We’re now nine months since lockdowns were first introduced across most of the world and while many countries are flattening the curve of the virus, the same cannot be said of the COVID-19 litigation caseloads hitting insurers.
In the US alone, 1,438 COVID-19 related cases have been filed by policyholders. Most of these disputes revolve around Business interruption (BI) claim declinatures. It’s still too early to say whether policyholders or insurers will prevail in the end. Take the United Kingdom, for example. A significant ruling was made in favor of policyholders in a test case in September, but insurers are now appealing the judgment before the UK Supreme Court.
However, while the focus of the industry will be on the significant cases making their way through the courts, insurers have a much more immediate problem to deal with: litigation caseload management. And with many internal legal departments ill-equipped to deal with mounting caseloads, panel counsel are being relied upon much more than usual.
As such, insurers must optimize both their internal and external case management processes, which include the following.
Put sufficient resources into initial case assessments
An influx of lawsuits will inevitably put pressure on case managers, but you must ensure this doesn’t impact on their ability to complete a thorough assessment of each case when it first comes in. Setting accurate budgets for each case and triaging cases to the most appropriate attorney are vital. Rushing this step will inevitably lead to poor decision making.
Also bear in mind that in many instances you will want to keep this function in-house, in order to have greater control over cost containment. In which case, you can’t rely on external legal resources to free up a potential resource bottleneck. Therefore, you’ll need to consider how you can allocate additional suitable resources when required. Experienced claims adjusters will have many of the skills and experiences required of a litigation case manager, so could be considered for secondment if necessary.
Upgrade systems for better case management
If you need to free up your case managers’ time so they can focus on effective case management, the first place to look is your systems. It’s not uncommon for large insurers to still be using spreadsheets and other rudimentary record keeping systems for litigation management. However, manual systems don’t scale well. Not only will this suck up resources on admin tasks, but this can also lead to mistakes and errors.
Specialist litigation management systems are available, but there are plenty of other options too. For example, free task management software such as Trello or Asana are great for assigning tasks to different team members and for keeping an audit trail of all actions on each case. Tools such as Trello also enable you to upload all documents into each task and keep a calendar of key dates.
Reassess your external legal resources
A sudden increase in litigation caseloads will almost certainly impact on the work you’re handing off to external vendors, such as outside legal professionals or panel counsel. This will either be due to an increase of work going through your existing external referral process, or handing off cases that would otherwise have been dealt with internally.
If you already have a panel of law firms, now is the time to reassess their suitability to manage the increased caseloads. The majority of the COVID-related cases insurers are dealing with are BI claims, so ensure your panel firms contain attorneys who are subject matter experts in this field. Also consider in which jurisdictions these cases are being filed in, as well as in which jurisdictions the majority of your policyholders are based in, to ensure you have sufficient panel counsel resources who can deal with these cases.
Carefully negotiate terms with legal vendors
If you’re entering into new relationships with legal vendors, then you need to take the time to negotiate the best possible terms. Or even if you’re sticking with existing vendors, the fact you may be significantly increasing the amount of work you’re handing off could allow you to renegotiate terms.
Confirm service level agreements that work best for you, including turnaround times, availability and reporting. You may also want to confirm specific resourcing matters, such as ensuring that only one attorney handles each deposition and motion.
The next thing to consider is what the optimal fee structure is based on your needs. Ask the vendors to provide a range of options, including hourly rates and project fees, so you can determine the most cost effective option.
Optimize cost containment
This should run through all of your case management processes. At the front end, confirm with your panel counsel the attorney expenses that are and are not covered by you. You should also confirm the expenses that require pre-approval, to avoid any surprises later on.
Case managers must carefully develop budgets for each case, based on what tasks need to be completed and who they need to be completed by. As tasks are completed, budgets must be regularly updated and the estimated costs versus actual costs analyzed. If actual costs are way above initial budgets, then case managers need to analyze processes and invoices to determine the cause of this.
This brings us onto the invoices. Analyzing invoices is vital for cost containment. Case managers should work closely with either an expert internal panel or a specialist legal bill review partner, to ensure all external legal costs have not been inflated. Reviews should focus on any unreasonable time entries, inefficient staffing, unnecessary work, violation of contracts and failure to comply with other billing guidelines.
Maximize the use of data
Data should be used to both optimize processes and cost containment, as well as to help inform decision making when deciding whether to settle or defend a case.
For process and cost containment optimization, case managers should be analyzing average timescales as well as how long each attorney spends on each case. They can also analyze success rates by attorney. This will help them allocate resources more effectively as well as helping them make more informed choices on the best attorneys to allocate for each case.
When it comes to deciding whether to settle or defend each case, analyzing the outcomes of similar historic cases is the best way to calculate the probability of success. Of course, with COVID-related business-interruption claims, new data on court decisions is coming in all the time, so datasets will need to be constantly updated to stay relevant.
While the recent news of successful vaccine trials means we might be able to get back to business as usual at some point next year, the longtail impact of COVID-releated litigation against insurers could last a lot longer. As such, insurers need to equip themselves to be able to deal with these cases as efficiently and cost effectively as possible.
By tightening both internal and external processes, as well as focusing on data driven decision making, insurers can shield against the storm that lies ahead.
About the author: Markham, is founder of LSG, a predictive analytics company that provides litigation and panel counsel management software to insurers.
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