Are early, overpaid settlements making you sick? They might be if you are in the first trimester of pregnancy. This month’s column is dedicated to all the mothers who endured months of morning sickness during pregnancy. It also is a lesson in the effects of a global litigation strategy.
It often is the case that claims are settled as a business decision. The cost of defense for large or numerous claims can become extremely high. Sometimes it makes sense to settle the claims even if there is a viable defense to liability. However, that’s not always the case. There are compelling reasons to try cases that extend beyond the numbers of defense cost and indemnity cost.
The pregnancy anti-nausea drug, Diclegis, is new to the market. It is used to treat what is traditionally known as “morning sickness.” In its most extreme form, morning sickness can turn into “hyperemesis gravidarum,” a severe condition that leads to vomiting, dehydration, and weight loss. Severe cases require hospitalization during pregnancy. Diclegis previously existed under the name Bendectin. In the 1970s, the manufacturer of Bendectin was the target of a number of lawsuits claiming that the drug caused birth defects. However, an FDA investigation determined that there was no link to birth defects. In fact, when the manufacturer took the drug off the market in response to pressure in litigation, the number of birth defects did not decrease, helping prove that the drug did not have the propensity to cause such problems.
The mounting costs of defending lawsuits, insurance premiums, and possible indemnity payments were likely factors in the company’s decision to remove the drug from the market. This decision no doubt saved significant costs and expenses, but the real cost was to pregnant mothers who did not have access to a highly effective anti-nausea regimen.
Interestingly, it was this litigation that led to the landmark Daubert case that held trial courts as the gatekeepers of expert testimony. The plaintiff’s expert in this litigation used spurious science to support the claim that the drug caused birth defects. Many believed that these claims were clearly defensible. If the manufacturer and its insurers had decided to defend the claims in the face of mounting costs, would the outcome have been different?
In just about any area of litigation, the decision to try marginal liability cases should be a part of the overall litigation strategy. Product manufacturers sometimes understand this when defending allegations about the design of a product. This also applies to routine, high-volume liability cases. Picking the right cases to try early can affect the overall pattern of litigation for years to come. You also can affect the reputation of your company within the plaintiffs’ bar. There certainly are enough plaintiff lawyers who are looking for quick, early settlements. The carriers, companies, and other defendants who are willing to pay these settlements get a reputation for overpaying claims and not trying cases.
On the other hand, showing a willingness to go to the mat actually makes it easier to settle the claims that should be settled. Cases with questionable liability frequently result in a game of chicken. At some point between the time of filing the complaint and picking a jury, one side is usually going to express an interest in a settlement. It’s not necessarily bad to be the first to do this. However, your opponent needs to know from experience and observation that you are willing to take the case to trial and have the experience to do so.
Claims professionals and defense counsel need to be on the same page with regard to case strategy and global litigation strategy. Defense counsel needs to be trustworthy and capable of trying the worst of cases. They also need to have current experience in doing so. The worst scenario occurs when plaintiffs’ counsel knows defense counsel has not tried a case in a long time and they push settlement all the way to the courthouse steps, even to the point of being willing to try a case that could be settled if defense counsel were ready and able to try it.
The lesson is that defense counsel and claims professionals need to communicate clearly about their litigation and trial strategies. Most of all, they need to try cases on a regular basis. This keeps defense counsel’s trial skills current and lowers the overall payment of indemnity over the long haul.