Avoiding Shock Verdicts

In our August 2021 CLM Magazine article, “Nine Best Practices in Defending Billion-Dollar Claims,” we suggested steps to help you manage, prepare to litigate, and resolve a billion-dollar claim. Here, we further elaborate on the final steps in handling high-exposure claims to avoid the shock verdicts trending in our industry. It does not pay to take such claims all the way to trial without special precautions.

Test New Strategies

When handling high-stakes litigation, it is important to be creative. Remember what has worked for you in high-exposure cases in the past, but be aware that this type of litigation is different because it requires thinking outside the box to find resolutions that everyone can accept. For example, while globally resolving the claims of 100% of the potential claimants is always the ideal solution, such litigation may involve hundreds or even thousands of claims, making a global resolution problematic.

With plaintiffs’ groups this large, percentages of 90%-95% may be acceptable, depending on the risk, categories of injuries, and exposure of non-participants. The goal, then, is to capture the claims that present the highest exposure if left outstanding. Each side should be motivated, and alternate channels should be built into frameworks in case key participation thresholds are not met. The parties should propose a schedule with timelines for specific benchmarks to ensure progress toward resolution.

The settlement agreement also may involve numerous other conditions and caveats. When sides disagree on details, however, the focus should always be on the big picture. Everyone needs to compromise to pursue the larger resolution. In the event that certain “asks” cannot be resolved, it is important to leave an “out” available for both sides.

To execute the settlement agreement and further the administration of the claims, parties should consider engaging experienced claims administrators—objective third parties who can inform the insured of the progress of claims resolution and collaborate well with all parties. Parties should discuss cost-sharing and ensure that lead counsel from both sides are in constant communication with the administrators.

Carefully Message the Outcome

Settlement of high-exposure claims is a process that takes time and patience. Going in, everyone should be aware that it will take a significant amount of time to reach a resolution and agreement on the framework and details of the settlement. Once struck, however, that agreement in principle is an important milestone.

Resolution benefits everyone. For claimants, there are two goals: some form of compensation with no appeal, and closure for a tragic situation. The insureds can continue to run their businesses to benefit society and their employees, and the public can begin to heal and move on.

Messaging the settlement appropriately will help control the public’s reaction and demonstrate the fairness of the process and the resolution, facilitating the success of the settlement. The public has a stake in what happens because they may have lived through it to some extent, or they are emotionally invested in the outcome or even impacted by unresolved claims. Remember that the public is always the potential jury, i.e., the court of public opinion.

If the jury is still sitting after a failed settlement or remains to hear the few claims that did not get captured by the settlement, what they are told about the settlement and how they are told may impact their deliberations. The settlement should be announced to the public jointly by counsel for claimants/plaintiffs and counsel/representatives for the insureds. It is important to show the public that all parties support the settlement. It may be appropriate to announce the settlement at a certain date, such as an anniversary of the event, a moment that would provide closure. When handled in this manner, a settlement can have a positive impact on public opinion for both sides.

All courts involved should be kept advised of the status of resolution with checks scheduled to keep everyone on track and allow the courts to step in to help facilitate the process, if needed. The logistics of executing the settlement and ensuring that the proper releases and pleadings are completed are vitally important for the parties. Coordinating with the courts to finalize resolution will enhance the entire process.

Be Ready for Anything

Regardless of exhaustive planning and efforts, a global resolution may not be possible. More often than not, stragglers will exist and opt-outs will happen. Given that some claims will remain unresolved and be pursued in further litigation and negotiation, it is important that all input, investigation, and evaluation of these claims occurs globally and in a detailed manner.

Always be prepared to negotiate. Some claimants and counsel do not want to be part of a larger settlement for various reasons, but that does not mean remaining claims cannot be reasonably resolved. Be open to and aware of opportunities to settle those claims. Sometimes it may take more talking; other times a different mediator is needed to provide another level of independence and a fresh perspective. Sometimes formal discovery may be needed, or perhaps just a little more time.

Whatever the reason, outstanding claims that cannot be resolved despite all good-faith efforts may require an advanced level of preparation. Given the nature of the catastrophic event and the level of billion-dollar exposure at play, expect plaintiff’s counsel to launch an aggressive, reptile theory-driven offense during discovery and through the trial. Defendants need to be prepared to defend against these tactics in new ways at each stage of litigation. As trial approaches, motions in limine to battle the reptile theory strategy must be filed. At trial, defense counsel must be extremely skilled at voir dire and able to ensure that jurors prone to shock verdicts are not seated on the jury. Throughout the trial, the defendants must tell a compelling story that humanizes the corporate defendants and seek new methods to defeat the reptile theory strategies.