What happens if you deny a settlement offer?

By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.

Informal offers and formal statutory offers

Most offers before a lawsuit come from the adjuster by letter or phone. If you turn one down, you lose that number and nothing else. Our pages on responding to a lowball offer and whether to accept the first offer cover that stage.

After a case is filed, each state has a formal procedure that puts a price on saying no, but only if the final judgment fails to beat the offer.

California: the 998 offer

Under Code of Civil Procedure 998, either side may serve a written offer at least 10 days before trial or arbitration. If it is not accepted before trial or within 30 days, it is treated as withdrawn, and it cannot be given in evidence at trial.

When a defendant’s 998 offer is turned down and the plaintiff does not obtain a more favorable judgment, the plaintiff cannot recover costs incurred after the offer and must pay the defendant’s costs from the date of the offer. The judge may also order the plaintiff to pay toward the defense’s fees for retained opinion witnesses, such as doctors hired to testify. Those costs are subtracted from the plaintiff’s damages, and if they are larger, the defendant receives the difference under subdivision (e).

The rule also works in the other direction. When a plaintiff’s 998 offer is refused and the defendant fails to get a more favorable judgment, the court may order the defendant to pay toward the plaintiff’s post-offer witness fees. In personal injury cases, Civil Code 3291 adds interest at 10 percent a year from the date of the plaintiff’s first 998 offer that the judgment beats. That interest does not apply to a public entity or a public employee acting in the course of the job.

Example only: a defendant serves a 998 offer of $60,000, the plaintiff rejects it, and a jury later awards $50,000. Because the plaintiff did not beat the offer, the defense’s costs from the offer date come out of the $50,000. Real figures depend on the costs actually claimed and the judge’s rulings.

Texas: chapter 42 and Rule 167

Texas uses Civil Practice and Remedies Code chapter 42, carried out through Rule of Civil Procedure 167. The procedure does not exist in a case until a defendant files a declaration that it is available. Section 42.002 leaves out several case types, including class actions and suits by or against a governmental unit. As described in Bobo v. Varughese, the offer must state a deadline no sooner than 14 days after it is served.

The cost shift applies only if the judgment is “significantly less favorable” to the person who said no. For a rejecting claimant, that means an award below 80 percent of the offer. For a rejecting defendant, it means an award above 120 percent. Recoverable litigation costs are those incurred after the rejection and can include court costs, reasonable deposition costs, reasonable fees for no more than two testifying witnesses retained for their opinions, and reasonable attorney’s fees. Section 42.004(d) limits the costs awarded against a claimant to the total the claimant recovers, so a cost award under this rule can use up the recovery but cannot go beyond it.

Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou.

Washington: CR 68 and RCW 4.84.250

Washington’s Civil Rule 68 lets a party defending a claim serve an offer of judgment more than 10 days before trial. The other side has 10 days to accept in writing. If the judgment the plaintiff finally obtains is not more favorable than the offer, the plaintiff must pay the costs incurred after the offer was made.

Under RCW 4.84.250, when the amount pleaded in a damages case is $10,000 or less, the prevailing party gets reasonable attorney’s fees, and offers decide who prevails. A plaintiff who recovers as much as or more than his or her own offer prevails under RCW 4.84.260, and a defendant prevails under RCW 4.84.270 if the plaintiff gets nothing or no more than the defense offered. RCW 4.84.280 requires these offers to be served at least 10 days before trial and keeps them from the judge or jury deciding the case until after judgment.

Policy-limits demands and bad faith

Sometimes the plaintiff makes the offer by demanding the full limit of the defendant’s policy. In Comunale v. Traders & General Insurance Co. (1958), the California Supreme Court held that an insurer that wrongly refused to defend and turned down a reasonable settlement within its limits was liable for the whole judgment against its customer, even above the limits. Since 2023, CCP 999.1 has required a time-limited demand in auto, homeowner and commercial premises claims (CCP 999.5) to be in writing and to give at least 30 days to respond, or 33 days by regular mail.

Texas has its own version, the Stowers duty, from a 1929 case. As the federal Fifth Circuit summarized in Golden Bear Insurance Co. v. 34th S&S (2025), the duty arises when the claim is within coverage, the demand is within policy limits and fully releases the insured, and an ordinarily prudent insurer would accept it. Whether either doctrine applies turns on the wording of the demand and the facts.

What this means for your case

Before you say no to a formal offer, ask your lawyer what a realistic verdict range looks like and how much each side is likely to spend between now and trial. Write the acceptance deadline down. If the case keeps going, the next step is usually discovery, including your deposition. The choice to accept or reject belongs to you. For what follows a loss at trial, see what happens if you lose a car accident lawsuit.

Common questions

Related pages

Injury law FAQs

Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.