Managing to WinCollaborating on Litigation Objectives

Q By Irwin R. Kramer and David A. Pisanic

PROFESSIONAL LIABILITY

or as much as lawyersand clients talk aboutwinning their cases, youwon't find a definitionof "win" in Black's Law

Dictionary. There may be winnersand losers at the end of a trial, butyou can't tell who's who just bylooking at the verdict sheet.

What constitutes a win is in the eyeof the beholder. In insurance cases,carriers and their counsel may not seeeye to eye on the subject. Even whenthey do agree, their mutual client, theinsured, may not be quite as enthused with their claimed victory.To function effectively as a team, carriers, policyholders, andcounsel must define their objectives at the start of each case.

A History Lesson"Millions for defense but not one penny for tribute."— Robert Goodloe Harper, 1798

"Millions for defense but notone penny for tribute."

When France demanded multi-million dollar bribes from the United States,Congressman Harper used these words to express the contempt of a nationbesieged by its rival's unwarranted seizure of American ships. Unwilling to meetthese demands, hostilities between the two nations continued for two yearsbefore American and French diplomats ultimately resolved the conflict on moreamicable terms. American defiance produced a favorable settlement.

Over the next 200 years, insurers have echoed these sentiments in responseto the inflated demands of plaintiffs. Exclaiming that the "best defense is agood offense," claims managers were more apt to take dubious claims to trial.Understanding the risks, litigation managers would tell their counsel that "if youaren't losing any cases, you aren't trying enough of them."

Times have changed. As their front line soldiers prepare for battle, the generalsin home office now question the cost of ammunition. Mr. Harper's descendantsmay want millions for defense, but defense counsel must answer to claims res-olution managers who carefully monitor legal expense. Hawkish exclamationshave been replaced by guidelines designed to manage attorney's fees.

Now that "every case has a value," adjusters are more inclined to pay tribute on

claims that their predecessors mighthave denied. As their counsel worktoward winning at trial, claims reso-lution professionals are increasinglyevaluated on the speed with whichthey resolve their cases. Thus, whiledefense verdicts may be the pinnacleof success for trial lawyers, the celebra-tion may be muted in claims depart-ments that must account for a spike inlegal spend.

Accurate or not, carriers think thatlitigation costs have skyrocketed.This perception adds tension tootherwise congenial relationshipsamong carriers, counsel, and pol-icyholders. Left undefined duringthe course of battle, each may havedifferent concepts of winning that

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correspond with their distinct roles in the process. Unlessthey can articulate common goals^at the start of a case,their differing perspectives may interfere with the team-work required for effective litigation management.

Differing PerspectivesTo reach a meeting of the minds, carriers and their counselshould engage in a reading of the minds. Though their viewsmay differ, all participants in the process have perspectivesworthy of consideration when forming a winning strategy.

With sound litigation management,claims resolution professionals may

save their companies many timestheir own salaries.

tlements. Ironically, after spending thousands of dollarsabove the value of a case, these same carriers cut nickelsand dimes off of the defense bill.

Those who are more generous to plaintiffs' counsel thanto their own lose the savings that comes through astutelitigation strategy. Closing cases quickly can save penniesin the short run, but hasty deals leave many defense law-yers perplexed.

Carriers - Defense lawyers will find many kindred spiritsin the claims department of the carriers they represent.Claims departments are frequently seen as a source of redink rather than as a source of savings. Indeed, one CEOquipped that "underwriting brings money in the frontdoor" while the claims department "let's money go outthe back door."

Defense Counsel - Contrary to the claims of cost-con-tainment experts, defense counsel are not adversaries inthe effort to obtain efficient and favorable results. Nor arethey greedy mercenaries who thrive on protracted litiga-tion and line their pockets with unnecessary work. In fact,their rates are typically less than half of those chargedby lawyers representing other corporations in litigationfar more protracted and expensive than the majority ofinsurance claims.

Insurance defense lawyers strive to protect the systemfrom those who would abuse it. Forgoing the lavishlifestyle of those who litigate on the other side, theseattorneys are passionate about trial work and possess thecompetitive drive needed to win. Unlike litigators whorarely appear in court, these trial lawyers take great pridein bringing defensible cases to trial and in combating theinflated demands of their adversaries.

Considering the leverage provided by daring defend-ers who frequent the courtroom, carriers seek thesetraits when retaining counsel. Because they know whatit takes to win, these lawyers are particularly adeptat tailoring discovery efforts to expose the plaintiffs'flaws. Armed with this information, insurance defensecounsel are uniquely qualified to evaluate liability anddamages, to ascertain the prospects of dismissals ordefense verdicts, and, if appropriate, to negotiate favor-able settlements.

Given the resources, defense attorneys may make a bigdifference in the final outcome. Yet, rather than exercisethe patience to achieve better results, some carriers putthe brakes on legal fees and pay a premium for fast set-

Like their counsel, experienced adjusters can have a majorimpact on the value of claims. With sound litigationmanagement, claims resolution professionals may savetheir companies many times their own salaries. But if theywant to keep their salaries, adjusters on the front linesmust answer to their leadership.

Unlike their adjusters, senior management sets corpo-rate policy on a global scale. Open cases may be assetsto outside law firms, but each represents a liability to theinsurance company. As one top executive remarked, car-riers "are in the claims business — not in the litigationbusiness." Their counsel may thrive on courtroom drama,but carriers do not fund Hollywood productions.

Because litigation is as expensive as it is unpredictable,those in the business of managing risk are understand-ably concerned about the cost of lengthy proceedings.Accordingly, carriers keep careful statistics on theexpense of pending cases and the speed with whichthey are closed. Thus, while outside counsel may focuson the merits alone, their counterparts in claims mustfollow directives that go well beyond the facts of agiven case.

Policyholders - Where defense costs deplete aninsured's coverage, policyholders may share their car-riers interest in limiting them. This is true under manyprofessional liability policies. But when the cost ofdefense does not reduce the amount of coverage, poli-cyholders may be more concerned with the intangibleconsequences of litigation.

The ramifications to an insured may long outlive the caseitself. A policyholder worried about her reputation may feel

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that even a "penny for tribute" would tarnish her image andirreparably harm her business. Conversely, policyholdersconcerned about ongoing business relationships with otherlitigants may wish to resolve the dispute more generous-ly and expeditiously. If not, a resounding victory for theinsured may seriously jeopardize future business.

Effective litigation plans must consider both the tangi-ble and intangible objectives of the policyholder. Whereinterests conflict, we must make special arrangements tohandle the defense. But even if they do not present legalconflicts of interest, carriers and their counsel should takethe policyholders views into account to form a plan thatserves everyone well.

Defining ObjectivesLike any effective business plan, winning litigation plansdefine specific goals that accommodate all interests.Working together, carriers and their counsel may meetthe company's global objectives in a plan that is flexibleenough to consider the realities of specific claims.

Be Specific - Concerned with the speed and expense oflitigation, most carriers have adopted Defense CounselGuidelines to articulate key objectives:

• "Our goals are cost containment and dispute resolution."• "We seek to minimize litigation and related expenses."• "A goal is to discuss settlement opportunities early."• "Our cases may remain in litigation only as long as

needed to achieve successful outcomes."

These are important goals, but they do not replace the needfor litigation plans that address the details of specific claims.

To set winning objectives, we must exercise vision.Envisioning the end of the trial, how will the judgeinstruct the jury? What will the verdict sheet look like?What evidence will you emphasize in closing arguments?Specific answers will identify key issues and provide aroad map to victory.

By working backward, the defense team may marchforward with strategies tailored to the issues that mattermost. Since we don't have millions for defense, we cannotafford to conduct endless discovery. Rather than reflex -ively depose minor witnesses, smart lawyers focus on theevidence needed to win. With proper planning, they canprepare a detailed budget that conserves resources andpromotes a successful and prompt resolution.

Costs and Benefits - Carriers and their counsel mustconduct a cost-benefit analysis. Yet, all too often, carriers

closely scrutinize the price of litigation while disre-garding its benefits. This is a costly mistake. With theincreased focus on metrics, carriers tend to overvalueitems that can easily be measured and to undervaluethose that cannot. If we only measure expenses, carrierswill not recognize the inverse correlation between liti-gation efforts and indemnification costs. We must keepbetter score.

Litigation comes at a cost, but with proper planning itmay also be seen as an investment. By conducting anoptimal amount of discovery, the defense may underminea claimant's case and contribute to a resolution that couldsave the carrier far more than it spends on counsel.

Efficiency matters. It is not all that matters. Effective liti-gation management does more than cut costs. In collabo-ration with counsel, litigation managers must implementstrategies to minimize exposure by winning cases outrightor by reducing the value of claims.

Those who manage expenses alone may harm theircarrier's economic interests on a global scale. Uniquecases may set precedents that preclude future claims.In more routine cases, carriers who rush to settle caneliminate legal fees in the short run, but may encouragemore claims. Conversely, those who litigate, and settlelate, may unwittingly promote protracted litigation fromclaimants who think that their best deals will come onthe courthouse steps.

Be Flexible - Effective litigation plans must specifyobjectives in relation to the merits of the claim, the over-all exposure, and the expense of reaching a favorableoutcome. As events unfold, the defense must continuallyrevise projections, reconsider costs, and adjust objec-tives accordingly.

This plan must not be confused with Defense CounselGuidelines. Written from a global perspective, general guide-lines cannot replace the advice of counsel, or the experienceof litigation managers who analyze the case at hand.

Claims resolution professionals and their counsel must col-laborate on a winning game plan — one that sets realisticobjectives and provides the resources to achieve them, mi

Irwin R. Kramer is the Managing Attorney ofBaltimore's Kramer & Connolly and president ofCLM's Maryland Chapter. David A. Pisanic is thePresident of David A. Pisanic & Associates, a regionaladjusting firm in Maryland, Washington, D.C.,and Northern Virginia.

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