Opinion ID: 1379949
Heading Depth: 3
Heading Rank: 1

Heading: Legislative Overview

Text: Code of Civil Procedure section 998, subdivision (b), provides that Not less than 10 days prior to commencement of trial, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken in accordance with the terms and conditions stated at that time. Section 3291 authorizes prejudgment interest on personal injury damages if the defendant fails to accept an offer to compromise pursuant to Code of Civil Procedure section 998 and the judgment exceeds the amount of the compromise offer. It provides in relevant part: In any action brought to recover damages for personal injury sustained by any person resulting from or occasioned by the tort of any other person, ... whether by negligence or by willful intent of the other person, ... and whether the injury was fatal or otherwise, it is lawful for the plaintiff in the complaint to claim interest on the damages alleged as provided in this section. If the plaintiff makes an offer pursuant to Section 998 of the Code of Civil Procedure which the defendant does not accept prior to trial or within 30 days, whichever occurs first, and the plaintiff obtains a more favorable judgment, the judgment shall bear interest at the legal rate of 10 percent per annum calculated from the date of the plaintiff's first offer pursuant to Section 998 of the Code of Civil Procedure which is exceeded by the judgment, and interest shall accrue until the satisfaction of judgment. Section 3291 was part of Senate Bill No. 203, 1981-1982 Regular Session, chapter 150, enacted in April 1982 (Stats. 1982, ch. 150, § 1, p. 493). Chapter 150 also added and amended other statutes by increasing the annual rate of interest accruing on judgments from 7 percent to 10 percent. Although the statute is silent as to its applicability to punitive damage awards, its history indicates the Legislature rejected several proposed amendments expressly providing that prejudgment interest would not accrue to that portion of the judgment representing punitive damages. (Sen. Bill No. 203, proposed amendments Aug. 31, 1981, 16 Assem. Final Hist. (1981-1982 Reg. Sess.) pp. 111, 116.) [3] As noted above, section 3291 provides that a judgment on a personal injury damage award shall bear interest when a plaintiff's settlement offer is refused and the plaintiff recovers a more favorable judgment. Courts generally agree that the purpose of section 3291 is to provide a statutory incentive to settle personal injury litigation where plaintiff has been physically as well as economically impaired, and thus it has been considered inapplicable to contractual disputes, business-tort losses and arbitration proceedings. (See Morin v. ABA Recovery Service, Inc. (1987) 195 Cal. App.3d 200, 206-207, fn. 1 [240 Cal. Rptr. 509]; accord, Woodard v. Southern Cal. Permanente Medical Group (1985) 171 Cal. App.3d 656, 665-668 [217 Cal. Rptr. 514]; see also Ops. Cal. Legis. Counsel, No. 17984 (Nov. 2, 1982) Judgment and Prejudgment Interest [§ 3291 prejudgment interest imposed because of refusal to accept settlement offer, not because of refusal to pay sum owed].) With this background in mind, we now address whether section 3291 should apply in an insurance bad faith action.