Litigation management effectiveness is of critical importance to claims executives and the attorneys they hire. But where is the industry headed? What changes are on the horizon that will have lasting impacts? How will you benefit? Most importantly—are you prepared?
Effective Litigation Management Is Critical
Half of all claims leaders continue to report escalating litigation costs on a per-file basis, according to the 2019 CLM Litigation Management Study. For many claims organizations, attorneys’ fees and expenses exceed the unallocated expenses required to maintain the claims department itself. That same study showed a full 80 percent of claims executives say that a majority of their litigated claims settle later in the process “than is necessary.”
Litigation management effectiveness is highly visible within insurance companies. In 2019, more than 70 percent of senior claims executives report having had a conversation with their CEOs about litigation management effectiveness in the prior 12 months. Social inflation, nuclear verdicts, and a highly coordinated plaintiffs’ bar are all influences that are coming at the industry quickly and add to this challenge. Many organizations struggle to identify early in the process which cases are good early resolution candidates and which present significant severity risk.
In the context of these pressures, we predict three industry changes that will improve how claims organizations and the attorneys they hire work together, how they define and measure litigation performance, and the case outcomes they achieve together.
Prediction #1: Collaborative Case Management Platforms
Our first prediction is that litigation management software will evolve beyond invoice audit and management tools into comprehensive and highly integrated platforms. Participants in the 2019 and 2020 CLM Litigation Management Symposia discussed a plethora of industry improvements and ideas, but there was one common thread that emerged from the presentations made by several innovative law firms in attendance: The idea of collaborative case management platforms, into which a law firm could invite its clients.
The idea is that by giving clients more information with less effort, claims professionals can spend more time proactively managing their litigation. Such platforms can provide more insight into both the big picture and detailed case information; they offer more opportunity to interact; and there are fewer surprises.
Development of such collaborative technology approaches was showcased by law firms at the Symposia, not buyers of legal services. Their experiences showed that clients love these platforms. These systems have the potential for outlining everything that is needed for good litigation management in an easy-to-access way:
• What is the case about? How old is the case? What are the case’s strengths and weaknesses?
• What is our strategy? What are the steps in that strategy? What steps have been completed? When are the next steps due?
• What efforts have been made to resolve the case?
Of course, it is impractical to ask claims organizations to sign into 50 different law firm platforms. Additionally, these law firm platforms are not integrated with claims systems, meaning that the data resides in disparate systems. This approach quickly becomes unwieldy for claims organizations.
We predict that claims executives will reverse this process and start asking counsel to sign into their own litigation management platform. Such platforms will reside outside of the claims system to preserve security, and will be used by counsel to populate crucial case information.
We expect such secure platforms will integrate directly with the claims systems. Ultimately, this platform may also integrate directly with law firm management systems. Such integrations enable this platform, which sits between claims systems and law firm platforms, to keep everyone working in their core environments while automatically sharing information more effectively with each other.
Why is this groundbreaking? Because the emails; Word and PDF reports; and phone calls used by counsel to report case information today present two crucial flaws.
First, these traditional methods require claims professionals to decipher, outline, and summarize the information coming to them in these varied formats. Instead of strategizing about resolution or case strategy, claims professionals spend time pulling out key data elements from documents or filing the report to its digital folder, and then entering that information into their claims system. Imagine instead a completely integrated environment that eliminates the claims professional’s constant obligation to manually update the claims system.
Second, the use of such an integrated platform that captures information provided by counsel creates a wide array of data sets, metrics, and analytics not available with current e-billing platforms.
Prediction #2: Improved Structured Litigation Data Elements
Our second prediction is that claims organizations and law firms will be able to structure a wide range of new litigation data elements, resulting in vastly improved metrics and analytics. When you automate the transfer of data from the lawyers’ fingertips to the claims system, key elements of the case become structured data.
What are these elements? Think about what claims organizations ask counsel to provide today: venue, plaintiff’s counsel, judge, exposure predictions, demands and offers, dispositive motions, discovery, expert utilization, use of mediation, expense budgets, and dollar amount spent to date. The list goes on and on.
Currently, because this information is provided in PDF and Word attachments in emails, it is by definition unstructured. Regrettably, only a small fraction of this information makes its way to a structured place in a claims system. This means it cannot be aggregated, assessed, analyzed, and reported on and, thus, becomes lost. In the future, because this information will be captured in a structured way, it will become useful from a metrics and analytics perspective.
For many claims organizations, a significant majority of litigation metrics come from legal invoices, which are scraped and massaged by e-billing platforms. Averages fees per file can be calculated. Invoice adjustment rates can be seen. Cycle times can be estimated by measuring the days between first and final invoices.
Yet, the invoice is an unreliable source for actual events that are taking place on the case. What strategies, legal tools, and resolution attempts are actually positioning the case for resolution? These are performance indicators that are critical to assessing counsel and claims professional performance in litigation management. It may be for this reason that in the 2019 CLM Litigation Management Study, when senior claims leaders were asked to rate the helpfulness of their current litigation metrics, they gave them a lukewarm score of 55 out of 100.
In contrast, the highly integrated and comprehensive platforms we have discussed capture data directly from defense counsel in a structured way. It can also be used to drive cycle time and improve outcomes by affecting earlier resolution strategies. Here are some command examples that will be possible with such a setup:
• “Show me all cases in which the offer and demand are close to one another.”
• “Show me all cases in which the delta between demand and offer is less than the expense budget.”
• “Show me all high-severity cases with a poor defensibility rating.”
• “Show me all cases in which counsel is behind in the execution of our agreed-to strategy.”
• “Show me all upcoming scheduled plaintiff’s depositions,” (so as to make an offer after each deposition).
The possibilities are endless. Every litigation executive can think of five reports they would immediately like to see but cannot currently retrieve.
From the use of such software, we predict that the industry will develop entirely new datasets of information. This information will be used to generate automated alerts to the claims organization to proactively manage their cases. Fewer unstructured reports; more structured data elements.
Prediction #3: A Focus on Outcomes
Our final prediction is that litigation management performance evaluation will focus more on case outcomes (in addition to billing performance). Many discussions today about litigation performance remain about fees as opposed to outcomes. Possibly this is because the majority of structured data is driven by e-billing and invoice review. We tend to manage to what we can measure.
Legal services buyers will continue to maintain a strong focus on hourly rates, average fees, and the costs required to handle the litigation. They will continue to compare firms that appear to be more efficient in their handling of like cases. However, we predict that the new data sets we have discussed will put legal fees into a larger context for claims defense litigation. Why? Because what really costs money are the indemnity dollars and loss costs involved in the litigation.
Take an example of one claims organization’s ratio of legal fees and expenses to total litigation costs, by line of business. Their legal fees and expenses as a percentage of total litigation costs (fees, expenses, and indemnity) are 15 percent for auto, 33 percent for liability, 13 percent for property, and 31 percent for workers’ compensation. All lines combined, that is an average of 23 percent. The remaining 77 percent of program costs are on the indemnity side.
Why does this matter? A focus on expenses only affects a small portion of total litigation costs. A reduction of legal fees by the industry average of six percent means a total program improvement of only 1.4 percent. In comparison, an improvement to case outcome value of only two percent would be a larger amount.
The new data sets we have discussed, created by counsel’s direct input of information into secure, more comprehensive data-capture platforms enables a renewed focus on controlling outcome. Imagine reports that show which attorneys:
• Seem to get the best results against certain plaintiff’s counsel; in certain venues; and on certain types of cases.
• Use mediations most effectively (or which mediators get the best results).
• Get plaintiffs deposed most quickly.
• Seem to be the most accurate in their early assessments of value.
• Always seem to be late in their execution of agreed-upon strategies.
These are just five core performance areas that most litigation executives would agree are important, but admit are rarely measured now.
We predict that these new data sets, squarely centered on outcomes and inclusive of the steps and activities that led to those outcomes, will make counsel performance assessment easier and, frankly, more relevant.
A Bright Future
We are bullish on the future. Each of our predicted changes is facilitated by advances in technology; particularly the increasing ability for claims systems and other platforms to speak with one another and put all data elements in the right place. Technology can be a powerful innovation enabler.
We predict that the shift in performance measurement focus to include case outcomes and activity in addition to billing compliance has the potential to be very powerful. It is a shift that better aligns counsel and their clients, and closely aligned communities always do better collectively than those that are not.