Drafting an effective demand letter is critical to almost any civil case. It introduces you and your client to the other party and their representative, who may be an attorney, an insurance adjuster, or risk management. This first impression will speak volumes about how they should evaluate you, your client, and your client's case.
The letter also sets the tone for settlement negotiations. With fewer and fewer cases actually going to trial, and the cost of trying a case increasing significantly, more cases are settling pre-trial. It is therefore important to place your client in a position of bargaining strength. Having a well-written, effective demand letter will help you do just that.
Finally, the demand letter helps the adjuster set their reserves. For example, insurance companies often provide their counsel or risk management department an internal evaluation of your case, and set a reserve amount aside for possible settlement. This amount is calculated into their annual budget, so even if your case does not settle right away or they undervalue your case, at the very least, there is a certain amount set aside for possible settlement of your case, which may make it easier to settle as the progresses, depending on the circumstances of your particular case.
Here are 10 tips to help you on your way:
1. Be Organized
Gather all pertinent documents relevant to your client's case at the outset of the case. For example, in a personal injury case, this may include sending requests for copies of records from your client's medical providers and employer, obtaining police reports, and collecting any documents that your client may possess. In a contract case, this may include a copy of the contract and any correspondence between the parties. The nature of the case will dictate what documentation is needed. It will be impossible to write an effective demand letter without all of the information, so obtaining copies of documents as soon as possible is key.
It is preferable to send a complete demand letter with all of the documentation, rather than sending items piecemeal. Overworked adjusters may not get everything if it comes in at different times; papers get lost or misplaced. This can lead to a delay in the handling of the case or an incorrect evaluation of the case, if key information is missing.
The caveat to that general rule is where treatment is protracted for some reason in a personal injury case. In that case, it may be necessary to provide the adjuster with periodic updates, and advise that additional information will be provided as treatment progresses. However, even in that scenario, providing as much updated information at once is advisable, so that the adjuster can set reserves.
2. Submit the Letter in a Timely Manner
For the reasons set forth above, it is critical to send the demand letter in a timely manner, i.e., as soon as possible. It will convey that you are on top of the case, and it will assist the adjuster in setting reserves.
If for some reason your letter is being held up because you are waiting on documentation, communicate that to the adjuster, so they can note their file accordingly. And as stated in section 1, if your case involves protracted treatment, provide periodic updates, and advise that additional information will be provided when it becomes available.
3. Reference Pertinent Claim Information on All Communication
Prior to sending the demand letter, you hopefully sent the other side a letter of representation with your client's signed authorization. The other side will then send a confirming letter, which should also include their claim number or file number, and a policy number, as applicable.
On all your communication, include in the reference section at the beginning of your letter the following: your client's name, their client's name, the date of the incident, the claim number and the policy number, as appropriate. If a lawsuit has already been filed, also include the name of the case, the county in which the matter was filed and the court case number.
Attorneys, adjusters, and insurance companies deal with many cases, and you want to make it as easy as possible for them to easily route your correspondence to the appropriate person.
4. Use Appropriate Professional Language and Tone
It goes without saying that appropriate professional language and tone should be used. Overly emotional or threatening language should be avoided.
In California, ordinarily a demand letter sent in anticipation of litigation is a legitimate speech or petitioning activity that is protected under California Code of Civil Procedure section 425.16. However, an attorney may be subject to liability if the demand letter is so extreme that it amounts to criminal extortion as a matter of law. In Flatley v. Mauro (2006) 39 Cal.4th 299, the attorney's demand letter included threats to publicly accuse Flatley of rape and to report and publicly accuse him of other unspecified violations of various laws unless he "settled" by paying a sum of money to the plaintiff of which plaintiff's attorney would receive 40 percent. The letter also included statements advising that: "Any and all information, including Immigration, Social Security Issuances and Use, and IRS and various State Tax Levies and information will be exposed." Plaintiff's counsel in that case also made several follow up phone calls in which he demanded seven figures for their silence. The California Supreme Court concluded that the demand letter constituted extortion as a matter of law, and was therefore not protected speech, subjecting the attorney to liability.
Moreover, the Rules of Professional Conduct specifically prohibit attorneys from threatening to present criminal, administration, or disciplinary charges to obtain an advantage in a civil dispute. See, Flatley, supra, 39 Cal.4th at 327, citing Cal. Rules of Prof. Conduct, rule 5-100(A).
5. Use Subheadings
Within the body of the demand letter, using subheadings will help the reader easily navigate through each topic.
Suggested subheadings include: Introduction, Facts, Liability, Medical Treatment, Property Damage, Wage Loss, Itemization of Damages, and General Damages. Subheading titles can be adjusted depending on the type of case and the type of damages incurred.
6. Be Specific
Including very specific facts, particularly with regard to the summary of facts, medical treatment, and general damages, is advised. Having specific facts will assist the adjuster in properly evaluating the case. Refer to the record in which the fact can be found, which should be attached as an exhibit and the exhibit number or letter.
General damages in particular can be challenging to value, but describing specific difficulties that your client faced will make the amorphous concept of pain and suffering more tangible.
7. Set Forth Demand Amount Clearly
Include a section for "Itemization of Damages" at the end of the letter that sets forth each category of damages, the amount, and then shows the total amount.
Restate the final demand in bold in the final paragraph so that it is very clear. Some people also suggest setting forth the demand in the introduction of the demand letter.
8. Provide Deadline for Response
Language such as "this offer will remain open for 30 days" should be included at the end of the letter, so that the other side has a clear deadline.
While many argue to also include language threatening to file a lawsuit if the case does not settle, my personal opinion is that it is not necessary. The adjuster or attorney reading the demand letter will know that if the case does not settle that a complaint will likely be filed.
9. Attach Organized and Tabbed Exhibits
All of the records to which you refer in your demand letter should be attached as exhibits, and should be organized chronologically. Use colored paper and tabs to separate exhibits to make it as easy as possible to find a document.
10. Send by Email and Regular Mail
Some people advise sending a demand letter by registered mail. As an attorney, this is probably not generally necessary since you keep copies of everything sent in your files, unless the demand letter also includes a demand for arbitration pursuant to an insurance policy or contract, in which case sending by registered mail may be required.
However, in this digital age, it may be beneficial to send the demand letter by email as well as mail. More and more companies are scanning in correspondence and then routing it to their adjusters anyway, so it may make their job easier to receive a scanned copy directly from you. This also creates a record of when the demand letter was sent.
The process of drafting the demand letter will also be beneficial to you as the attorney. It is an opportunity to become well-versed in every detail of the case. As the case moves forward, it will be much easier to discuss the case with opposing counsel, as you can flip through the demand letter to refresh your memory. Copies of the important documents will be attached as exhibits, and already organized. If the case does not settle, preparing discovery and/or an arbitration or mediation brief will also be a far easier task.