New Paths in Litigation Management - CAJPA Conference...Sep 09, 2016 · SEPTEMBER 13 -16, 2016 SOUTH LAKE TAHOE, CA New Paths in Litigation Management: Leveraging Data to Improve

SEPTEMBER 13-16, 2016 SOUTH LAKE TAHOE, CA

New Paths in Litigation Management:

Leveraging Data to Improve Outcomes and Cost

Kevin Combes, Director, Risk Control Claims & Engineering Pradnya Nimkar, ACAS, MAAA Consultant & Actuary

Litigation Management Defined Planning, controlling, and monitoring the litigation process to:

•Achieve earliest possible resolution

•Minimize legal costs

•Achieve the most optimal outcome possible

SOUTH LAKE TAHOE, CA SEPTEMBER 13-16, 2016

Litigation Study Context •Severity continues to trend negatively in CA and elsewhere ◦ WCIRB reports estimated increase in WC indemnity severity at 15% over

2012 to 1015. ◦ Paid ALAE per indemnity claim: Since 2012, the average has increased 26%.

◦ Driven by cost containment and Litigation Expense

•Legislative uncertainty ◦ Increase in litigation volume follows in the wake of reform. ◦ Liens: Following a sharp decline in liens from 2013 to 2014 (after passage of

SB863) the total number has nearly doubled from 2014 to 2015.


Litigation Study Context •Lack of objective measures of performance ◦ Mostly subjective ◦ Not focused on litigation outcomes

•Litigation is most significant cost driver across all lines of coverage ◦ Common theme for every organization

Sample demonstrating impact of litigation on incurred values


What We Did… •Developed an actuarial algorithm to identify performance differences between defense firms ◦ Adjusts for differences in severity/complexity, volume, case load composition,

etc.

•Assessed $0.6B in incurred values

•Over 2.2M transactions

•Over 3,500 litigated claims ◦ Primarily California WC

•Using Statistical methodology, we were able to quantify the differences in attorney performance.


Differences in Performance – Legal Fees


Differences in Performance – Outcomes


Difference in Performance – Client Performance v. Industry

Difference in performance relates to client’s engagement in Litigation Management process ◦ Clients less engaged in process (as

defined by presence or absence of formal litigation management program) experienced similar adjusted scores compared to Industry

◦ In this example, the client performance was 26% better from a adjusted score perspective compared to industry

Attorney Firm name Final (Adjusted) Score Rank Attorney Firm 1 1.7 1 Attorney Firm 2 4 2 Attorney Firm 3 4.6 3 Attorney Firm 4 4.7 4 Attorney Firm 5 4.9 5 Attorney Firm 6 7.8 6 Attorney Firm 7 9 7 Attorney Firm 8 10 8 Attorney Firm 9 10.8 9 Attorney Firm 10 12.3 10 Attorney Firm C (Client) 12.9 11 Attorney Firm 12 13.6 12 Attorney Firm 13 13.8 13 Attorney Firm 14 14 14 Attorney Firm 15 14.4 15 Attorney Firm 16 14.8 16 Attorney Firm 17 15.5 17 Attorney Firm C (Industry) 16.2 18

Attorney Firm 19 16.6 19 Attorney Firm 20 17.3 20


What we have learned… Invariably there are differences in firm performance ◦ There are significant differences between firms in the legal expenses charged

for similar injury types/causes of action ◦ There are significant differences between defense firms in outcomes

produced ◦ There are difference in performance of a single defense firm between client

and industry

We can model changes to panel mix to drive outcome performance improvement.


What do differences in performance mean from a balance sheet perspective? •Important to understand from 2 perspectives… ◦ Leakage (historical) ◦ Savings (predictive analytics)


Leakage


Savings


What else have we learned?

800

850

900

950

1000

1050

$-

$1,000.00

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

$7,000.00

Defense FirmA

Defense FirmB

Defense FirmC

Defense FirmD

Defense FirmE

Defense FirmF

Average Legal Fees Duration (in Days)

• Time is Money!

• Duration effects Legal cost


What else have we learned?

…but not necessarily outcomes


Take-Aways •Defense attorney performance significantly varies between defense firms

•Clients with formal Litigation Management programs in place outperform industry

•There are metrics now available to objectively evaluate firm performance

•Adverse panel selection can significantly impact your balance sheet


Common Litigation Management Program Weaknesses •Wrong person in the litigation manager role

•No written guidelines

•Guidelines not followed / lack board or member support

•Lack legal bill review process

•For pools, implementation lacking at member layer

•Lack of quality data and metrics


Practical Litigation Management Solutions


Litig

atio

n M

anag

emen

t G

uide

lines

• Litigation Cost Analysis • Develop written Litigation

Guidelines to drive consistency and sustainability of legal panel

• Sets expectations aligned with your organization’s goals and objectives

• Establish Key Performance Indicators (KPIs)

Litig

atio

n Co

st

Cont

ainm

ent

• Reduce legal spend based upon compliance, best practices and spend management

• Actionable data to manage firms and program

• Faster, more efficient legal bill processing gets claims closed faster

• Create greater accountability of firms engaged

Take-Aways At a minimum:

Understand what drives cost in your program

Educate board / members on advantages of early resolution / importance of litigation management

Develop written guidelines ◦ Board or General Counsel to review / adopt ◦ Require defense counsel sign-off

•Implement a legal bill review program

•Use metrics to evaluate performance ◦ Review results with defense counsel ◦ Annually report results to board


Questions?


New Paths in Litigation Management: ��Leveraging Data to Improve Outcomes and CostLitigation Management DefinedLitigation Study ContextLitigation Study ContextWhat We Did…Differences in Performance – Legal FeesDifferences in Performance – Legal FeesDifferences in Performance – OutcomesDifference in Performance – Client Performance v. Industry What we have learned…What do differences in performance mean from a balance sheet perspective?LeakageSavingsWhat else have we learned?What else have we learned?Take-AwaysCommon Litigation Management Program WeaknessesPractical Litigation Management Solutions Take-AwaysContact InfoSlide Number 21

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New Paths in Litigation Management - CAJPA Conference...Sep 09, 2016 · SEPTEMBER 13 -16, 2016 SOUTH LAKE TAHOE, CA New Paths in Litigation Management: Leveraging Data to Improve