § 998 offer in the form prescribed by that statute.

1. Summary of Claims

On or about [__/__/____], [DESCRIBE FACTUAL BACKGROUND IN 3–5 SENTENCES]. As a direct and proximate result, Claimant has suffered the damages described in Section 4 below.

2. Causes of Action

Claimant's investigation supports the following California causes of action:

☐ Breach of Contract (Cal. Code Civ. Proc. § 337 — 4-year SOL)
☐ Breach of the Implied Covenant of Good Faith and Fair Dealing (Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988))
☐ Fraud / Negligent Misrepresentation (Cal. Civ. Code §§ 1709, 1710; Lazar v. Superior Court, 12 Cal. 4th 631 (1996))
☐ Negligence (Cal. Civ. Code § 1714; 2-year SOL under Cal. Code Civ. Proc. § 335.1)
☐ Premises Liability / Personal Injury (Cal. Code Civ. Proc. § 335.1 — 2 years)
☐ Products Liability (Greenman v. Yuba Power Products, 59 Cal. 2d 57 (1963); Escola; Barker v. Lull Engineering, 20 Cal. 3d 413 (1978) — risk-benefit / consumer expectation tests)
☐ UCL — Cal. Bus. & Prof. Code § 17200 (restitution and injunction; 4-year SOL under § 17208)
☐ FEHA / Discrimination / Harassment / Retaliation (Cal. Gov. Code § 12940 et seq.)
☐ Wrongful Termination in Violation of Public Policy (Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 (1980))
☐ Labor Code Claims (e.g., § 226, § 1194, § 1102.5, PAGA under § 2698)
☐ Elder Abuse (Welf. & Inst. Code § 15600 et seq. — statutory attorney fees under § 15657)
☐ Insurance Bad Faith (first-party) — Comunale, Crisci, Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566 (1973)
☐ Other: [________________________________]

3. Liability Analysis

[Concise statement of why liability is established; discuss any comparative fault allocation under Li v. Yellow Cab Co., 13 Cal. 3d 804 (1975), and American Motorcycle Assn. v. Superior Court, 20 Cal. 3d 578 (1978). For joint and several liability for economic damages, cite Proposition 51 / Cal. Civ. Code § 1431.2 (several liability for non-economic damages only).]

4. Damages

4.1 Special / Economic Damages

• Past medical expenses (billed — though note Howell v. Hamilton Meats, 52 Cal. 4th 541 (2011), limits recoverable medical damages to the amount actually paid, not billed, when collateral-source adjusted): $[____________________]
• Future medical expenses (present value): $[____________________]
• Past lost earnings: $[____________________]
• Future lost earnings / loss of earning capacity: $[____________________]
• Property damage: $[____________________]
• Out-of-pocket: $[____________________]
• Subtotal Economic: $[____________________]

4.2 General / Non-Economic Damages

• Pain, suffering, emotional distress, loss of enjoyment of life, disfigurement, inconvenience: $[____________________]
• Loss of consortium (if applicable): $[____________________]
• Subtotal Non-Economic: $[____________________]
• Note: MICRA cap of $350,000 (non-death) / $500,000 (death) applies for medical malpractice and increases annually under Cal. Civ. Code § 3333.2 as amended by AB 35 (2022).

4.3 Punitive Damages (where authorized)
Cal. Civ. Code § 3294 permits exemplary damages upon clear and convincing evidence of malice, oppression, or fraud. Based on Defendant's [conduct description], punitive exposure is in the range of $[____________________] to $[____________________], consistent with the single-digit ratio guidance of State Farm v. Campbell, 538 U.S. 408 (2003), and Simon v. San Paolo U.S. Holding Co., 35 Cal. 4th 1159 (2005).

4.4 Prejudgment Interest
10% per annum under Cal. Civ. Code § 3289(b) (contract) or § 3291 (personal injury, from date of § 998 offer), totaling $[____________________] to date.

4.5 Statutory Attorney Fees
Recoverable under [Cal. Civ. Code § 1717 / Cal. Gov. Code § 12965 (FEHA) / Cal. Lab. Code § 1194 / Welf. & Inst. Code § 15657 / Cal. Code Civ. Proc. § 1021.5].

4.6 Total Anticipated Recovery at Trial: $[____________________]

5. Settlement Demand

To resolve all claims, Claimant demands payment of $[____________________] in consideration for a full and final release, delivered in certified funds within [THIRTY (30)] days of your receipt of this letter, on or before [__/__/____].

6. Terms of Proposed Release

Settlement is conditioned on execution of a mutual written settlement agreement containing:

6.1 A general release of all claims, known and unknown, arising from the facts described herein, with an express waiver of Cal. Civ. Code § 1542, which reads:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY."

Claimant expressly waives and relinquishes all rights and benefits under § 1542 as to the claims released.

6.2 Confidentiality of the settlement amount, to the extent permitted by California law. The Parties acknowledge that any confidentiality provision will comply with Cal. Code Civ. Proc. § 1001 (Silenced No More Act), which prohibits confidentiality provisions concerning factual information relating to claims of workplace harassment, discrimination, or retaliation.

6.3 No admission of liability.

6.4 Dismissal with prejudice of any pending action and tolling / termination of all claims.

6.5 Attorney fees and costs incurred to date.

6.6 California law and California forum for any dispute arising from the settlement agreement.

7. Statutory § 998 Offer to Follow

If this settlement demand is not accepted by [__/__/____], Claimant reserves the right to serve a statutory offer of compromise under Cal. Code Civ. Proc. § 998 in an amount to be determined, which (if rejected and Claimant obtains a more favorable judgment) will shift to Defendant post-offer costs, expert witness fees under § 998(c), and — in personal injury cases — 10% prejudgment interest from the date of the § 998 offer under Cal. Civ. Code § 3291.

8. Insurance-Specific Notice (If Applicable)

☐ Check if insurance carrier is recipient. This communication is made with the expectation that the insurer will act in accordance with its duty to accept a reasonable settlement demand within policy limits, as established in Comunale v. Traders & General Ins. Co., 50 Cal. 2d 654 (1958), Crisci v. Security Ins. Co., 66 Cal. 2d 425 (1967), and Johansen v. Cal. State Auto. Assn. Inter-Ins. Bureau, 15 Cal. 3d 9 (1975). Failure to accept a reasonable demand within policy limits may expose the insurer to a judgment in excess of policy limits and a subsequent action for breach of the implied covenant of good faith and fair dealing.

9. Litigation Hold

This letter serves as notice of Claimant's reasonable anticipation of litigation and triggers your duty to preserve all relevant documents and ESI. Spoliation may result in sanctions under Cedars-Sinai Medical Center v. Superior Court, 18 Cal. 4th 1 (1998), and an adverse inference under Cal. Evid. Code § 413.

10. Reservation of Rights

All of Claimant's rights, claims, and remedies are expressly reserved. Nothing herein shall be construed as a waiver, novation, or election of remedies. Time is of the essence.

Very truly yours,

[ATTORNEY NAME], Esq.
CA Bar No. [____________________]
[LAW FIRM NAME]

cc: [CLIENT]
[Enclosure: Itemized damages calculation]

Sources and References

• Cal. Evid. Code §§ 1115–1128 (mediation confidentiality); § 1152 (settlement offers); § 413
• Cal. Code Civ. Proc. §§ 335.1, 337, 998, 1001, 1021.5
• Cal. Civ. Code §§ 1542, 1709, 1710, 1714, 1717, 3289, 3291, 3294, 3333.2
• Cal. Ins. Code § 790.03(h)
• Cal. Gov. Code § 12940 et seq. (FEHA); § 12965 (fees)
• Cal. Lab. Code § 1194, 1102.5, 2698 (PAGA)
• Welf. & Inst. Code §§ 15600, 15657
• Cassel v. Superior Court, 51 Cal. 4th 113 (2011)
• Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988)
• Comunale, Crisci, Gruenberg, Johansen (insurance bad faith)
• Howell v. Hamilton Meats & Provisions, Inc., 52 Cal. 4th 541 (2011)
• Cedars-Sinai Medical Center v. Superior Court, 18 Cal. 4th 1 (1998)
• Moradi-Shalal v. Fireman's Fund Ins. Cos., 46 Cal. 3d 287 (1988)