As litigation shows no signs of slowing in the next year,insurance professionals need to be aware of emerging litigationtrends that may impact the industry, as well as their clients.

Crowell & Moring, the 2013 “Washington Litigation Departmentof the Year,” recently published their annual LitigationForecast, providing an expert look at legal trends, regulatorylandscapes, and upcoming cases that could impact businesses, withboth short- and long-term effects.

“Litigation trends traditionally have been cyclical. The economytumbles, and the lawsuits commence. The economy recovers, andlitigation gives way to corporate deals. But that waltz is a thingof the past,” said Kent Gardiner, chairman of Crowell &Moring.

With cases increasingly intertwined with federal and stateregulatory practices, agents can use these predictions to betterprepare for the future of the industry, planning strategically forsuccess. They can also better serve corporate clients who may beimpacted by the shifting regulatory environment.

From the concussion-related injury suits in the NFL to theAffordable Care Act, the Litigation Forecast 2014 providesa comprehensive coverage of several different industries,illustrating the impact that complex litigation has on the businessworld.

Click through the following slides for an overview of some ofthe biggest litigation trends for 2014.

For more details on legislation, upcoming cases, and regulatoryimpacts, read the full report on Crowell & Moring's website.

Health Care – Legislation driven change sets the stagefor litigation

It is no surprise that the Affordable Care Act is a major driverof litigation. In order to take advantage of the increased federalfunding and to keep costs down, some states have expandedeligibility for their managed care programs, presenting anappealing opportunity for health plans as many moved into theMedicaid managed care business.

For these states, the transition has not been easy, with somefacing financial problems as a result. Some plans have been forcedto exercise early termination rights arising from arrangements madewith states based on disputes concerning the state's accuracy inclaims data when they bid on the business.

Christopher Flynn, Crowell & Moring partner says thatunderstanding the expanding Medicaid market is imperative to avoidfuture losses. The states need to work with plans to createagreements based on mutual success.

Additionally, the federal Mental Health Parityand Addiction Equity Act of 2008, and several similar state lawssubsequently enacted, will impact the health care industry. Theselaws call for similar insurance coverage for medical treatments andbehavioral treatments, including counseling and psychiatrictreatments. However, this is not as clear as it seems. For example,if an insurance plan allows an unlimited number of visitsconcerning a broken leg, does it also need to allow unlimitedvisits for the treatment of depression?

“The trick lies in determining what's comparable from themedical health side to the behavioral health side because, inreality, they don't always line up so neatly,” said Flynn.

“Some advocacy groups argue that utilization review leads tocoverage that is too restrictive for behavioral treatments comparedto general medical treatments, and are therefore unlawful. Bututilization review is an accepted part of modern-day health care,and is often mandated by employer groups because it helps ensurethat members receive appropriate medical care. So there's a lot atstake here.”

Financial Services – State courts: thenew M&A battleground

Merger and acquisition activity has increasedsignificantly over the last few years, resulting in a growth of anew “cottage industry,” whose practitioners file class actionlawsuits that serve to delay every deal involving a public company.As a result, this has become a commonplace issue that bankers andlawyers who arrange the deals have to expect.

Smaller class action firms that once focused on securitieslitigation in federal courts are filing strike suits in statecourts after almost every merger involving a public company isannounced because federal procedures have made it difficult forsmaller firms to get lead counsel appointments in these cases.

“These firms routinely post trolling notices on theInternet within hours or even minutes after an M&A deal isannounced,” said Crowell & Moring partner Edwin Baum. “Theythen race to file putative class actions in state courts. Inessentially cookie-cutter fashion, they assert state-lawbreach-of-fiduciary-duty claims, typically claiming that the saleprocess was deficient, the proxy disclosures are inadequate ormisleading, and the agreed share price is inadequate.”

It is not uncommon for merging companies to face multiple suitsin several states because of these practices. Cases are generallysettled quickly to avoid delaying the closed deal.

“There is usually no change in the deal price or in any cashpayments made to the putative shareholder class. These suits havebecome a virtual private 'tax' on public company M&A deals,”said Baum.

Energy – New Generation: Who decides what, where andwhen to build?

In the past, the division of authority betweenstate and federal regulators in the electric utility industry wasclear. The states would authorize the construction of power plantswithin their borders and regulated retail rates, while the FederalEnergy Regulatory Commission regulated wholesale rates.

But with the industry restructuring and the wholesale capacitymarkets overseen by the federal government evolving, some wonderwhether the resource planning by state regulators could be replacedby a market-based system, where price signals drive developers toconstruct new plants.

“In reality, nothing new was being built, or if it was, it was a pitifully small amount of capacity compared to what would beneeded to replace generating units that were going to be retired,”said Larry Eisenstat, partner in Crowell & Moring'sEnvironment, Energy & Resources group.

Subsequently, a number of states required utilities to enterinto long term contracts with power plant developers in order togive incentives for the construction of new generation, which hasalso prompted lawsuits from utilities and existing power generatorschallenging the states' authority.

“The question is, do states have the authority to require theirjurisdictional utilities to build generation capacity when they seea need, be it for reliability, policy, or other reasons, even if aFERC-overseen capacity marketplace might not be recognizing thatneed,” said Eisenstat.

Two recent cases were recently decided by federal districtcourts, partially siding with the utilities and existinggenerators, saying that the activity of the states wasunconstitutional. After appeal, however, these cases willultimately make their way to the Supreme Court.

“The outcome of these suits might well lead to the developmentof new ground rules for how a state may encourage the developmentof the power generation resources it believes it needs within ornear its borders, and whether the states are permitted to treatdifferent types of power differently,” Eisenstat said.

E-discovery – TAR enters the mainstream

Technology Assisted Review (TAR), also knownas “predictive coding,” uses computer analytics to identify thepatterns of words and phrases in documents to analyze the content,which provides a richer assessment of documents than moretraditional e-discovery methods. For lawyers, this means having theability to sharpen its focus on documents to specific topics.

In Crowell & Moring's experience, the accuracy rate inidentifying relevant documents is as high as 95 percent, requiringless effort and cost. The court's view of TAR has evolved, with agrowing number finding its use acceptable, compared to severalyears ago when parties were concerned that the cost of defendingthe use of TAR would outweigh the savings, or it would just berejected by the courts.

“Concerns have largely disappeared. Courts are being morediligent about requiring parties to confer on the issues related tothe discovery process. Because of that we're seeing partiesreaching agreements on the use of TAR, including the processes forvalidating results,” said Jeane Thomas, co-chair of Crowell &Moring's E-discovery and Information Management group.

Insurance/Reinsurance – Burgeoningconcussion lawsuits and changing principles

With the highly-publicized lawsuits involving former NFL playersand traumatic brain injury, concussion lawsuits have taken centerstage. In August, the NFL announced a $765 million settlement,which if approved, would resolve the claims of thousands of retiredplayers. But these suits have also raised a number of insurancecoverage issues, leading the NFL and its insurers to file competingcoverage actions.

“There will undoubtedly be a need to address the seriouscoverage issues related to the lawsuits against the NFL,” saidJennifer Devery, partner in Crowell & Moring'sInsurance/Reinsurance group.

Similar cases have been filed against the NCAA as well as theNHL, and subsequently, individual lawsuits have been filed againstPop Warner football, school districts and high school coaches,helmet manufacturers and more.

“While the concussion-related lawsuits have resulted in a greatdeal of recent public interest given the nature of the allegationsand the parties involved, potential coverage disputes are likely torequire the attention of insurers and policyholders,” Devery said. Advertising – False Advertising:Injunction rules get tougher, and the stakes gethigher

More class action firms are shifting their focus from productsliability to false advertising litigation, which is simpler andless expensive in most cases. These firms are on the lookout forfalse advertising, and companies know it.

“Today, if you file a false advertising claim,you are almost certainly going to get a counterclaim,” saidChristopher Cole of Crowell & Moring's Advertising &Product Risk Management group. “If you lose on the counterclaim,you know you're going to get sued in a consumer class action.”

Because of this, some companies are reconsidering theirsituation before getting involved. But as false advertising claimsstill make their way to the courts, the rules of injunction havebeen changing. Traditionally, plaintiffs in false advertising casesdid not need to prove harm to get an injunction, but in recentcases, plaintiffs are required to provide evidence of harm to getthe injunction, which can be difficult considering proving specificharm from an advertisement may require surveying customers to seeif the advertising has affected their purchases.

White Collar – Challenges from theinside and overseas

The Dodd-Frank Act gave authorization to the SEC to rewardwhistleblowers who provide information that leads to successfulenforcement actions. Within the last year, the SEC has increasedits activity in this area, and in October, it announced more than$14 million in an investment fraud case—the largest whistleblowerpayout to date. According to Crowell & Moring, actions likethis could become increasingly familiar.

As cases are resolved, the media generates increased awarenessof the program and its large rewards among corporate employees.

“We are seeing concerted efforts by the plaintiffs' bar to drumup SEC whistleblower cases, including cold-calling employees atlarge financial services companies, broker-dealers and otherenterprises that operate in high risk environments. So momentum forthese cases is likely to increase in 2014,” said Stephen Byers,partner in Crowell & Moring's White Collar and RegulatoryEnforcement group.

Under the Dodd-Frank Act, whistleblower complaints can proceeddirectly to federal courts instead of having to go through anadministrative proceeding first. And now, the SEC itself caninitiate retaliation suits of its own, scrutinizing employmentseverance and settlement agreements that make it difficult forwhistleblowers to report problems.

Trade Secrets – Potential New Laws andNew Risks

Trade secret fraud has become an increasinglyhigh profile issue, resulting in new legislation. The Private Rightof Action Against Theft of Trade Secrets Act of 2013 would allowanyone who suffers injury as a result of violation of the EconomicEspionage Act to seek damages, adding a civil cause of action tothe existing criminal law.

“That would give companies a new arrow in the quiver in thefight against trade secret theft,” said Mark Romeo of theLitigation and Labor & Employment groups at Crowell &Moring.

Other bills would target cyber theft by foreign entities. TheCyber Economic Espionage Accountability Act would createimmigration and financial penalties for individuals involved incyber espionage. This would mean that foreign officials and agentsengaged in espionage would be ineligible for a U.S. visa and wouldbe at risk of having their U.S. assets frozen. The Deter CyberTheft Act would require a similar approach, requiring the directorof National Intelligence to compile a list of countries engaged incyber espionage and the U.S. intellectual property beingmisappropriated or targeted by foreign entities.

Additionally, the U.S. Attorney's office is willing to work withU.S. companies to pursue foreign trade thieves, and Congress hasproposed a bill, SECURE IT (Strengthening and EnhancingCybersecurity by Using Research, Education, Information andTechnology).

“This fits with the idea that government and business should bemore collaborative in protecting against trade secret theft byforeign governments or entities,” said Romeo.

Tax – New Truces and New BattleLines

According to Don Griswold of Crowell & Moring's Tax group,there is an increasing lack of trust for the corporations.

“As the taxpayer pendulum swings away from creativity towardmore conservative positions, the government pendulum continues toswing the other way, reflecting a continuing mistrust of thecorporate community,” Griswold said.

This shift has a number of consequences. Penalties are gettingtougher, and the IRS has accelerated its audit processes, partly toexpand its window into evolving taxpayer strategies, and partly toavoid allowing the statute of limitations to run out. The IRSannounced a new enforcement policy for taxpayers who fail torespond promptly to Informational Document Requests during inquiry.Now, taxpayers can work with the IRS to set initial responsedeadlines, but if those deadlines are missed, the taxpayers will besubject to a new enforcement procedure that may culminate in asummons.

“These matters previously could be handled within the company'stax department, but now they require closer collaboration with thelegal department,” Griswold said.