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Rouland v. Pacific Specialty Ins. Co.

California Court of Appeals, Fourth District, Third Division

October 7, 2013

LARS ROULAND et al., Plaintiffs and Respondents,

Appeal from a postjudgment order of the Superior Court of Orange County, No. 06CC08086 Gail Andrea Andler, Judge.

Shoecraft Burton, Michelle L. Burton and Sara A. McClain for Defendant and Appellant.

Jorgensen & Salberg, Richard Allen Jorgensen and Jeffrey R. Salberg for Plaintiffs and Respondents.



In this action for breach of contract and insurance bad faith, defendant and appellant Pacific Specialty Insurance Company appeals from a postjudgment order denying the expert witness fees it incurred in successfully defending against plaintiffs and respondents Lars and Lisa Rouland’s claims.[1] Pacific Specialty sought its expert witness fees under Code of Civil Procedure section 998 because the Roulands did not accept Pacific Specialty’s pretrial settlement offers and thereafter failed to obtain a more favorable judgment at trial.[2] The trial court found Pacific Specialty could not recover its expert fees because its settlement offers did not strictly comply with section 998’s requirement that an offer “shall include... a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.”

We reverse the trial court’s order because we conclude Pacific Specialty’s offers satisfied this requirement by directing the Roulands to file an “‘Offer and Notice of Acceptance’” with the trial court if they accepted the proposals. The statute merely requires the section 998 offer to identify a manner of acceptance that complies with the statute’s additional requirement of a signed acceptance by the party or its counsel. We remand for the trial court to exercise its discretion in determining whether to allow Pacific Specialty to recover its expert witness fees because the court did not reach that issue based on its erroneous conclusion Pacific Specialty’s offers were invalid.


Facts and Procedural History

The Roulands owned a hillside home in Laguna Beach, California, that was damaged in a landslide. Pacific Specialty insured the Roulands’ home, but denied their claim because its policy excluded the damage caused by the landslide. The Roulands sued Pacific Specialty for breach of contract and insurance bad faith to recover for the damage to their home.

Approximately two months before trial, Pacific Specialty served separate offers to settle with Lars and Lisa under section 998. It offered to pay Lars $95, 000 and Lisa $30, 000 in exchange for general releases and dismissals with prejudice. Both offers stated, “If you accept this offer, please file an Offer and Notice of Acceptance in the above-entitled action prior to trial or within thirty (30) days after the offer is made.” The Roulands did not accept either offer.

Following a five-week trial, a jury returned a verdict in Pacific Specialty’s favor, finding the insurance policy did not cover the landslide damage to the Roulands’ home. The trial court entered judgment against the Roulands and Pacific Specialty filed a memorandum of costs seeking approximately $385, 000 from the Roulands. Those costs included more than $331, 000 in expert witness fees based on the Roulands’ failure to obtain a judgment more favorable than Pacific Specialty’s section 998 settlement offers.

The Roulands moved to tax Pacific Specialty’s expert witness fees on the ground the settlement offers did not comply with section 998’s procedure for acceptance because they lacked a signature space for the Roulands to formally accept the offers. The Roulands also argued Pacific Specialty’s section 998 offers were merely token gestures made without any reasonable expectation the Roulands would accept them and the expert fees Pacific Specialty sought were unreasonable and unnecessary.

The trial court granted the motion and taxed all the expert witness fees because it found Pacific Specialty’s settlement offers failed to satisfy section 998’s requirements: “[T]he motion is granted in light of Puerta v. Torres [(2011)] 195 Cal.App.4th 1267 [(Puerta)], which requires strict compliance with the dictates of statute 998. The Court finds that the 998 offer[s] in this matter w[ere] defective and therefore the motion is granted.” Although the court did not identify the specific defect in the offers, the Roulands only argument concerned Pacific Specialty’s failure to provide a signature block for them to acknowledge their acceptance. Despite its ruling granting the ...

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