Order in the Court: Litigation Management Strategies

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With continued pressure on businesses to reduce their cost of risk, risk managers are focusing increasing attention on managing legal expenses. Given the current economy, there is a tremendous …

With continued pressure on businesses to reduce their cost of risk, risk managers are focusing increasing attention on managing legal expenses. Given the current economy, there is a tremendous financial pressure for claimants to turn to attorneys for perceived justice and claim resolution. Attorney involvement has been shown to increase claim costs significantly. Resulting outcomes are seldom ideal for employers or employees. The claims process becomes extended, costs increase, and frustrations mount for both sides. This session is designed to provide risk managers with a broader view of how to manage both expenses as well as the process. Participants will learn the benefits of establishing a well-defined legal philosophy, how to select and direct a legal and claim management team, when to consider the use of alternative dispute resolution techniques, and how to effectively employ these techniques to improve the legal outcomes for their own organizations.

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  • 1. David Herman, Esq.Managing Counsel – Insured Litigation, Nestlé USADavid SmithDivisional Vice President – Risk Management, Family DollarScott RogersExecutive Vice President – Casualty Operations, SedgwickWednesday, April 24, 2013Session Time: 10:30 to 11:45 a.m.
  • 2. Litigation management strategies
  • 3. Current assessment• John Hopkins University School of Medicine• Attorney involvement results in longer claim durations and higher cost• California Workers’ Compensation Institute• 44% of all indemnity claims were represented• Workers’ Compensation Research Institute (WCRI)• Feel threatened• Possible claim denial• Employment jeopardized• Economic impact• Unemployment• Healthcare• Cost and frequency of litigation has grown by double digits since recessionended in June 2009
  • 4. Current assessment
  • 5. Workers’ compensation litigation costs• Litigated files are 3 times more expensive• Litigated = $90,750• Non-litigated = $30,004• Average TTD is over 3 times higher for a litigated file - 261 dayscompared to 80• Litigated files take significantly longer to close - 2.7 years vs. 4.6 years• Outside of manufacturing, the range for the cost of a litigated file iswithin $10,000 across remaining industry groups (between $82,000 and$92,000)• State range is 2 to 6 times more expensive for a litigated file for the top10 states
  • 6. Workers’ compensation average cost- litigated vs. not litigated by state$25,126$21,570$25,973$29,807 $27,785 $26,888 $28,648 $32,070$27,755 $28,671$99,811$80,221 $83,416$172,062$70,027$59,591$128,684$72,382$100,380$114,655$0$20,000$40,000$60,000$80,000$100,000$120,000$140,000$160,000$180,000$200,000CA FL IL MI NY OH PA TN TX WANot Litigated Litigated
  • 7. Workers’ compensation average cost- litigated vs. not litigated by industry$25,552$20,196$40,302$24,988 $23,572$50,590$27,264$19,205$81,835$89,449$111,779$87,945 $85,374$91,664$87,280$82,874$0$20,000$40,000$60,000$80,000$100,000$120,000Not Litigated Litigated
  • 8. General liability litigation costs• Litigated files are 28 times more expensive• Litigated = $65,756• Non-litigated = $2,362• Litigated files take significantly longer to close - 5 months vs.2.9 years• State range averages 32 times more expensive for a litigatedfile versus not litigated for the top 10 states
  • 9. General liability average cost- litigated vs. not litigated by state$1,810 $2,198 $4,157 $1,864 $2,599 $1,540 $3,123 $1,743 $3,108 $1,297$48,712$61,790$77,226 $78,421$59,989$115,409$65,654$38,110$55,185 $58,311$0$20,000$40,000$60,000$80,000$100,000$120,000$140,000AZ CA FL GA IL NC NY OH PA TXNot Litigated Litigated
  • 10. General liability average cost- litigated vs. not litigated by industry$1,590$15,898 $16,455$2,181 $1,622 $3,001 $1,918 $2,221$72,130$104,320$98,163$118,775$54,556$92,625$70,687$133,500$0$20,000$40,000$60,000$80,000$100,000$120,000$140,000$160,000Not Litigated Litigated
  • 11. Automobile liability litigation costs• Litigated files are over 10 times more expensive• Litigated = $115,507• Non-litigated = $11,435• Litigated files take significantly longer to close - 1 year vs.2.9 years on average• State range averages 19 times more expensive for a litigatedfile versus not litigated for the top 10 states
  • 12. Auto liability average cost- litigated vs. not litigated by state$10,594$2,325$17,583$7,954 $10,787 $5,629 $6,018$17,077 $18,158 $14,165$191,998$170,169 $171,418 $173,971$75,745$98,902$116,979$107,870$179,634$131,498$0$50,000$100,000$150,000$200,000$250,000CA DC FL IL LA MD NC NJ NY TXNot Litigated Litigated
  • 13. Auto liability average cost- litigated vs. not litigated by industry$14,120 $6,883 $14,072$6,284 $9,262 $12,241 $6,169 $9,100$171,174$140,071$206,505$99,026$129,317$197,201$89,281$143,871$0$50,000$100,000$150,000$200,000$250,000Not Litigated Litigated
  • 14. Dave SmithDivisional Vice President – Risk ManagementFamily Dollar
  • 15. ERM approach to litigation management• ERM or Enterprise Risk Management - the strategicevolution and integration of a holistic risk managementapproach, identifying and addressing strategic, operational,financial and business risks throughout the entireenterprise.• Litigated claims are defined as:• Claims in suit• Represented claims• WC claims with hearing requests• This discussion explores the application of an ERM approachto the management of litigated claims
  • 16. ERM approach to litigation management• Corporate risk managementmaturity and its influence onlitigation management• Typical approaches tolitigation management• Measuring performance– Analytics and metrics• Considerations for processimprovement• What is the risk managementmaturity of your organization?• Who drives litigationmanagement in yourorganization?• Management withoutmeasurement?• Evolving to the ERM approach
  • 17. Perspective & point of reference
  • 18. Risk management maturity model• Traditional• Risk transfer/guaranteedcost/deductible• Defensive• Integrated• Loss avoidance• Loss cost management• Sophisticated performance analytics• Risk transfer• ERM• Broad scope, addresses theenterprises strategic, operational,financial and business continuity risks
  • 19. Litigation management maturityLitigation management model• Insurance carrier driven• Frustration Risk Legal Human resources Corporate• Inefficient and expensive• Ownership absent• Management control• Poor• Traditional• Defensive• Risk transfer/guaranteedcost/deductibleRisk maturity model
  • 20. Litigation management maturityLitigation management model• Insurance carrier is partner• TPA/carrier claims examiner• Sophisticated performance analytics• Approved panel list• Risk management leads• Selective corporate legalengagement• Inconsistent approach• “Formulary” approach• Stress: risk vs. legal• Management control• Developing – intermediate/high• Integrated• Loss avoidance• Loss cost management• Sophisticatedperformance analytics• Risk transferRisk maturity model
  • 21. Litigation management maturityLitigation management model• Strong partnership andcomprehension:• Risk management• Legal• TPA• Involved business partners• Insurance carrier• Driven by:• Understanding risks• Business decision mentality• Enterprise mission and culture• Sophisticated management• ERM• Broad scope, addresses theenterprise’s strategic,operational, financial andbusiness continuity risksRisk maturity model
  • 22. The mature litigation management program• The ERM approach• Enterprise business strategy to litigation management Inclusive/integrated Economic Creative Rejects “formulary” management Smart use of counsel and expert resources Management by success (and failure)• Metrics Not an end state• CPI/QA
  • 23. David Herman, Esq.Managing Counsel – Insured LitigationNestlé USA
  • 24. Order in the court :Litigation management strategies
  • 25. Order in the court :Litigation management strategies
  • 26. Order in the court :Litigation management strategies
  • 27. Order in the court :Litigation management strategies
  • 28. Order in the court :Litigation management strategies
  • 29. Potential solutions & strategies- litigation avoidance
  • 30. Potential solutions & strategies- litigation management