In a personal injury case, a demand letter can be very important. But it’s not just writing and serving the demand letter…it also can matter how the demand was written, and what steps were taken after a demand is accepted.
This recent California Court of Appeal case CSAA Insurance Exchange v. Hodroj gives an example regarding this. Hodroj was filed 11/3/21 and is currently cited as 2021 WL 5631492.
In Hodroj, Defendant crashed into Plaintiff (Hodroj) during a car accident. Plaintiff sends Defendant a demand letter, offering to settle the case for Defendant’s policy limit along with some other conditions. Defendant accepts that policy limit demand…but when it comes time to reduce the agreement into writing, Plaintiff objects how Defendant drafts the agreement to release liability.
As Plaintiff says: ““the release you required our client to sign introduces significant and material new, additional and different terms and conditions” beyond the offer of settlement.” What was a sticking point? “Among them was that the release required Hodroj to release all his claims, including for property damage, whereas the settlement offer contemplated only claims for bodily injury.”
Both parties then stake their claims:
Per Plaintiff: “Hodroj contends CSAA’s purported acceptance was actually a counteroffer he was free to reject because it included a request that he sign a written release containing different terms than were in his settlement offer.”
Per Defendant: “CSAA argues that a binding contract was formed when it accepted Hodroj’s offer to settle his claim for the insurance policy limits and fulfilled all conditions stated in the offer, and the written release was simply an effort to reduce the terms of the agreement to a formal writing.”
And the Court holds in favor of Defendant here: “We conclude the communications between Hodroj’s lawyer and CSAA reflect a settlement which could be later memorialized in a formal writing.”
The Court reasoned “when parties agree on the material terms of a contract with the intention to later reduce it to a formal writing, failure to complete the formal writing does not negate the existence of the initial contract.” And in particular for this case, the Court says “[i]f the parties do not agree on the content of the formal writing (for example because one party wants to include something not agreed on in the first place, as Hodroj says happened here), the proposed writing is not a counteroffer; rather, the initial agreement remains binding and a rejected writing is a nullity.”