Beating Your CCP 998 May Not Be Enough — You May Have to Show It Was Reasonable When You Made It

Matthews v. Ryan, 118 Cal.App.5th 155 (filed 1/28/26) — Part 2

In Part 1 (see here), I discussed whether a 998 offer that conditions acceptance on the defendant's insurance carrier consenting is invalid. Spoiler: the Court said no, it's redundant, but not invalid.

Now with Part 2 of Matthews v. Ryan: the reasonableness of a 998 offer.

Before I get into the case, let’s do a quick review of Part I:

Scenario: you serve a 998 at or below what you think the case is worth. Defendant rejects. Trial happens. Jury comes back with a verdict over your 998 offer. And then you move for prejudgment interest under Civil Code § 3291.

Seems easy, right? You beat the 998 — maybe by a lot — so of course it was reasonable (says you to yourself).

Well…maybe…but maybe not. As Matthews v. Ryan reminds us, beating the 998 at trial is not the end of the analysis.

Quick refresher on the facts: This is a car collision case. Plaintiffs served a 998 for $749,999.99. Defendant rejected. Jury awarded Mr. Matthews $6,536,330.66 and Mrs. Matthews $343,750. Roughly a $6.9 million verdict against a $749K offer. You'd think that's case closed for prejudgment interest.

But the trial court here never reached the reasonableness question because it stopped at the insurer-consent issue (see Part 1). On appeal, the Court of Appeal reversed on the insurer-consent point and remanded — not with a finding that the 998 was reasonable as a matter of law, but with instructions for the trial court to actually do the reasonableness analysis. Plaintiffs even argued their offer was reasonable as a matter of law given the verdict. The Court of Appeal said no, that's the trial court's call.

So what is the reasonableness analysis?

The Court here says this, citing another case: "A 998 offer is made in good faith only if the offer is 'realistically reasonable under the circumstances of the particular case' — that is, if the offer 'carr[ies] with it some reasonable prospect of acceptance.'"

"Whether a 998 offer has a reasonable prospect of acceptance is a function of two considerations, both to be evaluated in light of the circumstances 'at the time of the offer' and 'not by virtue of hindsight.'"

Here's how those two considerations break down:

First consideration (offeror's perspective):

Was the 998 within the "range of reasonably possible results" at trial, considering all the information the offeror knew or reasonably should have known?

Second consideration (offeree's perspective):

Did the offeror know that the offeree had sufficient information — based on what the offeree knew or reasonably should have known — to assess whether the offer was reasonable, such that the offeree had a "fair opportunity to intelligently evaluate the offer"?

Now, what about beating the 998 at trial? Doesn't that solve the analysis?

Hm, maybe. It creates a prima facie argument in favor of reasonableness: "the fact that the verdict in their favor was higher than their settlement offer 'constitutes prima facie evidence showing the offer was reasonable.'"

But…"[t]his does not end the reasonableness inquiry because the trial court still must determine whether the offeree had sufficient information at the time of the offer to evaluate it."

Here, the Court did not address the reasonableness argument and instead sent it back to the Trial Court for that analysis. So, to be determined for that argument.