Defending Billion-Dollar Claims

Nine best practices for 10-figure losses

August 09, 2021 Photo

As we all know, when it comes to 2021, insurers and defense attorneys must think the unthinkable and be ready for the unimaginable. We are all too familiar with breaking news chyrons from major news outlets that alert us on a daily basis to mass shootings, building collapses, wildfires, refinery or bomb explosions, or catastrophic transportation accidents involving planes, trains, and trucks, all with significant numbers of fatalities and injured victims. As insurance carriers and defense litigators, we must be ready for any of these events from the moment they occur.

So, when you get the call, what do you do? Based on our experience, there are nine best practices for handling the most difficult and complex situations. We discuss each step in detail below.

Step #1: Create a defined team to handle a crisis at the outset.

Immediately naming your legal team—or, better yet, having predetermined counsel for crisis situations—allows the insured to be more prepared out of the gate. This is especially critical since plaintiffs’ counsel may organize quickly, be aggressive, and start making discovery demands immediately. Other critical actions include:

•    Engaging experienced lead counsel to ensure legal efforts are coordinated at the outset and to act as the central point of contact for all retained to assist in the defense of the insured.

•    Working with local, state, and national authorities in the investigation of the incident.

•    Determining the best local counsel to retain and locking them in before others do. Discuss with them potential key players and issues to be addressed in the near future that may be specific to a jurisdiction.

•    Retaining the best criminal attorneys in the local jurisdiction for consultation and coordination, if criminal charges may be involved.

•    Speaking with the insured and as many individuals/employees/agents/witnesses as possible who could have relevant knowledge to help guide the investigation and determine key issues that may be raised.

•    Preserving critical evidence and testimony for accuracy and establishing a solid chain of custody.

•    Identifying the expert specialties required and locking them in before they are retained by others.

•    Researching the jurisdiction in which the incident occurred and the applicable law (possible multi-state application) to inform additional efforts.

Step #2: Engage a crisis management team so that you can control your part of the narrative. Major crises have the potential to become a national or even an international story, so an insured’s ability to get in front of the story is critical. Some important actions to consider here are:

•    The court of public opinion is the jury, so engage an experienced crisis management or public relations team to manage events internally and externally. When potential jurors hear the matter years later, their initial impressions and memories of the incident will include your narrative, and contemporaneous public opinion can be used strategically to your advantage.

•    Events will move rapidly, so having a preselected stable of firms and teams is a smart strategy (failing to plan is planning to fail).

•    Ensure that your public relations team has good relationships with key contacts in the media so that you have the pulse on the latest developments and will be given a fair opportunity to comment, if the legal team desires. It is important that the public relations team closely coordinates with the legal team and does not make any public statements without prior approval. Consult with the public relations team about legal strategy and potential public perceptions to help adjust strategy and execution when it comes to court filings, hearings, and related litigation action and inaction.

Step #3: Define the defense strategy plan, or at least the key hypothesis of the defense strategy, and be focused and consistent in the execution of that plan. This will ensure that all teams are strategically aligned in the insured’s defense while also eliminating competing approaches.

•    The defense and crisis management teams must work together to create a clearly defined strategy as they play off and support one another. Organization and coordination here is critical, from the big picture down to the tiniest of details.

•    The strategy should be the “north star” of the defense, and should be consistent and revisited periodically to ensure stakeholders are updated and that the necessary tweaks are made to improve execution.

•    Engage the insurance tower from the beginning so that all levels of insurance support the strategy and are introduced to the legal and crisis management team, with key points of contact shared.

•    Schedule regular all-hands calls with the insured, defense team, and carriers so that everyone is apprised of rapidly moving developments and remains on the same page, with opportunity for input by all.

•    Consider whether the insured has indemnity from other key parties and make demands to defend the insured as soon as practical. Additionally, if opportunities to tender are available, explore these to help control the investigation and potential litigation.

•    Consider a joint defense agreement with other parties, if appropriate.

Step #4: Determine the insured’s exposure to better understand risk and evaluate strategy. The level of exposure or number of potential plaintiffs and defendants are key variables in adjusting a strategy.

Determining exposure must be done holistically and precisely.

•    Define victims, fatalities, and injuries to assess damages.

•    Research all media for information on victims to determine injuries and backgrounds; potential witnesses who may be relevant to the investigation and likely litigation; and other potential claims and claimants to incorporate into the exposure analysis.

•    Categorize injuries to inform damages and bifurcate plaintiffs.

•    Prepare a preliminary damages model, ideally automated so that it can be updated continually and optimized.

•    As best as possible, determine potential exposure and note critical caveats and outstanding information that could impact the evaluation.

Step #5: Create leverage for negotiations and fracturing plaintiffs. Understanding your strengths is key to improving your negotiation and settlement posture. Be sure to:

•    Review and analyze all legal defenses to improve the insured’s legal position and potential outcomes. For example, where applicable, consider the Protection of Lawful Commerce in Arms Act Congress passed to protect firearm retailers and manufacturers from certain lawsuits seeking damages arising out of the criminal conduct of third parties. This defense could be put forward at the motion-to-dismiss stage and could require the dismissal of the entire suit.

•    Determine if you can remove to federal court or transfer to an out-of-state court, as that is traditionally more advantageous for defendants. However, as this is a jurisdiction-specific inquiry, be sure to consult local counsel for their knowledge and experience.

•    Use motions to dismiss as well as preliminary motions where they can be credible and available tools to create leverage.

•    Consider outcome-determinative motions as early as possible and weigh the potential impact on the litigation and potential to advance resolution, even if unlikely to be successful in court.

•    Consider declaratory actions to go on the offensive and give plaintiffs’ counsel something to deal with and think about, while creating leverage for the defense.

•    Consider the likelihood of potential multi-district litigation and coordinate with local counsel in respective jurisdictions—ideally local counsel from the regional offices of a large, national law firm—for organized and orchestrated execution in litigation strategy.

Step #6: Develop a resolution strategy that aims for global resolution to the extent possible.

•    Consider the resolution strategy after developing leverage and fragmenting plaintiffs; alternatively, if plaintiffs are organized and not fragmented, identify their leaders for purposes of communication and negotiations moving forward.

•    Use your relationships with plaintiffs’ counsel to obtain as much information as possible to support or supplement your own investigations, and check your evaluations on an ongoing basis.

•    Use focus groups and mock trials to help test defenses, evaluate damages, and direct future strategy.

•    Rely on early mediations to remove claimants/plaintiffs.

•    Research mediators who have a track record for success with complex litigation in your jurisdictions. Finding mediators who all parties respect will help the mediation succeed.

•    Work with mediators to structure the mediation in a way most advantageous to resolution.

•    Align insureds with the insurance tower so settlements are not delayed and are agreed on by all.

•    Be prepared for outrageous demands, and deal with them accordingly. Do not let frivolous demands deter your strategy and process.

Step #7: Be creative and don’t be afraid to test new strategies. This is a billion-dollar claim after all, and there is a lot at stake for the insured.

•    Negotiations should focus on the big picture, not minutia. Compromise when possible in order to preserve the resolution.

•    Consider using experienced claims administrators, as they can inform the insured and collaborate well with others to help facilitate resolution.

•    Try to create a global conceptual framework for resolution—a holistic approach makes the plaintiffs work together—and make tradeoffs when possible.

•    Negotiate details and always leave an “out.”

•    Be aware that the insured may not want to be involved in the adjudication of individual claims.

Step #8: When settlement is finalized, carefully message the outcome.

•    Plan to issue a joint message with plaintiffs’ counsel to ensure that they are on record in support of the settlement.

•    Promote to the public that the outcome of the settlement is fair and equitable.

•    Time the announcement to coincide with key events.

•    Coordinate with courts to finalize the resolution.

Step #9: In the aftermath, be ready for anything and be prepared for everything. Regardless of planning and efforts, a global resolution may not be possible. More often, stragglers will exist and opt-outs will happen. Deal with them as they occur. As with most litigation, there will be unforeseen difficulties, but if you adopt these best practices, maintain adherence to your strategy and plan, and remain flexible, you will achieve a better outcome.

About The Authors
Multiple Contributors
Stratton Horres

Stratton Horres, retired, was most recently senior counsel at Wilson Elser Moskowitz Edelman & Dicker LLP.

Karen L. Bashor

Karen Bashor is partner at Wilson Elser.

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