Jack McCalmon, president of The McCalmon Group Inc. in Tulsa, Okla. and partner at Titus Hillis Law Firm in Tulsa, advises risk managers to get involved early and often with their company’s litigation—and to lobby for settlements as the best cost-control strategy.
“Typically, if you’re managing for cost—which is wise because you should never bet on litigation—then you’re looking to settle as early as you can,” he advises.
The economics of the legal field, he explains, mean that a plaintiff attorney who has taken a case on a contingency fee also has a vested interest in settling.
“[For plaintiff attorneys] investing time into a case—knowing there is a strong chance they won’t get their money back—there is a value proposition to settling early to get as much money as they can before they invest too much into it.”
McCalmon points out, however, that some trial attorneys won’t settle and are ready and willing to go to court because they have the means to do so. Those attorneys will “win three out of five, but those three are really big. But those attorneys are kind of rare. You have to have a lot of resources and be able to take the losses.”
From a defense perspective, too, it’s always valuable to try to get a settlement as early as possible, he notes.
“But there are some things that keep that from happening,” McCalmon notes. “If it’s an emotional issue—an employment or wrongful-death issue—often the plaintiff is not willing to settle. They are upset. You especially see that in directors-and-officers cases.”
There are also certain cases that just don’t settle. “Wage-and-hour cases are that way, because you either paid them or you didn’t, and that usually comes out in discovery—and there’s no reason to settle for less than what the law requires [an employer to pay],” he explains.
But when dealing with negligence and with pain and suffering, there is no set dollar. “All you have is what you think the jury will give. You can look at what they’ve decided before. In the medical-malpractice field and the insurance-defense field in the sense of car wrecks and slip and falls, you get an understanding of what a county jury will give you—and you can literally go 30 minutes away, and it will change.”
In these cases, settlement, even before a pleading is filed, can be best. Right after a pleading is good, as well, he says.
“But the more discovery you do—this is where attorneys sometimes get into trouble. They do discovery, they go all the way, and then at trial say they want to settle, but the number goes up,” McCalmon says.
THE INSURER’S SIDE & “OUTRAGEouS VERDICTS”
Meanwhile, the insurer’s position is to keep costs down and settle early, which “creates a rub, because sometimes the client doesn’t want to do that,” McCalmon says. The client may want to show they can’t be sued by everybody and “that they have a backbone, but the carrier is saying, ‘you’re making a statement on my dollar—I’d rather you settle.’”
Cost of discovery, he says, “is huge; it’s divisive. I tell people it’s not for lack of a spine, for settling, it’s because you have a brain. Because it’s expensive and you don’t have a clue as to how it will come out.”
He notes that even with a good defense case and the facts on your side, “you’re dealing with a jury that is unemployed, angry and you never know what you’re going to get. Some outrageous verdicts are coming out.”
For example, McCalmon says, the largest sexual-harassment verdict ever came out this year. “The facts were egregious. The trial attorney probably said there was no way he would settle. The person was awarded in the hundreds of millions of dollars and the person didn’t lose their life,” he says, adding, “There are people who lose their life who are awarded less than somebody who suffered through sexual harassment for a period of time.”
One of the most important steps risk managers can take to ultimately keep costs down is to be on the lookout throughout their organization to guard against lawsuits in the areas of workers’ compensation, directors and officers, and securities, McCalmon says.
“The best prevention, an apple a day, is loss control,” he says. “If your first defense is ‘I’m going to win in court,’ that’s not a good strategy,” he warns.
Loss prevention is always the best strategy because it helps reduce risk, and “it also shows to your employees that you care,” he says. “When you’re talking about safety and you say it matters and you’re backing it up with safety training, you’re showing employees that you care.”
This is especially the case if you follow through, he says, explaining that an organization that claims it doesn’t want any sexual harassment in its workplace needs to do the training, have strong policies and enforce those policies. “This shows that you care, and it allows you to keep good employees,” McCalmon asserts.