What is the test for an offer of settlement made under section 998 of the California Vehicle Accident Act?

Section 998 is a cost-shifting statute designed to encourage pretrial settlements and avoid needless litigation. (Barba v. Perez (2008) 166 Cal.App.4th 444, 451.) It

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provides that "[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, . . . the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant." ( 998, subd. (c)(1).) To be valid, a section 998 offer must be made in good faith, which requires that the offer of settlement be " 'realistically reasonable under the circumstances of the particular case.' " (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1262.) " 'Normally, therefore, a token or nominal offer will not satisfy this good faith requirement.' " (Ibid.)

"As a general rule, the reasonableness of a defendant's offer is measured, first, by determining whether the offer represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial, discounted by an appropriate factor for receipt of money by plaintiff before trial, all premised upon information that was known or reasonably should have been known to the defendant. . . . [] If the offer is found reasonable by the first test, it must then satisfy a second test: whether defendant's information was known or reasonably should have been known to plaintiff. This second test is necessary because the section 998 mechanism works only where the offeree has reason to know the offer is a reasonable one." (Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 699, fn. omitted.) "Where, as here, the offeror obtains a judgment more favorable than its offer, the judgment constitutes prima facie evidence showing the offer was reasonable and the offeror is eligible for costs as specified in section 998. The burden is therefore properly on plaintiff[s], as offeree[s], to prove otherwise." (Id. at p. 700.) We review the trial court's determination that a section 998 offer was reasonable and made in good faith for abuse of discretion. (Elrod v. Oregon Cummins Diesel, Inc., supra, at p. 700.)

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