A proposal for settlement in Florida can be filed by a party to a lawsuit pursuant to Florida Statute §768.79. The proposal for settlement, or offer of judgment as it is sometimes called, is different than an informal settlement offer during negotiations. The proposal for settlement can potentially bring consequences to the offeree if it is not accepted. The proposal for settlement is utilized often in litigation by insurers, notably in Hurricane Wilma cases. I wanted to discuss some of the concerns policyholders may have when an insurer files a proposal for settlement in their case.

Pursuant to Florida Statute §768.79(1), the party to whom the proposal is directed has thirty days from the date of filing to accept the proposal or it is deemed rejected. If the proposal for settlement is rejected by the offeree and the case progresses through litigation and the judgment is at least 25% less than the amount of the proposal for settlement, a court can award costs and attorney’s fees to the party that filed the proposal.

Insurers file proposals for settlement in coverage cases where they assert defenses to coverage and they know the consequences of rejecting the proposal for settlement statute could likely impact the policyholder’s decision. It triggers a risk/benefit analysis by the offeree. This is how a formal proposal for settlement is very different from informal settlement negotiations where there are none of these potential consequences.

Ironically, while the proposal for settlement was intended to relieve congested court dockets by encouraging litigants to settle their disputes before a trial, it has had the opposite effect. The proposal for settlement has actually triggered additional litigation over the enforceability of the proposal, particularly when it is a joint proposal made to two plaintiff insureds. Last month, in The Decision to Settle an Insurance Claim is Entirely Your Own, Chip Merlin wrote about a recent Florida Supreme Court decision which made it clear that insurers cannot condition settlement offers on the mutual acceptance of joint insureds.

The proposal for settlement statute has been strictly construed, which means the proposal may be invalid if its terms are not crystal clear to the party to whom it is directed. Oftentimes, courts do not determine whether the proposal for settlement is valid during the thirty day acceptance period. It is very important that a party to litigation have a detailed discussion with their counsel regarding the potential pitfalls and consequences of a proposal for settlement if one is filed in their case.