Navigating the Liability Landscape in the Age of the Nuclear Verdict

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Sherry Hersey overlay speaking – introduction slide. Text, No stone unturned. Navigating the liability landscape in the age of the nuclear verdict. More data is more. Constitution State Services.

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SHERRY HERSEY: Thank you for joining us for No Stone Unturned - Navigating the Liability Landscape in the Age of the Nuclear Verdict.

We are all experiencing tectonic shifts over the past five years that are driving unprecedented volatility in liability claims. These shifts are not caused by any single factor alone, but by several broad issues that combine to make for a less predictable litigation environment.

We've brought together three of our litigation leaders from Constitution State Services and Travelers to explore this topic. We will compare recent case examples with similar examples from five years ago to illustrate how the legal environment is changing. You will learn more about what your business is up against and best practices for your company's response.

Sherry Hersey overlay speaking – disclaimer slide. Text, The content of this presentation is provided for informational purposes only. Information contained herein is not intended as, nor does it constitute, legal or professional advice, nor is it an endorsement of any source cited or information provided. Any examples or discussions of claim handling or processes are for illustrative purposes only. Every claim is unique and must be evaluated on its own merits. Claim professionals should exercise their professional judgment in the management of all claims in accordance with all Travelers guidelines and/or procedures. This presentation does not amend, or otherwise affect, the provisions or coverage of any insurance policy or bond issued by Travelers, nor is it a representation that coverage does or does not exist for any particular claim or loss under any such policy or bond. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy or bond provisions, and any applicable law. In no event will Travelers or any of the subsidiaries and affiliates be liable in contract or in tort to anyone who has access to this presentation for the accuracy or completeness of the information relied upon in the preparation of the presentation or for the completeness of any recommendations from cited sources. Participants should consult source material for more detail. These materials are confidential and proprietary. Reproduction, copying, disclosure, dissemination, or distribution is strictly prohibited. ^© 2020 The Travelers Indemnity Company. All rights reserved.

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SHERRY HERSEY: The content we share today is for informational purposes only. I'm Sherry Hersey, Marketing Strategy Lead for Constitution State Services, and now let's meet our panelists. Keith.

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Displaying the panel speakers’ image and role at CSS/Travelers. Various panel members speaking over slides introducing themselves.

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KEITH ANDERSEN: Hello, everyone. I'm Keith Andersen. I lead the General Liability Group for Constitution State Services and Travelers.

SHERRY HERSEY: Anna.

ANNA NEWSOM: Hi. I'm Anna Newsom. I lead the Staff Counsel Organization.

SHERRY HERSEY: David.

DAVID BEAUREGARD: Yes, my name is David Beauregard. I'm a Senior Forensic Scientist at the Travelers Engineering Laboratory.

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Sherry Hersey overlay speaking slide 4. Text title, Key factors that account for the volatility of the current litigation environment. Text key points, pro-plaintiff judiciaries; sophisticated plaintiff attorney tactics; societal mistrust of corporations; shift in jury demographics; value of money and personal responsibility. An image displayed which includes sample news headlines.

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SHERRY HERSEY: Thank you. So, these headlines may look familiar to you. We regularly see headlines like these in the news of multi-million dollar nuclear verdicts. Anna, what are some of the trends driving the escalation of liability verdicts?

ANNA NEWSOM: Sherry, before we get into a discussion about the more specific factors, let's first set the stage on just how much things have changed. If we look at the top 100 verdicts in the five years before COVID when courts were largely shut down, we've seen average judgments rise from $64 million in 2015 to around $214 million in 2019. That's more than triple.

Now, there isn't a single factor that accounts for the volatility of the current environment. When we talk about the ground seeming to shift underneath us, we're really looking at several variables. For example, there has been a rise in pro-plaintiff verdicts and judgment as we just noted, there have been increasingly aggressive plaintiff's bar tactics that we've seen, and there have been other societal trends that include more negative views towards corporations, the polarization of public opinion. And all of that has made its way into the courtroom as well.

We're also seeing a shift in jury demographics. For example, we've come to associate certain cultural attitudes with the baby boomer generation, and we likewise are associating changes in public attitudes and perceptions among millennials, whose presence on jury panels will continue to rise.

I think social media and other digital channels can also amplify negative feedback about brands given the immediacy of that feedback and given the ability for something to go viral at the drop of a hat. And all of this makes for the less predictable litigation environment that you mentioned at the top of the call. Keith, what do you have to add to that?

KEITH ANDERSEN: Yeah. Thank you, Anna. I just had a couple of things. I'd first… I agree with the societal views on corporations or corporations being held to a higher level of accountability than they ever have. Also, in the public, the value of money and how people perceive that now. And then also with personal responsibility and the lack of people taking personal responsibility for their own actions.

So, these are changing societal issues that the plaintiff's bar that really understands, and they're exploiting these items when they are litigating a claim against the corporation.

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Keith Andersen overlay speaking slide 5. Text, Attitudes toward corporations. An image displayed of a construction site and case examples 5 years ago vs. today.

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KEITH ANDERSEN: It's interesting in 2019, we did retain a PR firm to go out and really try to understand deeper what's happening in the environment.

And through our connection with this PR firm, we interviewed people as potential jurors. And here's some of the results that we got out of many, but that are very surprising. 88% of people that we surveyed believe that companies should take any and all precautions no matter how costly to ensure the safety of their products or premises. So, pretty high standard there.

In addition, 58% of the people believe that a corporation always, and I want to emphasize always, not some of the time, not part of the time, not occasionally, but always has some responsibility for an injury even if the customer was injured while misusing the product. This really drives home how society views brands today.

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Hersey.

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SHERRY HERSEY: Those are some shocking statistics, Keith. Can you share with us a case example that brings these statistics to life?

KEITH ANDERSEN: Sure, I'd like to. So, I’d like to an example of a construction project like you're looking at, at the screen. There is a large national retailer that has footprint across the entire US, and they decided to build a new facility or a new store in an area in the US.

And they did what most developers and owners do. They hired a contractor, a competent contractor, to construct the building. Signed all contractors, turned it over to the contractor, and the contractor began their work. Contractor excavated the land, then they fenced it to keep people from entering the construction zone.

Well, somebody did enter it. A young man broke into the facility and decided to go joyriding on some of the construction equipment. As he was doing so, he was in an accident and was severely injured. So historically, or if we even look as early as five years ago, the liability case would have been primarily against the contractor. They would have gone to the contractor and alleged that they were responsible for safety. They didn't properly safe zone the area and that they're responsible.

Well, what we're seeing today and which is illustrated by this case example is that the plaintiff's bar is taking a little different or quite a bit of a different tactic when it comes to cases like this. They look at the national retailer with national exposure with deep pockets, and the focus of the case becomes on them. And it's not about what the retailer in this case did wrong, it's about what they didn't do in order to prevent the accident.

So, today it's more about not what you did wrong, but what you didn't do. So, in this case, they presented a strong case against the retailer that they did not provide the appropriate safety or did not fund the contractor with enough money to do the appropriate safety, that they should not and could not delegate that responsibility to another party, even if it's a competent party that's an expert in that area.

They even went to the extreme to allege that this company chose to cut corners on safety because of the neighborhood they were in. That this was not an affluent area, so they invested less in the safety for this job.

Well, what we're seeing today and which is illustrated by this case example is that the plaintiff's bar is taking a little different or quite a bit of a different tactic when it comes to cases like this. They look at the national retailer with national exposure with deep pockets, and the focus of the case becomes on them. And it's not about what the retailer in this case did wrong, it's about what they didn't do in order to prevent the accident.

So, today it's more about not what you did wrong, but what you didn't do. So, in this case, they presented a strong case against the retailer that they did not provide the appropriate safety or did not fund the contractor with enough money to do the appropriate safety, that they should not and could not delegate that responsibility to another party, even if it's a competent party that's an expert in that area.

They even went to the extreme to allege that this company chose to cut corners on safety because of the neighborhood they were in. That this was not an affluent area, so they invested less in the safety for this job.

So, they did a very good job in making that case against the retailer. So, this illustrates how plaintiff attorneys are approaching these cases in a different and a unique way than they have historically, which makes it a little harder to defend.

And we find ourselves engaging in much more motion practice over these issues that we wouldn't expect to litigate in years past. And the appellate landscape has changed as well as the way that claims are being litigated lends itself more to runaway juries and us appealing more issues and verdicts.

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Hersey.

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SHERRY HERSEY: Thank you, Keith. This example of a retail client… you shared an example of a retail client, but we're seeing this across many different industries. And so, I want to repeat something you said earlier.

It's important for key stakeholders in organizations to understand that corporations are held to a different standard today, and that is to prevent any risk possible, not just what's believed to be reasonable. So, that's quite a high bar or standard to me. And if corporations are being held to this different standard today, David, what can our audience do to help prepare for this scenario?

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David Beauregard overlay speaking slide 6. Title text, how can companies mitigate potential risks? A graphical illustration is displayed focusing on 4 points: anticipate and prepare; don’t wait; plan to treat each incident; and consider all sources of electronic data.

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DAVID BEAUREGARD: Well, there's a number of things. First of all, you got to anticipate and prepare for the type of liability claims that you and your industry are likely to be involved with. If you're in the hospitality industry, you're going to have some slips, trips and falls. If you're in the transportation industry, you're going to have vehicle accidents from fender benders right up through serious head-on collisions. If you sell products and those products can in any way be implicated in a fire, water loss or bodily injury, they probably will be at some point.

So, you need to understand the risks associated with the products. And even offer that you'll peel the layer of the onion back a little bit more and understand the processes that the product manufacturers uses in terms of their quality control systems, how do they prevent manufacturing defects, and their engineering design practices and risk assessment, how do they prevent design defects that would potentially be seen in the industry.

But I caution you, don't wait until you have a serious claim to assemble a team of resources to address this… a team from legal, from engineering, risk management, because having these resources available at the time that the incident happens helps you respond faster and more completely. So, gathering the relevant facts and information at an early stage in the claim process is really a key to achieving desirable outcome.

At Travelers Lab, we like to say that our mission is bringing science to claims. And that's not just a tagline for us. We really believe that we have a purpose in doing that, and that purpose is to get at the truth because we feel that the truth does matter.

And what we want to do is we want to be able to put the truth about what really happened with an individual loss in the hands of the legal people, the Claim professionals, and anybody else who needs to understand what really happened, what are the facts so that they can make the best, the most optimal decisions on behalf of Travelers.

Now, preparing for these liability incidents, it's really not unlike preparing for a hurricane from an insurance company standpoint. You have category one hurricanes; you have category five ones. If you go into these liability claims believing that they have the potential to be a category five hurricane, you have your team in place, you can be much better prepared.

Things like social media, viral videos now allow our insurance brand and reputation to be at risk very quickly, and you need to stay ahead of that kind of stuff. And working with the TPA to develop this response strategy will really allow you to mitigate and possibly to avoid exposure.

But the last thing I'd like to talk about is this brave new digital world we're in. From an investigative standpoint, there are all kinds of sources of electronic data that you're aware of and that you may not be aware of. And it's all becoming part of the critical evidence that may be used by a plaintiff to make their case against you or by us to defend our case.

So, gathering security camera footage, social media cell phone footage, cell phone data which might indicate a distracted driver, or vehicle tracking data that might tell how fast someone was going or whether or not they applied the brakes before impact can be extremely important.

Even common household products like refrigerators and washing machines now have sensors in them and the ability to communicate with the internet. So, they are gathering data as well. They might have some data that may be useful for us. You really want to gather this data and be able to be relying on it so that as you're putting the pieces of your investigation together, you have it all there.

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Hersey.

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SHERRY HERSEY: Thank you, David. So, our clients will kind of follow your four-step plan here to prepare for this catastrophic liability event. Keith, what are some of the factors driving up the actual dollar amounts of both auto liability and general liability claims?

KEITH ANDERSEN: Yes. So, there are many factors. But one of the main factors that we see is in the medical area, and we're seeing much more robust medical expenses and questionable medical treatment and plans. And it's, as you mentioned, Sherry, it's driving up both the auto and the general liability area.

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Keith Andersen overlay speaking slide 7. Text, a factor driving up both general liability and auto liability claim costs is that claims are being presented with much more robust, expensive and speculative medical plans. A courtroom image is displayed.

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KEITH ANDERSEN: I’d like to just share with you a quick high-level example of a trip and fall case and how it evolves today versus five years ago. So, five years ago, we’d see a trip and fall. Somebody hurts their back. Typical treatment, you'd see its doctor, possibly some medication, some physical therapy, some rest, and over time, in not a long time, but they get better and well. And that's how claims generally would proceed in this trip and fall.

But we're seeing a new way that the plaintiff’s bar is approaching these claims and making a smaller claim into something bigger using a lot of speculation. And that's on the medical side. We're seeing that traumatic brain injuries are much more popular.

We're seeing them presented even on the smaller claims, smaller rear-end accidents… trip and falls, which gives the ability to drive up the medicals and really put some speculative medicals out there as it relates to life care plans and future treatment.

We're seeing the same life care plans on what we would historically consider simple orthopedic injuries. But now they're making those bigger claims that they need a life care plan, somebody is going to need help the rest of their life. So, we're seeing this very creative way of approaching the medicals.

If we look back five years ago, and the typical trip, slip and fall with an injury historically was $50,000 or less. Now we're seeing those go for a much, much more. And a couple quick examples in that we've seen in the industry. We saw in Illinois an elderly woman tripped and fell and had to have a hip replacement. Not a huge cost, but there was costs associated with it.

Historically, we think that that case is worth probably 200,000, maybe a little less when we take into account her comparative negligence. But the jury, even after taking into account her comparative negligence which was substantial, they awarded her $2.3 million.

Let's jump over to another state, to New York where we were aware of a case where it was tried… back injuries, not significant, but back injuries. A life care plan was alleged. As a claim developed, they alleged a close head injury.

And this gentleman that was injured had the ability to use safety devices right around him. He chose not to and did something that some may consider a little bit dangerous. And even after his comparative which was small, the jury awarded $22 million. So again, significant, much more than we would see if we were to go back just five years ago.

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Hersey.

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SHERRY HERSEY: So, this speculative medical is contributing to the volatility we see in the legal environment. Anna, you spoke about some trends earlier, including pro-plaintiff judiciaries, sophisticated plaintiff attorney tactics, and societal mistrust of corporations. How can our audience navigate this hostile environment as early as possible where plaintiffs’ attorneys are presenting a worst-case scenario on medical costs and appealing to the emotions of jurors?

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Anna Newsom overlay speaking slide 8. Text, Navigate a volatile legal environment early on by. An image is displayed of professionals in a meeting, accompanied by text of two supporting examples.

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ANNA NEWSOM: Well, Sherry, I think that it goes back to what Dave noted at the outset, which is it comes right down to preparedness, right. Preparing for the possibility that a claim that would not have necessarily ended up being litigated a few years back is very likely to end up in litigation today.

So it seems obvious to say this, but I do believe that shaping the narrative from the first moment the claim comes in, maybe even before that, and we're just aware of a particular incident, that's so critical in today's litigation environment.

We have to treat each incident as if it has the potential to turn into a liability claim and a litigated one of that, and consider the possibility of a public relations crisis on our hands given a set of facts that could be particularly controversial, right.

We're seeing that the media is playing a significant role in telling a story around a particularly shocking set of facts such as a gruesome industrial accident, a car pileup on the freeway, or some instance of sexual misconduct.

In our experience with these types of sensational incidents, we work with our in-house experts, as well as crisis management teams, to create a counter narrative that enables our clients to fight these cases in the court of public opinion, as well as in actual courtrooms where we're able to really refine our litigation strategies given all this expertise that we have.

A lot of times, the story around a claim can take a life of its own. And given the breadth of claims that we've dealt with, we can partner with our client and share our informed expertise with them. Our experience litigating against the biggest plaintiff attorney firms out there really helps hone our strategies from day one of the claim and throughout the life of that claim… throughout settlement negotiations, motion practice and discovery, all the way to a verdict or a judgment in case a case has to be tried.

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Hersey.

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SHERRY HERSEY: Keith, would you like to add?

KEITH ANDERSEN: Sure, I would. I would say in addition to those great litigation strategies that Anna talked about is to take advantage of a carrier or your TPA who has deep expertise in jurisdictional knowledge.

When a plaintiff lawyer gets involved, it can cost… the claim has a value, it can increase as much as four times without the attorney involved. So, we've taken efforts, and we've developed some sophisticated analytics around claims and our expertise litigating claims against some of these plaintiff attorneys who we see over and over again.

These analytics help us manage a claim properly in spite of the noise that's coming in from the opposing counsel. We understand the tactics that they're going to be pursuing, and this helps us create a plan, a litigation plan on the way to address those tactics and get to the best possible outcome.

And then take that one step further, we develop knowledge and expertise in analytics about specific lawyers, but also what's happening in the medical environment. So, I mentioned early on medical is driving a lot of the claim inflation. It's coming from certain medical firms as well.

And we find that plaintiff and medical firms partner with each other. And so, we develop deep intelligence on plaintiff firms. We're doing the same thing with the medical firms, and bringing those together helps us present a claim or present the best defense possible.

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Hersey.

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SHERRY HERSEY: So, it sounds like specialized industry knowledge and expertise and analytics can help our audience shine a light on potential blind spots that can escalate into nuclear scenarios. David, what are other ways that TPAs can partner with brokers and clients to navigate this challenging and changing legal environment?

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David Beauregard overlay speaking slide 9. Text, Constitution State Services is a TPA with expertise in a wide range of industries and experience shaping the law on industry-specific issues in several jurisdictions. Four industry-related images are displayed.

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DAVID BEAUREGARD: Well, certainly, you want to leverage the specialized expertise and experts from your TPA and to consult with your third party or outside experts. For example, Constitution State Services has a tremendous amount of experience working with Travelers Risk Control Forensic Lab which is staffed by mostly engineers and scientists.

And these people have a lot of experience doing accident reconstruction, digital forensics, fire origin and cause investigation, as well as product failure testing. So, we're very familiar with the very issues that your experts are going to have to deal with. So, remember, truth still matters, and a scientific approach can help get you to the truth.

ANNA NEWSOM: Yeah, if I could add to that, Dave. I think both you and Keith touched on this earlier on. It's really about the partnership as well. Partnership with the expertise that the particular carrier has, and then also the partnership with counsel to ensure a successful outcome, especially where litigation is involved.

I think defense strategy in a given litigation needs to be adjusted by jurisdiction given the nuances of applicable law across the country. And you really need to have counsel who understands how to manage sophisticated litigation for liability claims.

And that's where our expertise with a wide range of industries has not only resulted in successful litigation outcomes on an individual basis, we've actually been able to help shape the law on industry-specific issues in several jurisdictions.

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Hersey.

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SHERRY HERSEY: So, there's also a human element to these scenarios. Keith, how does Constitution State Services tie capabilities borne out of both technical and human experience to the whole lifecycle of a liability claim?

KEITH ANDERSEN: Thanks, Sherry.So, if you think about Constitution States and Travelers, our experience and breadth of what we do. We're in all 50 states, we have multiple products, we have appetite to take in a lot. And so, it helps us with knowledge and understanding and expertise.

And I think it's appropriate to ask your carrier or TPA on some of the strategies that they are doing to mitigate attorney representation, and how do they approach claims when they're first reported? At Travelers, we've learned a lot, and one of the things that we know is that preventing somebody or helping somebody through a claim is time and money well spent versus letting them go to an attorney.

So, we brought a behaviorist on staff here at Travelers to help us with our Claim professionals on how to talk with claimants in a different way, how to show empathy, how to partner with them on claims that we owe to get to the right resolution, to really work with them through the process. A behaviorist has been a great awakening for us and has really helped us refine the way we approach and work with those unrepresented claimants.

We've also partnered with an organization called Authentic4D, and this is a medical organization that are able to take films of x-rays, MRIs, CAT scans, and they're able to take those and compare them to healthy films, whether it be a spine, a head.

But they're able to do some comparisons that really help us demonstrate if alleged injury or if somebody is claiming a back injury, if there's truly an injury, or by comparing it to a healthy or a healthy spine or the extent of the injury, and it becomes really beneficial if there are pre-existing images pre-accident that we can really do the comparison. But just arming us with some of that technical knowledge to really help us get to the right outcome.

We also have our investigative services organization that helps our Claim professionals get deep into some of the real specific items of the claim and really understand what's happening with the medical providers, what's happening around the claimant, and if they are trying to take the claim somewhere where it really shouldn't go and exaggerate things.

And then finally, I want to mention partnering with litigation consultants. So, these are firms that are able to help us present a claim that makes the most sense to a jury, simplifying cases, helping us prepare witnesses for deposition or trial testimony, helping put together the media for the courtroom, helping us pick a jury, helping us just be smarter about the jurisdiction we're in and those items that will really resonate with the jury to get to the right outcome.

So, we do a lot of different things. I just want to mention one more thing, and that's mass tort claims at our mass tort claims center of excellence. So, unfortunately, companies have those events that nobody wants, and nobody expects. And it's a massive event that has media attention, may even span beyond a geographical area to countrywide.

And we have a customer that had one of those events, where it was a countrywide event and their product was injuring some people and potentially injuring others. Over 8,000 people have received this product.

We were able to put our mass tort's claim center of excellence together when this came in, met with our insured, strategized with our customers, strategized with them on how to approach this to get to the right outcome, take care of people that were really injured, but not make this bigger than it should have been.

So, we partnered with them on the best way to do that. And I'm happy to report after all is said and done, 97% of those claimants withdrew their claim or moved on without us paying them any money. So, it was a great, great result for our customer.

The bottom line is we manage risk. That's what we do day in and day out. And partnering with you as a customer, it just builds a great team in order for us to really accomplish what we'd like to, and that's controlling the payout.

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Hersey.

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SHERRY HERSEY: Thank you, Keith. You mentioned many resources and the specialist experts that Constitution State Services clients could have access to. Now as we conclude our panel discussion, what is the one piece of advice that you'd like to give our audience on navigating the volatile liability landscape? Let's start with David.

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David Beauregard overlay speaking slide 10. Text, Key strategies in navigating this challenging and changing legal environment. A graphic of three strategies is displayed.

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DAVID BEAUREGARD: Okay.tI'd like to say above all, keep a focus on loss prevention because the best loss is the one that never happens. Beyond that, though, as I've said before, have that liability catastrophe team and the liability catastrophe response plan in place.

You don't want to wait for that black swan event, that huge loss to suddenly see how the team works together. Why don't you get it together early, use it before there's a black swan event? You'll get some confidence in the fact that it's working well, and you can, therefore, get the benefit from it in the outcomes.

SHERRY HERSEY: Thank you. Anna.

ANNA NEWSOM: I think what Dave said there about putting a team together, when you put that team together, I think it's important to ensure that everybody in the company understands that society's views on corporate accountability have changed, because as we've just discussed, litigation on a given claim today is that much more possible and real and can look very different than it did five years ago.

SHERRY HERSEY: Keith.

KEITH ANDERSEN: I totally agree with what David and Anna said. And just to add one other thing, it's partner with a TPA that has deep experience, expertise, jurisdictional knowledge, and access to the right resources so you can get it to the right resolution on each and every claim.

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Hersey.

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SHERRY HERSEY: Thank you very much to our panelists, Anna, Keith, and David, for the discussion today and leaving no stone unturned as we navigate the liability landscape in the age of the nuclear verdict. Constitution State Services has many resources available on our website,constitutionstateservices.com, including an article that accompanies this webinar. So, please contact your Constitution State Services representative or visit our website for more information. Thank you.