Policy Limit Settlement Offer


Policy Limit Settlement Offer


USE NOTES: This Model Letter should be signed by the plaintiff’s attorney. Adapt the template below by using the Legend.

Settlement negotiations are not admissible to prove a defendant’s liability to a plaintiff. “Evidence that a person has offered money to another who claims damage is inadmissible to prove liability for the damage.” (Ev. Cd. §1152(a) (ellipses omitted.) However, settlement offers may be admissible if relevant to prove something other than the offeror’s liability. (Truestone, Inc. v. Simi West Indus. Park (1984) 163 Cal.App.3d 715, 725.) Settlement negotiations are admissible to prove an insurer’s bad faith. If “an offer to compromise is admitted in an action for breach of the covenant of good faith and fair dealing, evidence relating to any other offer or counteroffer shall also be admissible.” (Ev. Cd. §1152(b) (ellipses omitted.)

Before sending the text below, delete everything above this line.







City, State Zip Code


Re:       &Plaintiff& v. &Client&

Your File No. ___


Dear __:





(Express a factual foundation to support that the settlement offer is reasonable in relation to the injuries suffered by the plaintiff and in relation to the defendant’s likely liability for such injuries.)



(Set forth the plaintiff’s understanding of the defendants’ insurance coverage, confirmation of which will be a condition of settlement.)


Plaintiff is informed that Defendants are insured under a policy issued by &InsCo& with coverage limits of $_ million.



“Every insurance contract contains an implied covenant of good faith and fair dealing. Good faith and fair dealing means that each party is prevented from interfering with the other’s right to benefit from the contract. The covenant of good faith and fair dealing is always a prominent issue in the settlement phase of insurance cases because of the possibility of a conflict of interest between the interests of the insurer and the insured. Where a conflict of interests emerges, the carrier has the obligation of protecting the interests of the insured equally with his own. [A] conflict occurs at the moment when a third party claimant offers to settle an excess claim within the policy limits. The measure for determining whether the insured’s interests were properly considered is whether a prudent insurer without policy limits would have accepted the settlement offer. In deciding whether to compromise the claim, the insurer must conduct itself as though it alone were liable for the entire amount of the judgment. The insurer must give informed consent to any offer of settlement and must advise the insured of the offer and the company’s assessment of that offer.” (Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739, 756 (Citations and ellipses omitted).)



            Plaintiff hereby offers to settle all claims by and against all Defendants and related persons who are potentially covered by &InsCo& for the limit of insurance coverage with &InsCo& as follows:


1.         &InsCo& will pay to Plaintiff on behalf of Defendants its policy limit in the sum of $___.


2.         Plaintiff will release all claims against all Defendants and will dismiss the Plaintiff vs. Defendants action with prejudice.


3.         Defendants will release all claims against Plaintiff and will release and waive any and all liens asserted against Plaintiff.


This settlement offer is conditioned upon each of the following:


1.         &InsCo& must promptly advise us of the amount of the policy limit of each policy and provide full and complete copies of the insurance policies potentially covering any Defendant(s) for this matter (See, Boicourt v. Amex Assurance Co. (2000) 78 Cal. App. 4th 1390).


2.         &InsCo& must provide written verification under oath of the amount of the policy limits and the amount of claims expense applied to reduce the limits (which shall not be less that $__). Any material misrepresentation shall be grounds to void this settlement.


3.         Each Defendant must provide written verification under oath that no other valid and collectable liability insurance may provide coverage for any released Defendant in the Plaintiff vs. Defendants action. Any material misrepresentation by any Defendant shall be grounds to void this settlement as to such Defendant.


4.         If accepted, this offer will not require any Defendant who is potentially covered by the Policy to pay to Plaintiff any sum other than the policy limit of &InsCo&. This offer excludes any Defendant who is not potentially covered by &InsCo&. Plaintiff will consider a separate settlement with any such Defendant. However, any such Defendant must provide to Plaintiff a written verified financial statement. Any material misrepresentation in such financial statement shall be grounds to void such separate settlement.

5.         This offer may be accepted by a writing received by us no later than 5:00 p.m., on DATE (30 days), whereupon this offer shall be automatically withdrawn. If you require additional time to respond to this offer for good cause, please contact me to make a request.


Very truly yours,

Plaintiff’s Attorney

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