California Court Clarifies the ‘Last Offer Rule’ for Personal Injury Settlement Offers

Margaret Meehan was riding a bicycle in the bike lane on Woodruff Avenue in Lakewood when she collided with a semi-trailer operated by Jaime Aguirre and owned by his employer, R & Y Castellanos Trucking, Inc. She alleged injuries that included a traumatic brain injury. The case proceeded in Los Angeles County Superior Court.

Before trial, Meehan served three separate section 998 offers for $1 million. She later served a fourth and final offer for $2 million. None was accepted. After a six-week bench trial, the court found defendants 85 percent at fault and Meehan 15 percent comparatively negligent. It awarded $1.25 million in damages, reduced to $1,062,500 for comparative fault.

Meehan then sought approximately $993,180 in costs. That request included about $326,000 in expert-witness fees and $313,510.27 in prejudgment interest calculated from the date of her first section 998 offer. The trial court used the final $2 million offer as the operative comparison. Because the judgment plus allowable costs did not exceed that offer, it denied the requested section 998 expert fees and prejudgment interest. The Court of Appeal affirmed.

Section 998 permits a plaintiff to recover certain expert-witness costs when the defendant does not accept a qualifying offer and then fails to obtain a more favorable judgment. Courts compare the statutory offer with the judgment under rules developed through the statute and California decisions.²

Meehan argued that her judgment exceeded the earlier $1 million offers. The Court of Appeal nevertheless applied the last-offer rule reflected in prior decisions: a later offer generally supersedes an earlier offer, so the most recently rejected valid offer supplies the comparison when the final award falls between successive offers.

The court reasoned that a clear benchmark supports settlement by telling the parties which terms are operative. On the facts before it, Meehan's recovery exceeded the first offers but fell short of the last offer, which was twice as high. The final $2 million offer therefore governed eligibility for section 998 benefits.

Civil Code section 3291 provides for prejudgment interest in qualifying personal-injury actions when a plaintiff makes a section 998 offer that the defendant does not accept and obtains a more favorable judgment. The statute says interest is calculated from the date of the plaintiff's first offer that is exceeded by the judgment.³

Meehan argued that this reference to the first offer supported interest from her first $1 million demand. The Court of Appeal rejected that reading. It explained that the last-offer rule first determines whether the plaintiff obtained a more favorable judgment and is entitled to section 998 benefits at all. Section 3291's reference to the first offer addresses the start date for interest only after that threshold is satisfied.

Because the operative $2 million offer was not beaten, the court concluded that Meehan did not cross the threshold for prejudgment interest. The phrase ‘first offer’ did not revive an earlier offer for purposes of deciding eligibility.

The decision should not be reduced to a rule that every later section 998 offer always eliminates every possible consequence of an earlier offer. Meehan addressed multiple valid, unrevoked offers where the award was more favorable than the earlier offers but less favorable than the final one.

California decisions recognize different questions when, for example, a later offer is revoked, invalid, or the judgment is better than more than one offer. The wording, validity, timing, acceptance period, and procedural history of each offer can matter. Meehan applies the last-offer rule to the specific successive-offer setting before the court.

Nor did Meehan lose the underlying personal-injury action. She prevailed on liability and obtained a seven-figure judgment. The appellate dispute concerned post-trial costs and interest, not whether she was entitled to recover damages for the collision.

The opinion is certified for publication, so it may be cited and relied upon as California appellate authority.⁴

The opinion also affirmed the disallowance of substantial trial-presentation expenses. The trial court found that certain court-reporter, video, and trial-technician costs had not been adequately supported as reasonably necessary to the litigation and reasonable in amount under Code of Civil Procedure section 1033.5.

That part of the decision is a separate practical reminder. Even when a party prevails, a cost memorandum does not make every requested expense automatically recoverable. Invoices, declarations, the actual use of an item at trial, and a clear explanation of necessity can matter when the opposing party moves to tax costs.

The evergreen lesson is not that a plaintiff should never increase a section 998 offer. Settlement positions can change as discovery develops, expert analysis arrives, damages become clearer, or trial approaches. The lesson is that a new statutory offer is not merely a revised negotiating number; it can alter the benchmark used for later cost and interest consequences.

Before serving a successive offer, counsel should evaluate the likely judgment range, comparative-fault risk, recoverable pre-offer costs, expert needs, prejudgment-interest exposure, and how the new offer interacts with prior offers. The analysis should also account for whether a proposed offer satisfies section 998's formal and good-faith requirements.

Mahrouyan Law handles selected California Personal Injury matters and business and commercial litigation involving evidence, damages, settlement strategy, and trial preparation.

The firm's discussion of How Much Is My Personal Injury Case Worth in California? explains how liability, available insurance, treatment, documentation, and provable loss can affect case valuation.

The same statewide procedural rule can matter in Los Angeles County civil cases and in injury litigation elsewhere in California.