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(USA Herald) - Insurance policies are meant to provide protection and peace of mind to policyholders in the event of an accident or loss. However, in California, the practice of time-limited insurance policy limit demands has become a sledgehammer in the litigation toolbox, potentially leading to bad faith practices by insurance carriers. To address these issues, the California Legislature has enacted crucial changes, that took effect on January 1, 2023, to regulate the use of time-limited demands within policy limits for settling civil claims.

Senate Bill 1155, or California Code of Civil Procedure sections 999-999.5, sets forth the statutory requirements for the use of time-limited demands in automobile, motor vehicle, homeowner, and commercial premises liability insurance policies for claims related to property damage, personal injury, and wrongful death.

According to California resident and USA Herald reporter, Samuel Lopez, a time-limited demand is defined as "an offer prior to the filing of the complaint or demand for arbitration to settle any cause of action or a claim for personal injury, property damage, bodily injury, or wrongful death made by or on behalf of a claimant to a tortfeasor with a liability insurance policy for purposes of settling the claim against the tortfeasor within the insurer's limit of liability insurance, which by its terms must be accepted within a specified period of time."

For a claimant to issue a valid time-limited demand, it must meet certain requirements, including:

• Being written
• Being labeled as a time-limited demand (or reference the statute)
• Providing at least 30 days to accept if transmitted by email or 33 days if transmitted by mail
• Include a clear and unequivocal offer to settle all claims within policy limits, including satisfying all liens
• Offering complete release from the claimant for the liability insurer's insured from all present and future liability for the occurrence
• Providing the date of the loss, the location of the loss, and the claim number (if known)
• Providing a description of all known injuries sustained by the claimant
• Providing reasonable proof of the claim and damages (e.g., medical records or bills)

When an insurer receives a time-limited demand, they have the right to seek clarification, additional information, or request an extension if they need further information. However, this request "shall not, in and of itself, be deemed a counteroffer or rejection of the demand." If the insurer chooses to reject the demand, they must notify the claimant in writing prior to the expiration of the demand, including the basis for the rejection.