Reducing Legal Claim Costs

Economic pressure is felt in virtually every corner of the litigation and claim business. Claim supervisors and department heads are required to search every nook and cranny to find ways to reduce costs. To find answers, one could ponder a phrase that is almost an oxymoron: You have to spend money to save money.

At a time when staffs are being reduced and defense firms are being asked to scale back on the cost of billable hours, it may at first seem strange to allocate additional funds for pretrial research. There are many reasons, however, to spend this money in order to bring the costs of litigation down.

Virtually all of the law firms the industry employs are highly competent, ethical, and professional. They are also extremely competitive; one does not become a successful defense attorney by merely walking away from fights. They are out there to win and to protect your interests. Unfortunately, the very competitive edge that makes for effective attorneys sometimes has a cost to the client. Some cases simply need to be disposed of early before hundreds of thousands of dollars are spent preparing a defense that is simply not going to work. The question therefore becomes, “How do we know which cases have to be settled and which cases should go to trial?”

Do Your Pretrial Research

Trial simulations, often wrongly referred to as focus groups, are the standard in predicting probabilities of a given outcome. A trial simulation requires that a consultant work with attorneys and case managers to determine the purpose of the research. In many cases, the purpose is vaguely stated as a need to determine the case viability and whether or not the case is going to move in favor of the plaintiff. What are the probable ranges of damages and comparative fault? Let's consider the following case.

A young, working-class couple plan a romantic weekend escape without the children around. While at a southwest resort, a gas line to a rented casita is blamed for an explosion that kills both parents. It is fairly clear early on that an improperly installed pipe caused the leak that led to the explosion. More than $150,000 is spent in attorney fees to cover the complete discovery process and trial preparation. Only at that point can defense attorneys concede that the defense will be found liable, and that damages are estimated to be at least $5,000,000. By this point in time, the plaintiff's attorneys are very sure of their case and their settlement demand is in the same $5,000,000 range. They are unlikely to negotiate a settlement that would be favorable to the defense.

In a case such as this, the primary facts would be determined very early in the discovery process, and defense counsel will usually know what type of testimony to expect from the various experts. The report of the fire investigation is readily available, and the lost wages of both parents are easily determined. If a behaviorally based trial simulation were conducted early in the discovery process, then it would be appropriately predictive of the outcome with regard to liability, as well as damages. Having this information allows the case manager to know in advance the probability of loss, as well as the amount that the loss would cost. It also puts the claim supervisor in a very strong position to settle the case. Early settlement reduces the cost of the defense and gives the claims manager an opportunity to negotiate with plaintiff's attorneys who still have worries about the eventual outcome. Most often, this will lead to a favorable settlement.

The trial simulation necessary to produce this type of information must have a carefully constructed research design. The design should be able to answer the specific questions targeted by the research, as well as provide ancillary information, such as case strengths and weaknesses, that can be used at trial if the case cannot be settled. The same trial simulation — if properly designed — will also yield specific information about demographics and attitudes that separate defense-prone jurors from plaintiff-prone jurors.

In an appropriately designed trial simulation, surrogate jurors should be examined through an initial screening questionnaire, a pre-presentation questionnaire, a post-presentation questionnaire, and an individual verdict form. In addition to the questionnaires, the jurors will deliberate so the group process may be observed by the client and consultant. This process will yield information that is useful for both trial and the settlement. The research design should require that, after deliberations are completed, the consultants examine all the collected data, which will then be used to generate a detailed report. This report is then used as either a settlement guide or a trial guide, whichever is more appropriate to the needs of the case.

Trial simulations should never be rushed. The outcome is far too important. Certain steps must be taken to preserve the validity of the findings. The research design should always require at least a two-day project. On day one, presentations are made to the surrogates by attorneys presenting both the plaintiff and defense cases. In addition to the attorney presentations, the jurors should be provided with short summaries of all the important witnesses' testimony, redacted copies of the pertinent reports, and, if possible, video clips of the actual witnesses from their depositions. After jurors receive all of this information on the first day, they should always be sent home. It is of critical importance that jurors not deliberate on the same day the presentations are made. In an actual trial, jurors will go home and think about the testimony they have heard about each day.

The term “sleep on it” is significant to behavioral scientists. If the jurors are not sent home for a cooling-off period in a case that has an emotional impact, then the verdict may be suspect because of these high emotions. When we allow jurors to deliberate the same day they hear information, their emotions will be artificially stimulated. This means that the likelihood of liability with higher damages will increase, which could therefore produce a false negative outcome. When jurors are required to return on the second day for deliberations, their emotions have likely cooled, and their verdicts are more accurately predictive.

A well-designed pretrial research project will have three or more panels of jurors. In a standard case, all jurors will simultaneously receive exactly the same information on the first day of the project. They will all return on the second day and deliberate in three consecutive juries. Jurors should never be observed in simultaneous deliberations. In the case of simultaneous deliberations, attorneys and case managers must jump from television to television, trying to capture the action of three or more panels. The cost of pretrial research is such that the case manager will want to get every bit of information that is available. This is best done by watching each of the juries deliberate in their entirety via closed-circuit television in the company of a trial consultant. This gives case managers, attorneys, and the behavioral scientist the ability to observe the behaviors and decision-making process and comment on matters of importance. Carefully watching each deliberation is necessary so that the parties involved can know what arguments jurors use to change one another's minds, what their belief systems are, and how entrenched they are in their attitudes.

Through this research method, the case manager can watch the defense test its hypothesis prior to trial and simulate the trial evidence before the two sides get on a collision course that can only end in trial. The comprehensive report yielded by such research must include the financial analysis in any case where liability is probable. In an effort to reduce the claim costs, you should know which cases need to be diverted to settlement and how early that settlement offer should be made.