I often ask claims leaders the question “What cases do you WANT to litigate?” The response is frequently an uncomfortable silence. I spent a long time NOT asking myself that question when I was in claims leadership positions. This never seemed to be on the agenda. That was a mistake.
Litigation isn't "bad," but it often seems to be in claims organizations. As a claims leader, one of the chief issues I had with defense expenditure- and continue to hear casualty leaders complain about - is incurred expenses with nothing to show for it. How many times have you looked at a file that has been in litigation for more than 6 months only to feel that nothing has changed? That result had me looking for ways to avoid spending.
Perhaps this dilemma needs to be turned on its head. The better question to ask is, "What is the most effective way to use defense spending to control settlement costs?" This question forces consideration of how to use litigation as an extension of your settlement options, rather than a home for unwanted claims. While most people would like to gain resolution by other means (who wouldn’t?), using litigation to accomplish effective resolution should be a core competency of every casualty claims organization.
Here’s a useful exercise to get you started. This exercise can be done alone, though is probably more illuminating if you do it with others. Divide your cases into three categories: 1. Those you DON’T WANT to litigate. You don’t want to litigate cases in which the evidence isn’t convincing for your position to prevail. No kidding, right? Well, this analysis isn’t always as sober as it should be and, too often, is clouded by an adjuster wanting to prove a point. In my experience, these “lessons” by adjusters are misplaced. The issues keeping the case from resolution are driven more by the plaintiff than their attorney. This approach clouds judgment about what the right place is to settle because any settlement is seen as distasteful. Examine this by presenting the defense’s case and comparing it to the plaintiff’s case. If their case is more compelling, this is not a case you want to litigate. Might you win sometimes? Of course. But hope isn’t a strategy. Settle. 2. Those you HAVE TO litigate. These are generally cases in which you have not really been given a chance to present and argue the case. The plaintiff attorney has shut this down. Unfortunately, many adjusters and managers think these are cases they should have somehow avoided. Don’t blame yourself for plaintiff attorney strategy. For some firms, this is a standard tactic (see “14 Minutes Until Litigation”) and, frankly, it works. A litigation adjuster receives the case and, more often than not, raises the offer.
The real issue in these cases is the math used to justify defense. This math is made up on the fly and too subjective. On these HAVE TO litigation cases, first create an opportunity to understand why the plaintiff’s lawyer won’t discuss it and, in the process, find out what they believe their case is. You don’t need discovery to do this, just a few well managed phone calls with defense and plaintiff’s counsel. Some of these will end up as cases you don’t want to litigate, some will end up as cases you do. You'll have a much better idea how to spend your money. 3. This leaves cases that you WANT to litigate. These are cases where you have solid evidence to support a settlement much closer to your position than the claimant’s. So, what do these cases typically look like? Here are a few starting points.
First, are there medical bills with highly inflated charges? Inflated medical charges inflate pain and suffering values (see “Own the Anchor” for more on this point). Undercutting inflated charges can be done at the onset of discovery by simple depositions of the billing manager at the healthcare provider. Yes, that’s right…the billing manager. Let THEM explain where those charges come from. Shifting the burden of proof back to the plaintiff is critical. This typically will result in them NOT being able to explain their pricing AND in an admission that they don’t ever get paid what they charge. This sort of admission opens avenues to resolving the entire case.
Second, if the plaintiff’s claims about the impact of the injury on their daily living aren’t supported by the medical findings, use discovery to demonstrate that. You don’t need expert witnesses. You need a methodical analysis contrasting the plaintiff’s claims and the medical facts. In our work, finding these contradictions is a regular occurrence. Let THEM explain the contradictions.
A few other thoughts:
1. This should change the way you negotiate in two ways. First, you should be presenting YOUR case, not just attacking the presumed case of the plaintiff. Second, your adjusters should be able to enumerate the claims of the plaintiff pre-litigation.
2. If this process must produce a WIN for you every time, don’t waste time on this exercise. You won’t find such a solution.
3. You won’t start changing your defense strategies to be nimble and responsive to the case – and produce tangible results – until you do this.
4. Knowing what you want to litigate leads to far more confident negotiation.