The data-management needs of the insurance industry aremultifaceted and always evolving. There is a constant challenge tosimplify the complexity of data management for a variety ofpurposes and requirements.

Yesterday's need for data-quality checks and balances is now amuch more sophisticated predicament. Data management has become amission-critical aspect of business operations, touching on allfacets of an insurance enterprise.

It is no longer sufficient for insurers to manage onlystatistical and financial data. E-mail and the protection ofpersonally identifiable information are among the challenges facedby the industry today.

Adding to those growing concerns is the issue of e-discovery:the process by which a company is required to produce electronicdocuments to defend its position or advance its case in a court oflaw.

E-discovery has moved into the spotlight in recent monthsbecause of the December 2006 revisions to the Federal Rules ofCivil Procedure. Those revisions affect many aspects of the FRCP,but one change in particular is leading organizations to change theway in which they manage information.

Specifically, the amended rules require the parties in any civildispute in federal court to meet early in the case to discussissues relating to electronically stored information (ESI) in theirpossession.

These early discussions now touch on the steps that have beentaken to preserve ESI, the form in which ESI will be produced, andrelevant ESI that is “not reasonably accessible because of undueburden or cost.” Similar requirements have been enacted or arebeing considered in many states.

In the past, parties to a dispute were not required toparticipate in an early discussion relating to ESI. Historically,the majority of lawsuits were settled before disputes about theproduction of electronic documents needed to be resolved.

There were not many e-discovery cases, but the new earlydiscussion requirements arguably turn almost every new civilproceeding in federal court into an e-discovery case. Earlydiscussion of ESI has not happened in every federal civil case thathas commenced since December, but the tolerance of some judges forlawyers who do not raise the issue is probably short-lived.

In addition to the requirement that your trial counsel be ableto intelligently discuss your relevant ESI early in a proceeding,your preservation obligations have become much more demanding.

Under case law prior to the amendments to the FRCP, preservationobligations are triggered not when the case is filed but whenprobable. Both the early discussions and the preservationrequirements can be very burdensome to the law department that doesnot have clear processes and protocols for responding in place.

Corporate legal departments–together with other disciplines thatsupport enterprise data, such as information technology and datamanagement–must take action and assemble a great deal ofinformation quickly when a dispute arises.

This is where advance planning can help: A coordinated,controlled, enterprise-wide program for data management is animportant part of readiness for e-discovery and can save a companysignificant time and money.

E-discovery obligations can be outsourced, but doing so isexpensive. Moreover, exceptional or event-related outsourcingexpenditures tend to result in very limited process benefits.

Typically, outsourcing e-discovery does not improve anorganization's records-management program. Fortunately, manyorganizations are recognizing that every lawsuit is now likely toimplicate their electronic information, and that the new rulesoffer opportunities to better manage litigation.

This is especially important for insurers that manage tens,hundreds or even thousands of cases that are similar in terms ofthe sources of ESI involved.

As a result, insurers are rapidly getting up to speed on thoserequirements. In doing so, carriers are changing the role of legalrepresentation, as well as the relationship among legal departmentsand the disciplines involved in the management or support of theirdata and systems.

Corporate attorneys have always had to focus on the facts andthe law, but because of the changes to the FRCP, they now also haveto focus on the management of the electronic data made relevant byany dispute. Often, a company's legal team needs to work closelywith its IT staff and data and records managers to effectivelyfind, store and manage a huge inventory of electronic informationthat's potentially pertinent to the case.

For many reasons, savvy organizations should link theirrecords-management program to their e-discovery readinessinitiatives.

First, the FRCP amendments further increase the risks associatedwith failure to consistently operate a records-management program.This issue was brought to national attention by the documentshredding that precipitated the demise of Arthur Andersen.

It was then generally magnified by the greater volume,redundancy, widespread dispersion and dynamic character ofelectronic messages and other e-documents–especially as comparedwith paper.

In its “safe harbor” provision, the amended FRCP now offerslimited protection when ESI no longer exists. Absent exceptionalcircumstances, discovery sanctions may not be imposed if ESI hasbeen lost as a result of the “routine, good-faith operation” of acomputer system.

Consequently, consistent and appropriate records-managementoperations are now becoming a cornerstone in the plans of manyorganizations to establish good faith for purposes of thatprovision.

Second, the gradual move toward new organizational structuresand technologies accelerates the risks associated withrecords-management issues. The people, processes and technologynecessary to manage ESI in records-management programs are similar,if not identical, to those necessary to manage e-discoveryeffectively.

For example, functions such as data searches, deduplication andauthentication are equally essential in both areas.

Designation of document coordinators in various divisions of adiversified organization–as well as compliance-related controlssuch as training, auditing and enforcement–is also critical tomanagement of both records and e-discovery.

However, the third and largest impact of the amended rules onrecords management may be the future development of the“reasonableness” analysis that is the foundation of thoseamendments. This is a type of analysis unfamiliar to recordsmanagement but ideally suited to the challenges of electronicdocuments.

Consider, for example, the intractable problem of legacyinformation stores that become harder to decipher or restore witheach passing year.

Perhaps the data restoration is difficult enough to be excludedfrom production because the information store is “not reasonablyaccessible” under the amended rules. However, the amended FRCP doesnothing to make preservation obligations more reasonable.

For example, by using a “reasonableness” test, followed by acost-benefit analysis in which the benefit is the value of such ESIto a prospective opponent, and culminating in targeted restorationefforts, one might succeed in turning a huge collection of uselessESI into an accessible store of potentially relevantinformation.

Widespread transformations of ESI and the often painfullitigation experiences of organizations–including insurers–meanthat a coordinated, controlled, enterprise-wide program for datamanagement is an important facet of being prepared fore-discovery.