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David Herman, Esq.
Managing Counsel – Insured Litigation, Nestlé USA
David Smith
Divisional Vice President – Risk Management, Family Dollar
Scott Rogers
Executive Vice President – Casualty Operations, Sedgwick
Wednesday, April 24, 2013
Session Time: 10:30 to 11:45 a.m.
Litigation management strategies
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 recession
ended in June 2009
Current assessment
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 days
compared 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 is
within $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 top
10 states
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
$200,000
CA FL IL MI NY OH PA TN TX WA
Not Litigated Litigated
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
$120,000
Not Litigated Litigated
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 litigated
file versus not litigated for the top 10 states
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
$140,000
AZ CA FL GA IL NC NY OH PA TX
Not Litigated Litigated
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
$160,000
Not Litigated Litigated
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 litigated
file versus not litigated for the top 10 states
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
$250,000
CA DC FL IL LA MD NC NJ NY TX
Not Litigated Litigated
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
$250,000
Not Litigated Litigated
Dave Smith
Divisional Vice President – Risk Management
Family Dollar
ERM approach to litigation management
• ERM or Enterprise Risk Management - the strategic
evolution and integration of a holistic risk management
approach, identifying and addressing strategic, operational,
financial and business risks throughout the entire
enterprise.
• Litigated claims are defined as:
• Claims in suit
• Represented claims
• WC claims with hearing requests
• This discussion explores the application of an ERM approach
to the management of litigated claims
ERM approach to litigation management
• Corporate risk management
maturity and its influence on
litigation management
• Typical approaches to
litigation management
• Measuring performance
– Analytics and metrics
• Considerations for process
improvement
• What is the risk management
maturity of your organization?
• Who drives litigation
management in your
organization?
• Management without
measurement?
• Evolving to the ERM approach
Perspective & point of reference
Risk management maturity model
• Traditional
• Risk transfer/guaranteed
cost/deductible
• Defensive
• Integrated
• Loss avoidance
• Loss cost management
• Sophisticated performance analytics
• Risk transfer
• ERM
• Broad scope, addresses the
enterprises strategic, operational,
financial and business continuity risks
Litigation management maturity
Litigation management model
• Insurance carrier driven
• Frustration
 Risk
 Legal
 Human resources
 Corporate
• Inefficient and expensive
• Ownership absent
• Management control
• Poor
• Traditional
• Defensive
• Risk transfer/guaranteed
cost/deductible
Risk maturity model
Litigation management maturity
Litigation management model
• Insurance carrier is partner
• TPA/carrier claims examiner
• Sophisticated performance analytics
• Approved panel list
• Risk management leads
• Selective corporate legal
engagement
• Inconsistent approach
• “Formulary” approach
• Stress: risk vs. legal
• Management control
• Developing – intermediate/high
• Integrated
• Loss avoidance
• Loss cost management
• Sophisticated
performance analytics
• Risk transfer
Risk maturity model
Litigation management maturity
Litigation management model
• Strong partnership and
comprehension:
• 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 the
enterprise’s strategic,
operational, financial and
business continuity risks
Risk maturity model
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
David Herman, Esq.
Managing Counsel – Insured Litigation
Nestlé USA
Order in the court :
Litigation management strategies
Order in the court :
Litigation management strategies
Order in the court :
Litigation management strategies
Order in the court :
Litigation management strategies
Order in the court :
Litigation management strategies
Potential solutions & strategies
- litigation avoidance
Potential solutions & strategies
- litigation management
Litigation management strategies for reducing costs

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Litigation management strategies for reducing costs

  • 1. David Herman, Esq. Managing Counsel – Insured Litigation, Nestlé USA David Smith Divisional Vice President – Risk Management, Family Dollar Scott Rogers Executive Vice President – Casualty Operations, Sedgwick Wednesday, April 24, 2013 Session Time: 10:30 to 11:45 a.m.
  • 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 recession ended in June 2009
  • 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 days compared 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 is within $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 top 10 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 $200,000 CA FL IL MI NY OH PA TN TX WA Not 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 $120,000 Not 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 litigated file 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 $140,000 AZ CA FL GA IL NC NY OH PA TX Not 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 $160,000 Not 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 litigated file 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 $250,000 CA DC FL IL LA MD NC NJ NY TX Not 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 $250,000 Not Litigated Litigated
  • 14.
  • 15. Dave Smith Divisional Vice President – Risk Management Family Dollar
  • 16. ERM approach to litigation management • ERM or Enterprise Risk Management - the strategic evolution and integration of a holistic risk management approach, identifying and addressing strategic, operational, financial and business risks throughout the entire enterprise. • Litigated claims are defined as: • Claims in suit • Represented claims • WC claims with hearing requests • This discussion explores the application of an ERM approach to the management of litigated claims
  • 17. ERM approach to litigation management • Corporate risk management maturity and its influence on litigation management • Typical approaches to litigation management • Measuring performance – Analytics and metrics • Considerations for process improvement • What is the risk management maturity of your organization? • Who drives litigation management in your organization? • Management without measurement? • Evolving to the ERM approach
  • 18. Perspective & point of reference
  • 19. Risk management maturity model • Traditional • Risk transfer/guaranteed cost/deductible • Defensive • Integrated • Loss avoidance • Loss cost management • Sophisticated performance analytics • Risk transfer • ERM • Broad scope, addresses the enterprises strategic, operational, financial and business continuity risks
  • 20. Litigation management maturity Litigation management model • Insurance carrier driven • Frustration  Risk  Legal  Human resources  Corporate • Inefficient and expensive • Ownership absent • Management control • Poor • Traditional • Defensive • Risk transfer/guaranteed cost/deductible Risk maturity model
  • 21. Litigation management maturity Litigation management model • Insurance carrier is partner • TPA/carrier claims examiner • Sophisticated performance analytics • Approved panel list • Risk management leads • Selective corporate legal engagement • Inconsistent approach • “Formulary” approach • Stress: risk vs. legal • Management control • Developing – intermediate/high • Integrated • Loss avoidance • Loss cost management • Sophisticated performance analytics • Risk transfer Risk maturity model
  • 22. Litigation management maturity Litigation management model • Strong partnership and comprehension: • 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 the enterprise’s strategic, operational, financial and business continuity risks Risk maturity model
  • 23. 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
  • 24.
  • 25. David Herman, Esq. Managing Counsel – Insured Litigation Nestlé USA
  • 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. Order in the court : Litigation management strategies
  • 30. Order in the court : Litigation management strategies
  • 31. Potential solutions & strategies - litigation avoidance
  • 32. Potential solutions & strategies - litigation management