In my practice, the statutory offer is such an important piece of information to provide to clients that I generally go over it at least three times – once when the client signs up with me, once when we start litigation (this one we do in writing) and finally when we are getting ready or are in mediation. The reason I go over this particular aspect of the law is because the consequences of not understanding how this process works can be devastating financially. So what is it?

Colorado law provides that when a case is in litigation (the process leading up to trial), either party can serve the other party with an offer of settlement as long as it is made to the other party at least 14 days before the start of trial (for those of you who are curious and may know how to access the law, the statute is Colorado Revised Statute § 13-17-202). The most common way that this comes about is when the parties go to mediation before a neutral third party (usually a retired judge). During the course of mediation, the typical process is for offers and counter offers to be passed back and forth by the mediator which hopefully results in a compromise which both sides are willing to accept even if it isn’t exactly what they wanted. At some point during the mediation, the insurer will make their final offer. This means that the negotiations have reached the maximum amount the insurer has assigned to the claim as a value and they are unwilling to go any higher. In this situation, my clients have a choice of accepting the offer or rejecting the offer and proceeding forward to trial.

If the offer is rejected, that is when the statutory offer comes into play. Following mediation, the insurer (defendant) will then reduce the last offer to writing and serve it on the plaintiff (the legal term used to identify the person who brought the legal action) via the court system (though the judge does not see it). At that point, the plaintiff has two weeks in which to decide whether to take the offer or not (CAVEAT – the offer can be withdrawn within that two weeks as long as it is done in the same manner as the offer was served). If the plaintiff takes the offer, the case is over, the parties are bound and the court can enforce the agreement. If the plaintiff rejects the offer and the case proceeds to trial (this is irrelevant if the case settles before trial), then the plaintiff has to beat the offer made by the defense. A simple example I give clients is to assume that the insurer makes an offer of $10,000 and you reject it and proceed to trial. If you go to trial and the jury compensates you in an amount greater than $10,000, then you have beaten the offer and there are no negative consequences. If the jury were to give you $8,000, then you didn’t beat the offer and the defense will be able to have the court award them all of their costs spent after rejection of the offer. Now you might not think much of that unless you consider that it is not unusual for a party to spend thousands of dollars preparing for trial. To give you an idea of the severity of these consequences, it is not unusual for a party to spend $10,000 to $25,000 on case costs (examples of these kinds of costs include expert witness fees (doctors charge anywhere from $250 per hour to testify and I’ve seen some charge as much as $1,250 per hour), service of subpoenas, depositions, investigators, court costs, and copying to name a few), preparing for and going to trial. Litigation is an expensive process so the effect of a statutory offer can be that you end up winning the battle by getting a jury to give you compensation, but lose the war because a large portion, or all, of that compensation is given right back to the defendant (insurer) because you didn’t beat their offer. This kind of exposure is just another reason you don’t want to hand your claim over to just anyone. You need someone who understands the potential dangers of this process for your own protection.

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