Filed 10/7/13




                              CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                               FOURTH APPELLATE DISTRICT

                                       DIVISION THREE


LARS ROULAND et al.,

    Plaintiffs and Respondents,                         G047919

        v.                                              (Super. Ct. No. 06CC08086)

PACIFIC SPECIALTY INSURANCE                             OPINION
COMPANY,

    Defendant and Appellant.



                  Appeal from a postjudgment order of the Superior Court of Orange County,
Gail Andrea Andler, Judge. Reversed and remanded.
                  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.

                                              I

                            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


          1    We refer to Pacific Specialty Insurance Company as Pacific Specialty. We
refer to Lars and Lisa Rouland collectively as the Roulands and individually by their first
names to avoid any confusion. No disrespect is intended. (Martin v. PacifiCare of
California (2011) 198 Cal.App.4th 1390, 1393, fn. 1.)
          2   All statutory references are to the Code of Civil Procedure unless otherwise
stated.


                                              2
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

                                              3
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 motion, the trial court also found the offers were not token offers and the Roulands
failed to show the expert fees were unreasonable or unnecessary. Pacific Specialty timely
appealed.

                                               II

                                         DISCUSSION

A.     Section 998 Settlement Offers
              Section 998 authorizes any party to make a statutory offer to settle an
action by allowing a judgment or dismissal to be entered based on the offer‟s terms and
conditions. (§ 998, subd. (b).) The statute seeks to encourage settlement by providing
parties a financial incentive to make and accept reasonable settlement offers before trial.
(Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1019 (Martinez);
Chaaban v. Wet Seal, Inc. (2012) 203 Cal.App.4th 49, 54 (Chaaban).)
              If a plaintiff rejects a defendant‟s section 998 offer and thereafter fails to
obtain a more favorable judgment, (1) “the plaintiff shall not recover his or her postoffer
costs and shall pay the defendant‟s costs from the time of the offer,” and (2) the trial
court may, in its discretion, require the plaintiff to pay the reasonable expert witness fees
the defendant incurred. (§ 998, subd. (c)(1).) If a defendant does not accept a plaintiff‟s
section 998 offer and thereafter fails to obtain a more favorable judgment, (1) the trial
court may, in its discretion, require the defendant to pay the reasonable postoffer expert
witness fees the plaintiff incurred in preparing for trial and at trial (§ 998, subd. (d)), and
(2) the judgment against the defendant in any personal injury action shall accrue
prejudgment interest at the rate of 10 percent per annum from the date of the offer
(Civ. Code, § 3291).




                                               4
              Effective January 1, 2006, the Legislature amended section 998 to specify
the requirements for a valid settlement offer and acceptance. (Whatley-Miller v. Cooper
(2013) 212 Cal.App.4th 1103, 1110, fn. 3 (Whatley-Miller); Puerta, supra,
195 Cal.App.4th at p. 1271.) The offer must be in writing and “include a statement of the
offer, containing the terms and conditions of the judgment or award, and a provision that
allows the accepting party to indicate acceptance of the offer by signing a statement that
the offer is accepted.” (§ 998, subd. (b), italics added.) “Any acceptance of the offer,
whether made on the document containing the offer or on a separate document of
acceptance, shall be in writing and shall be signed by counsel for the accepting party or,
if not represented by counsel, by the accepting party.” (§ 998, subd. (b).) The purpose of
these provisions is “to eliminate uncertainty by removing the possibility that an oral
acceptance might be valid.” (Puerta, at p. 1273; see also Boeken v. Philip Morris USA
Inc. (2013) 217 Cal.App.4th 992, 1003 (Boeken).)

B.     Pacific Specialty Made Valid Section 998 Settlement Offers
              The sole question presented is whether Pacific Specialty‟s settlement offers
satisfied section 998‟s requirement that the offers include a provision allowing the
Roulands to accept the offers “by signing a statement that the offer[s are] accepted.”
(§ 998, subd. (b).) The Roulands do not dispute Pacific Specialty‟s offers included a
provision that asked them to file an “„Offer and Notice of Acceptance‟” with the trial
court. The dispute lies in whether that provision satisfied section 998‟s acceptance
provision requirement. We decide this question under the de novo standard of review
because it is a question of statutory interpretation based on the undisputed terms of
Pacific Specialty‟s offers.3 (Martinez, supra, 56 Cal.4th at p. 1018; Boeken, supra,
217 Cal.App.4th at p. 1001.)

       3      The Roulands contend we should review the trial court‟s ruling under the
abuse of discretion standard, but the portion of the Whatley-Miller decision they cite to
support that contention involves the reasonableness of a section 998 offer — that is,

                                             5
              Four recent opinions concluded that the failure to follow section 998‟s
acceptance provision requirement invalidates the offer and the statute‟s cost-shifting
penalties may not be imposed. (Boeken, supra, 217 Cal.App.4th at pp. 1001-1004;
Whatley-Miller, supra, 212 Cal.App.4th at pp. 1110-1111; Perez v. Torres (2012)
206 Cal.App.4th 418, 422-426 (Perez); Puerta, supra, 195 Cal.App.4th at
pp. 1271-1273.) To reach this conclusion, these decisions relied on the plain meaning of
the statute‟s language that an offer “shall include . . . a provision” allowing acceptance to
be made “by signing a statement that the offer is accepted.” (§ 998, subd. (b), italics
added; Perez, at pp. 424-425; Puerta, at pp. 1272-1273; see also Boeken, at
pp. 1002-1003; Whatley-Miller, at pp. 1110-1111.) The Perez court further explained a
bright-line rule invalidating an offer that fails to address the manner of acceptance serves
section 998‟s purpose of encouraging settlement by eliminating confusion and
uncertainty about what must be included in a valid offer. (Perez, at pp. 425-426.)
              Although these decisions agree that failing to comply with the acceptance
provision requirement invalidates the offer, they do not provide clear guidance on how to
satisfy that requirement. For example, Perez explained, “Section 998 does not require a
particular form of acceptance provision[, but] . . . to be valid a section 998 offer must
include some indication of how to accept the offer.” (Perez, supra, 206 Cal.App.4th at
pp. 425-426, fn. 6, original italics.) Similarly, Puerta explained, “While there is room for
interpretation as to how an appropriate statement regarding acceptance might be phrased
in the offer, it is clear from the statute‟s language that at least some indication of how to
accept is required by the amendment.” (Puerta, supra, 195 Cal.App.4th at p. 1273,
original italics; see also Boeken, supra, 217 Cal.App.4th at p. 1003.) Boeken, Perez, and


whether the offer was a token offer made without any expectation it would be accepted
— and makes clear that interpreting what constitutes a valid offer under section 998 is a
legal question subject to de novo review. (Whatley-Miller, supra, 212 Cal.App.4th at
p. 1113.)


                                              6
Puerta did not establish specific criteria on what is required to satisfy the acceptance
provision requirement because the offers in those cases were silent on the manner of
acceptance, and therefore the courts could invalidate the offers without specifying how to
satisfy the acceptance provision requirement. (Boeken, at p. 1004; Perez, at p. 422;
Puerta, at p. 1273.)
              Whatley-Miller represents the only one of these four cases that found the
settlement offer valid under section 998 and affirmed the trial court‟s decision imposing
section 998‟s cost-shifting penalties. (Whatley-Miller, supra, 212 Cal.App.4th at
pp. 1106-1107.) The plaintiffs in Whatley-Miller simultaneously served two documents
in a single envelope. The first offered to settle the plaintiffs‟ claims for a specific dollar
amount under section 998. The second document, entitled “„Acceptance of Plaintiffs‟
Offer to Compromise Pursuant to [Section] 998 and Civil Code [Section] 3291,‟”
directed the court clerk to enter judgment against the defendant “„pursuant to Plaintiffs‟
Offer to Compromise which is attached hereto,‟” and included a space for the defendant‟s
counsel to sign and date the acceptance. (Whatley-Miller, at pp. 1107, 1111.) The
Whatley-Miller court found these two documents combined to form a valid offer under
section 998 because the statute authorizes an acceptance to be “„made on the document
containing the offer or on a separate document of acceptance.‟” (Whatley-Miller, at
p. 1110, original italics, quoting § 998, subd. (b).) As the Whatley-Miller court
explained, “Section 998 does not specify that the acceptance must contain any specific
words or that it be made in a particular manner, other than it be in writing and signed by
the appropriate person.” (Whatley-Miller, at p. 1110.)
              Here, Pacific Specialty included each offer and acceptance provision in a
single document. The acceptance provision 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 contend this statement fails to satisfy
section 998‟s acceptance provision requirement for two reasons: (1) it had no line for

                                               7
them to accept the offers by signing them “as included in Judicial Council form
CIV-090”; and (2) it “had no language . . . which stated that [the Roulands] shall accept
the offer[s] by signing a statement that the offer[s are] accepted.” (Original italics.)
Neither reason persuades us that Pacific Specialty‟s offers are invalid.
              Although the California Judicial Council has approved a form entitled
“Offer to Compromise and Acceptance Under Code of Civil Procedure Section 998,” it is
not a mandatory form nor does it specify the exclusive means for satisfying section 998‟s
requirements. (Judicial Council Forms, form CIV-090, capitalization omitted.) In a
single document, that form allows one side to make a settlement offer under section 998
and the other side to accept the offer. The acceptance section merely states the party
“accepts the offer for judgment stated in [the form]” and provides a space for the
accepting party or its counsel to sign and date the acceptance. (Judicial Council Forms,
form CIV-090, as rev. Jan. 1, 2008.) Whatley-Miller, Perez, and Puerta agreed the form
satisfied section 998‟s acceptance provision requirement, but they also emphasized the
form is not the only way to meet the statute‟s requirements. (Whatley-Miller, supra,
212 Cal.App.4th at p. 1110; Perez, supra, 206 Cal.App.4th at p. 426; Puerta, supra,
195 Cal.App.4th at p. 1273.) For example, the Whatley-Miller court stated, “Although
the use of this form may be a convenience for litigants, we conclude that a plain reading
of the language of section 998 makes it clear this form is not the one and only way to
comply with the offer and acceptance requirements of that statute.” (Whatley-Miller, at
p. 1110.)
              Nothing in the statute‟s language requires an offer to include either a line
for the party to sign acknowledging its acceptance or any specific language stating the
party shall accept the offer by signing an acceptance statement. Indeed, no “„magic
language‟” or specific format is required for either an offer or acceptance under section
998. (Berg v. Darden (2004) 120 Cal.App.4th 721, 731-732; see also Whatley-Miller,
supra, 212 Cal.App.4th at p. 1110.) The offer‟s acceptance provision simply must

                                              8
specify the manner in which the offer is to be accepted (Boeken, supra, 217 Cal.App.4th
at p. 1003; Whatley-Miller, at p. 1111; Perez, supra, 206 Cal.App.4th at pp. 425-426,
fn. 6; Puerta, supra, 195 Cal.App.4th at p. 1273), and the only statutory requirements for
a valid acceptance mandate a written acceptance signed by the accepting party or its
counsel (Whatley-Miller, at p. 1110). We may not impose any additional requirements or
limitations that do not appear on the face of the statute. (Cadlerock Joint Venture, L.P. v.
Lobel (2012) 206 Cal.App.4th 1531, 1549 [“„“„a court is not authorized to insert
qualifying provisions not included [in a statute] and may not rewrite the statute to
conform to an assumed intention which does not appear from its language‟”‟”];
see also § 1858.)
              Pacific Specialty‟s offers satisfied section 998‟s acceptance provision
requirement because they informed the Roulands how to accept the offers (file an “„Offer
and Notice of Acceptance‟” with the trial court) and the identified means of acceptance
satisfied the statute‟s requirements for a valid acceptance (a writing signed by the
Roulands‟ counsel). We recognize the offers did not expressly require a written
acceptance signed by the Roulands‟ counsel, but that requirement is implicit in the offers‟
identified means of acceptance because any acceptance the Roulands sought to file with
the court necessarily would have to be in writing and signed by their counsel. (See
§ 128.7, subd. (a) [all documents filed with the trial court must be signed by counsel].)
As long as a section 998 offer specifies the manner of acceptance, the steps for
completing the acceptance may be implicit in the identified means of acceptance. (See
Whatley-Miller, supra, 212 Cal.App.4th at p. 1111 [approving offer that did not expressly
state acceptance must be signed and filed with the court although those requirements
were implicit in the identified means of acceptance]; see also Judicial Council Forms,
form CIV-090 [providing space for accepting party‟s counsel to sign, but no instructions
on how to effectuate acceptance].) The Roulands have never argued they did not



                                             9
understand either the terms of Pacific Specialty‟s settlement offers or how to accept those
offers.
              Our interpretation of section 998‟s acceptance provision requirement is
consistent with the statute‟s overall purpose. Specifically, section 998 aims to encourage
pretrial settlements by providing a financial incentive for parties to make and accept
reasonable settlement offers. (Martinez, supra, 56 Cal.4th at p. 1019.) The purpose of
the 2006 amendment adding the acceptance provision requirement, and the requirement
that all acceptances must be in a signed writing, was to eliminate the uncertainty that
arose when section 998 allowed oral acceptances. (Puerta, supra, 195 Cal.App.4th at
p. 1273; Boeken, supra, 217 Cal.App.4th at p. 1003.) Accepting the Roulands‟
formalistic requirements potentially could invalidate written acceptances of section 998
offers and therefore undermine its statutory purpose.
              The trial court granted the motion to tax the expert witness fees because it
found Pacific Specialty‟s offers failed to strictly comply with section 998‟s acceptance
provision requirement as Puerta required. Our Puerta decision, however, does not
require strict compliance with the acceptance provision requirement or any of
section 998‟s other requirements. In Puerta, the settlement offer was silent as to how it
was to be accepted and therefore we found it failed to comply with the statute‟s plain
language requiring an offer to include a provision specifying the manner of acceptance.
Because the offer made no attempt to comply with the acceptance provision required, we
did not decide how to satisfy the requirement, let alone that strict compliance was
required. We simply concluded that “at least some indication of how to accept [the offer]
is required by the [statute].” (Puerta, supra, 195 Cal.App.4th at p. 1273, original italics.)
Nothing in Puerta required the trial court to grant the motion to tax.
              Although we conclude the trial court erred in finding Pacific Specialty‟s
offers did not satisfy section 998‟s requirements, we remand the matter for the trial court
to determine whether Pacific Specialty may recover its expert witness fees. Even when

                                             10
an offer satisfies all of section 998‟s requirements, the decision whether to award expert
witness fees, as opposed to any of the statute‟s other cost-shifting penalties, is vested in
the trial court‟s sound discretion. Pacific Specialty is not entitled to its expert witness
fees as a matter of right. (Chaaban, supra, 203 Cal.App.4th at pp. 54-55.) The trial
court‟s findings that Pacific Specialty‟s offers were reasonable and that the expert fees
Pacific Specialty sought were reasonable speak to whether the statute‟s requirements
were satisfied. They do not equate to an exercise of the trial court‟s discretion that
Pacific Specialty should recover some or all of its expert witness fees.

                                              III
                                        DISPOSITION

              The postjudgment order is reversed and we remand for further proceedings
consistent with this opinion. Pacific Specialty shall recover its costs on appeal.



                                                    ARONSON, J.

WE CONCUR:



RYLAARSDAM, ACTING P. J.



IKOLA, J.




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