The insurance industry has long been a leader in using data in all aspects of its business activities. A core activity of the insurance industry is to predict future loss exposure, so it is easy to understand why past claims data has long been used in setting rates and determining what types of coverage to offer. As the use of data has become more prevalent in many industries, insurers have also expanded the collection and use of data into many other areas of their business like fraud detection and marketing. Data on factors such as climate and health also are of increasing interest to insurers as they look for information that will help them provide products that are in-demand in a manner that is financially sound. But what happens when a disputed claim becomes a legal matter? How can insurers apply those same kinds of analytics to understand their legal exposure and improve their chances of succeeding in court?

Legal data analytics

The rapidly growing area of legal data analytics provides insurers and their counsel with powerful technology to use when handling litigated claims. Legal data analytics provides unequaled insight into the behavior of courts, judges and counsel in litigated insurance cases. Analyzing data from actual cases allows insurers and their counsel improved understanding of how insurance cases are actually decided, how long cases last, and what litigation strategies have been successful. With this data, insurers can better understand the litigation landscape and develop successful legal strategies. Let's look at some examples of how insurers and counsel can use Lex Machina's legal analytics to better evaluate insurance claim litigation. Lex Machina uses data from insurance cases pending in the United States District Courts from 2009 to present. Users can analyze the data for a wide range of insights such as spotting trends in insurance litigation, analyzing the relevant experience of counsel, forecasting litigation outcomes, and improving case strategy.

Spotting trends

The use of class actions in litigation aggregates hundreds or thousands of individual claims into one lawsuit and can result in large expenses for the insurer both in attorneys' fees and settlement costs for defendants.  As a result, understanding trends in class action filings in insurance cases is crucial for accurate staffing and budgeting. The filing data for insurance class actions in Federal District Court from 2009 to present is shown in the first slide above.

Analyzing counsel

From the class action automobile insurance filing data, we see that there is an increase in the filing of these types of cases over the past five years. Next, we look at which law firms have represented plaintiffs and defendants in class actions involving automobile policies from 2009 to present.

Forecasting and improving outcomes

Using legal analytics to understand how cases have been resolved in the past gives parties the opportunity to formulate a strategy that has the best chance of success. To demonstrate how legal analytics can assist in developing legal strategy, let's use another example. An insurance company issued a commercial general liability policy to a business in Chicago has been sued by its insured for defense in a case brought by competitor for unfair competition. The insurer denied the claim because the insured's notice was not timely under the policy. The insurer believed the policy excluded coverage for this type of claim. The insured filed suit in the Northern District of Illinois. The insurer and its counsel used legal data analytics to see what has happened in similar cases in this court, understand how long it might take to resolve this matter, and see what strategies have worked for insurers in similar cases. The data in slide No. 7 above shows timing for key events in these cases. The data also can be analyzed more deeply. Counsel can use it to identify cases that have rulings on the relevant issues. In this case, the principal issues were whether the insured provided timely notice and whether a policy exclusion applies. The findings table in the slideshow above reveals all the rulings this district has made on important insurance issues and gives counsel the ability to go right to cases involving the two key issues in this case.

Winning strategy

Legal analytics tools provide lawyers with unparalleled insights into litigation because they give users detailed information about how and when courts have decided cases, who the parties and counsel were,  the legal issues the court resolved, and the damages awarded. Insurers can take advantage of legal data analytics to spot litigation trends, improve case evaluation, and develop winning litigation strategies. Ronald Porter is a legal data expert with California-based Lex Machina, which provides a Software-as a-Service platform that delivers strategic insights on judges, lawyers, parties and more, mined from millions of pages of legal information. See also:

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