A Roadmap for Guiding Your Insured Through Litigation

Having just finished a season of four jury trials over just as many months, I’ve seen my share of insureds who are worked up and nervous over the rigors of litigation. In fact, in two of the four cases, the litigation lasted over two and a half years. While both claims professionals and lawyers don’t think twice about the extended life of a file, to our insureds, litigation is a distraction and a source of significant stress to which they are unaccustomed. 

There are a great deal of misconceptions about trials and litigation in general held by the uninitiated. It is impossible to completely assuage all stress and nerves that go along with litigation and trials. However, there are some things that your insured should understand early on that will help. In the end, a better understanding of the scope of litigation and what it is and is not will help your insured to be a better client for defense counsel, as well as help them to maintain their focus on other personal and business concerns during the course of the litigation.

If your insured has never been in litigation, what things do you need to pass on before they speak with defense counsel? Here we’ll look at the top six areas:

Length of Litigation —­ “How soon can we make this go away?” Regardless of the assessment of liability or settlement potential, this is almost always the first question asked. Business owners understandably want to focus on the product or service they provide and perceive litigation as a distraction from that task and ultimately the bottom line. They are correct.

However, a quick resolution does not always equal a good resolution, either for the carrier or for the insured. Remind the insured that they certainly don’t want the perception that they are rolling over and handing the plaintiff a blank check. That is bad for all involved in the defense of the case. Start by outlining the litigation process, beginning with paper discovery, non-party subpoenas, depositions, negotiation, alternative dispute resolution, and ultimately trial. It is always difficult to put a timeframe on this. Defense counsel will be able to better answer questions as time goes on. At this point, encourage your insured to be patient and remind them they are in good hands and need to allow the process to work over time.

Relationship with Defense Counsel – Depending on the duty of defense counsel as defined by the jurisdiction, the insured can almost always be told that the lawyer hired (and paid for as determined by the policy) is their lawyer. I always tell my clients that I work for them; I am their lawyer. Then, I follow with a conversation about reporting to the carrier and their role in strategy and settlement, reminding them of the attorney-client privilege and the confidential nature of those communications. This is a good chance to put the insured at ease and assure them that they are in expert hands. It’s also a good time to discuss their concerns and questions openly. The obligation of counsel to report to the carrier should also be explained along with the authority of the carrier in making settlement and other strategic decisions. Consent to settle provisions should also be fully explained and documented.

Times of Involvement — If there is enough coverage for the claim, the biggest loss to the insured will be the inconvenience of lost time. Let the insured know how much time they need to budget. It will often be less than they think. Often there will be an initial telephone call or meeting with defense counsel. This typically is not time consuming; it’s simply an introductory meeting or call. The first time-consuming endeavor will be responding to the plaintiff’s interrogatories and requests for production. A commercial or business insured will need to assign a point person to work with defense counsel in gathering all responsive documents and institutional knowledge.

The next major time drain for the insured will be depositions. This involves one or more preparation sessions, depending on the complexity of the claim as well as the deposition itself. The deposition will usually be anywhere from several hours to an entire day.

Next, if the case will be mediated, the insured’s presence is often an aid to resolution. If counsel wants the insured present, an entire day will need to be blocked out for this, as well. If the case is not resolved prior to trial, the insured will need to be available for the entire length of the trial as well as for trial preparation. The insured will need to be flexible since cases are often settled or continued at the last minute. This would be a good time to remind the insured that, although a vast majority of cases never get to trial, the more prepared they are, the more likely it is that the case will be resolved beforehand.

Requirement of Cooperation — Occasionally I run across an insured who takes the approach that litigation is not their problem and that the carrier and counsel need to “just take care of it.” Phone calls or requests for assistance from the insured are frequently rebuffed with disinterest and annoyance. Then, if something goes wrong, the insured will likely complain about not being kept in the loop, despite all efforts to the contrary. This can often be headed off from the outset by a very clear explanation of the insured’s duty to cooperate. Remind the insured that this will be a disruption and inconvenience, but that it will also be their only chance to fully and aggressively defend the claim. That cannot be done without their help. In addition to simply paying the premium, they have promised to cooperate in exchange for the provision of counsel and liability coverage. Insureds can be so absent from the litigation that they run the risk of losing coverage.

Excess Exposure — This is perhaps the part of claims handling most fraught with potential for problems. If a claim value exceeds or potentially exceeds the amount of coverage, the carrier will usually have the right to control the litigation but must do so in good faith and deal fairly with the insured. For this reason, most claims professionals are trained thoroughly in how to communicate with the insured on this issue. Be aware that jurisdictions deal differently with the tripartite relationship in scenarios where policy limits are in play. Your insured may have a right to retain independent counsel. Be sure you have a good understanding with defense counsel about the rights of the insured and the obligations of both the carrier and counsel in this situation. Giving the insured input into the negotiations is always a smart practice, even if there is no consent to settle provision.

Expectation of Outcomes — This is perhaps the hardest conversation to have with an insured at the outset simply because the projected outcome is always uncertain. If it weren’t, there would not be a lawsuit. The process of litigation always brings the two sides closer to an agreement of the likely outcome. Whether it does so enough to allow a resolution without trial is where the uncertainty comes into play. Do not make any promises to the insured. It is certainly appropriate to let them know that a vast majority of cases do not reach trial. If the claim involves a liability dispute, the likelihood of the case going to trial is usually higher. Discussing the specifics of the case along with how the claimant views liability will help manage unrealistic expectations.

It is a delicate task to be realistic and paint a full picture for your insured without sending them into a panic. At the end of the day, this is a customer-service issue. Providing a road map of realistic expectations will not only alleviate some stress for your insured, but also it will lead to better advocacy for your insured by counsel.  

Jim Pattillo is a partner with Norman Wood Kendrick & Turner, an Alabama-based law firm. He has been a CLM Member since 2010 and can be reached at jpattillo@nwkt.com, www.nwkt.com.