To Settle or To Defend: An Innovative perspective on Claim Resolution

1. To Settle or To Defend:An Innovative perspective on Claim Resolution Jack Blyskal Carl Fessenden CSAC-EIA Porter Scott Heather Fregeau www.porterscott.com CSAC-EIA www.csac-eia.org

2. Have you ever seen this? • A claim is in litigation, proceeding toward trial • Trial is now about 30 days away • Defense costs are above $200,000 • The attorney calls you to say:

3. Have you ever seen this? I think we better try to settle this claim! (Why wasn’t that considered $150,000 ago?!?)

4. Have you ever seen this? On a related note, • The claim includes civil rights allegations, or some other count that triggers third-party attorney fees • Plaintiff attorney fees are 2-3 times your defense costs to date • Again, why didn’t we try to settle this earlier, before the fees were so high?

5. Plaintiff Attorney Quote “Instead…the County engages in months of litigation and racks up legal fees. And then they settled. Who’s the Einstein that settled on that strategy?” Michael Thomas, attorney

6. Costs of defense Legal fees and expenses represented as a percentage of total paid on a claim is: 29% (for $100.6M) (from CSAC EIA closed claims, dates of loss 7/1/05 through 6/30/11. Plaintiff attorney fees are not captured in our data so not available. Where they apply they are usually more than the damages.)

7. Why are these costs so high?Why are they allowed to continue? • Rarely is an early assessment done on a case as to whether it should be settled • Rarely is an early demand elicited* • Cases are frequently driven by fees rather than the merits of the case (both sides) • Unrealistic demands * See next slide

8. Who’s on First? • Should you make an offer? • Should you wait for a demand? • Does it make a difference? • Pros and Cons

9. Elements which indicate settlement • Clear liability, or • Low share of liability (settle out) • Policy limits case, or • Minimal damages • Possibility of plaintiff attorney fees • Minimal number of defendants • Poor defense witnesses • Heavily emotional issues (damages, facts, etc.) • Jurisdiction issues

10. Elements which indicate defense • Low liability (Can’t settle out) • Multiple defendants • Large damages (but not policy limits) • Unreasonably large demand • Plaintiff attorney “churning” • Favorable jurisdictions • Political considerations

11. Elements which indicate settlement Clear Liability • No defense to owing something • Might admit liability at trial • Only issue is damages • Discovery should focus in this area • Try to negotiate directly, or set early mediation Low Share of Liability (Multiple Defendants) • Try to settle out your share, let others go to trial

12. Elements which indicate settlement Policy Limits Case • Full coverage is exposed • Why incur expenses beyond limit? • May be able to get an “early payment discount” for settling now, to reflect the time value of money • Why erode limits, if defense costs do so? • Why spend time and energy?

13. Elements which indicate settlement Minimal Damages • Exposure is low • Why spend far more than the case value on discovery? • May be political or “message” reasons to do so • May need mediator to get the plaintiff to realistic number

14. Elements which indicate settlement Plaintiff Attorney’s Fees Owing • Frequently the plaintiff fees exceed the case value • Why allow the fees to grow? • May need mediator to get the plaintiff attorney to realistic number • May need to make statutory offer to make him realize ongoing fees will not be reimbursed

15. Elements which indicate settlement Poor defense Witnesses • Even if the facts are on your side, if your witnesses don’t “sell” the story, you probably won’t win • Timing of settlement prior to witness depositions may improve the value you can reach • Like with clear liability, you probably won’t win the case Sensitive documents • Settle before they are discovered

16. Elements which indicate settlement Heavily Emotional Issues • Cases involving sympathetic minors and/or catastrophic injuries impact juries, lead to awards • Recognize reality and try to settle case early and reasonably • Like with clear liability, you probably won’t win the case • If you can’t settle, try to have case heard by judge

17. Elements which indicate settlement Jurisdiction Issues • Some jurisdictions, especially with some defendants, are not likely to get defense verdicts • In many areas the police are viewed as the enemy, or corrupt • In some jurisdictions if that city is the defendant, jurors tend to rule for the plaintiff • Knowing the plaintiff attorney skills, local vs. outsider • The ethnicity of the claimant and defendant may have an impact with some jury pools, both pro and con

18. When Settlement is Indicated • Prioritize discovery and place on a timeline • Keep discovery deadline in mind • Get an extension for discovery • Mitigating factors? • Selecting a mediator

19. Elements which indicate defense Low Liability • If a plaintiff will not accept his/her level of contribution to an accident, there may be no choice Multiple Defendants • It may be nearly impossible to reach an accord to allocate liability among the parties • Consider defendants-only mediation

20. Elements which indicate defense Large Damages • Damages, especially if there are pre-existing conditions, or questions as to causation, may impede the ability to settle a case • Ongoing damages may dictate to a plaintiff that they want to wait as long as possible to try and get the maximum consideration of what will be involved • Sometimes too soon may be “too costly” • Medicare considerations

21. Elements which indicate defense Unreasonably Large Demand • A demand does not necessarily resemble real value. But if the plaintiff won’t “come to earth”, settlement will not be possible • Don’t quit just because the initial demand is high, but be aware of the problems this creates, including plaintiff expectations

22. Elements which indicate defense Plaintiff Attorney “Churning” • Some attorneys see cases which award fees as opportunities to go as long as possible to maximize their fees • May need to consider statutory offers to bring these cases in line. If the attorney knows his fees are at risk, he is less likely to put in the extra work

23. Elements which indicate defense Political Considerations • Some public entities decide they want to send a message, make a practice not to settle, may have an issue with the specific plaintiff or attorney, etc. • Try to explain the realities of the case, and the cost to them • Involve excess carriers and/or pools early in the process

24. Tools to Consider • Statutory Offers • CCP 998 – State jurisdiction • Rule 68 – Federal jurisdiction • ENE • Mediation/ADR • Consider Hi/Lo when far apart • May require additional discovery to prepare

25. Questions or Comments

26. Carl FessendenPorter Scott350 University Ave, Suite 200Sacramento, CA 95825(916) 929-1481www.porterscott.com Mr. Fessenden graduated with majors in Political Science and Communications from the University of California, San Diego, in 1988. He graduated from University of the Pacific, McGeorge School of Law in 1992. Mr. Fessenden joined Porter Scott in 1994 and has been a shareholder since 2000. Carl represents clients throughout the State of California in a variety of forums, including the Superior Court, the Court of Appeals, the U.S. District Court for the Northern and Eastern Districts, and the Ninth Circuit Court of Appeals. He represents public entity clients in cases involving harassment, discrimination, and retaliation claims; civil rights; labor issues; whistle blower claims; contract actions; and dangerous condition of public property. 

27. Jack BlyskalCSAC Excess Insurance Authority75 Iron Point Circle, Suite 200Folsom, CA 95630(916) 850-7300www.csac-eia.org Jack Blyskal has over 40 years multi-line experience in the insurance field, with most of that time in Claims or Claims-related positions. In addition to both handling and managing most areas of Claims, he has served as a Claims Training Manager, Recovery Manager and Claims Audit Manager. He is currently the Chief Claims Officer for the CSAC-Excess Insurance Authority, the largest Property/Casualty JPA in the United States. In this role he oversees the Claims Functions for the Members’ JPA in Workers’ Compensation, Liability, Property and Medical Malpractice. Jack received a Bachelor of Arts Degree in English from Bucknell University, and a Master of Arts in Organizational Management from the University of Phoenix. He also has the insurance designations: CPCU, Associate in Risk Management, Associate in Claims, Associate in Insurance Services, and Senior Claims Law Associate.

28. Heather FregeauCSAC Excess Insurance Authority75 Iron Point Circle, Suite 200Folsom, CA 95630(916) 850-7300www.csac-eia.org Heather Fregeau has worked for CSAC EIA for over 10 years in the Liability Claims Department. Prior to working at CSAC EIA, Heather worked in Human Resources and management positions. Heather has attended several mediations and successfully resolved claims with a mind towards fiscal responsibility, political concern, and what is right for the exposure. Heather holds her AIC and is a graduate with honors of University of Phoenix. She resides in Rocklin with her husband and two children ages 9 and 7.