A California appeals court says a claimant cannot back out of a policy-limits settlement once the insurer accepts on the terms she set. 

In a decision filed July 9, 2026, and certified for publication on August 4, 2026, the Fourth Appellate District, Division Two, ruled for Farmers Insurance Exchange. The opinion sets out when a policy-limits demand becomes a binding deal, a question that reaches every claims professional handling auto liability files. 

It began with a rear-end crash. On January 5, 2021, a Farmers-insured driver hit another motorist at a red light in Hesperia, pushing her car into another vehicle. The insured's policy carried bodily injury limits of $15,000 each person and $30,000 each accident, so the most available for the claimant's injuries was $15,000. 

On July 30, 2021, the claimant's lawyer sent Farmers a letter offering to settle for the "total available policy limit of $100,000, or less," if Farmers accepted in writing by 4:00 p.m. on August 30, 2021, and provided a declaration confirming the limits. The letter added: "If this demand exceeds the policy, then we hereby make a policy limit demand." 

Farmers accepted on August 25, 2021. It agreed to pay the $15,000 per-person limit and sent the declarations page, stating it would pay the claimant "our single limit available $15,000 for her injuries and the remaining $15,000 will be distributed amongst" other passengers. 

Then the claimant refused to sign. The insured had filed an asset declaration saying he owned one vehicle and had $5,000 in the bank, but an assets check turned up other assets he owned. The claimant argued the deal was really for $100,000, that Farmers' letter was a counteroffer, and that the inaccurate asset declaration let her rescind. 

The court rejected all three arguments. The demand was for policy limits, not $100,000, as the letter itself stated. Farmers' acceptance matched those terms, so a binding contract formed on August 25, 2021. Because the claimant never made her offer contingent on the asset declaration, that paperwork did not rewrite or unwind the settlement. 

The court granted Farmers' petition and ordered the trial court to grant summary adjudication on Farmers' declaratory relief claim. 

For insurers, the ruling confirms that accepting a policy-limits demand exactly as written, within the deadline, with the paperwork requested, forms a settlement that holds even if the claimant later changes course.