The document discusses litigation management strategies from an enterprise risk management perspective. It outlines how litigation management maturity has evolved from an insurance carrier-driven approach to a more sophisticated model driven by risk management. A mature litigation management program takes an integrated, business-focused enterprise risk management approach where risk, legal, claims, and business partners work collaboratively. It emphasizes metrics and management by outcomes to contain costs while meeting business needs.

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.

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 recession
ended 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 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

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

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