Thursday, April 24, 2014

Insider's Guide to Insurance Claims For Outsiders: Litigation

Not too long ago, I was monitoring the trial of a large, complex third party liability claim involving multiple plaintiffs, a fatality, a severe injury, a bystander claim and several "dirty underwear" claims. It was interesting and boring all at the same time, and I genuinely feel sorry for the jurors who had to sit through that mess and render a verdict. It occurred to me that most people have no clue what goes on in litigation, the costs involved, etc. So, allow me to give you a primer on the world of litigation from the perspective of a jaded insurance claims professional.

First, let me give you a little background and disclaimer. I have been in the insurance business since 1991, and I've been handling claims since 1995. The majority of my  years of claims handling has involved handling, overseeing, negotiating, managing and otherwise dealing with what are considered high exposure, complex and litigated third party liability claims. I have dealt with attorneys on both sides of the bar. I have seen good, bad and average attorneys. I have dealt with fraud, exaggeration, malingering, faking, "lawsuit lottery", and a whole host of things that people try to pull thinking it makes their claims more valuable. I have seen the best and worst in people. I am jaded, cynical and not a little biased against plaintiffs, attorneys and judges.

To sum it up, when people threaten to sue me, my company or my insureds, I have a pretty good idea how things are going to play out.

So, where do we start?

First off, the United States Constitution and most, if not all, state constitutions guarantees everyone equal access to the court system. That includes illegal aliens whether we like it or not. According to my quick Google Fu, something like 15 or 16 MILLION lawsuits are filed across the US every year. Of those, on average, only about 2% of all lawsuits filed ever go to trial. Some estimates even put that number at less than 1% (which is pretty close to my experience at two large, national property/casualty insurance carriers).

Statistically, that means the likelihood of you "having your day in court" are slim. You are much, much more likely to settle your case out of court.

Now, let's talk about the length of time involved. All states have a statute of limitations which governs the length of time you have to bring a lawsuit. It varies from state to state, and the limitations period can depend on what kind of claim is involved. For instance, here in Texas the statute of limitations (a.k.a. "the statute" or the "SOL") is typically 2 years for most third party liability claims and 4 years for claims involving contract disputes. One exception to that rule is the statute of limitations for minor children. They get two years from their 18TH birthday to file suit.

So, for example, let's say you are in a car wreck today (which would be fairly typical reason for most people to consider litigation). It could be as late as 2016 before you have to file a lawsuit. Some states have a shorter limitations period (Louisiana is typically one year) while others have longer limitations periods (6 years is the max on a personal injury case that I am aware of and the majority of states have a two year statute). The statute can be as long as 20 years on contract claims in some states; and most notoriously, the state of Minnesota effectively lifted the statute of limitations in the 1-35 bridge collapse case a few years ago. That situation is a little more complicated because it involves long term construction defect issues and is hopefully an outlier rather than a developing trend.

There is usually no lower limit on when you can file suit. The case I mentioned at the beginning of this post involved an accident that occurred on a Saturday, and the lawsuit was filed first thing Monday morning. However, in some types of cases, there can be administrative hurdles you have to clear before you can file suit. Homeowner/Residential construction defect cases and employment discrimination (a.k.a. EEOC claims) cases often involve an arbitration or administrative right to sue process prior to filing suit.

Now, once you've filed your lawsuit, the waiting game REALLY begins. With certain exceptions, the parties to a lawsuit are entitled to engage in an information gathering process known as the discovery process. The discovery process is usually subject to time table either agreed to by the parties or dictated by the court and is usually governed by the controlling law's rules of civil procedure (ex. a Texas civil lawsuit filed in state district court would be subject to the Texas Rules of Civil Procedure). Some courts are known to aggressively push the cases assigned to their dockets in which affectionately become known as "rocket dockets". Other courts are ambivalent at best and outright slow or corrupt/incompetent at worst.

The discovery process is usually comprised of three phases (more or less). The first phase is generally referred to as written or paper discovery. This consists of requests for written interrogatories (a list of questions the party wants answers to...stuff like identify people with knowledge of relevant facts, etc.), requests for production (give us copies of stuff you have like police reports, photos, your Facebook account, etc.) and requests for admissions (admit or deny that you are a moron, etc.). The next phase of discovery, sometimes referred to as oral discovery, are the depositions of parties and witnesses. Finally, there is expert discovery which includes obtaining reports and depositions of potential experts including doctors, engineers, etc. Written discovery typically happens first but can continue through the life of the case as new information develops. Depositions and expert discovery can and often to happen concurrently although experts are often dealt with last just before trial.

Time wise, the discovery process can take as much time as the court will give you. In my experience, six months is about the bare minimum to expect for discovery in a simple two party car wreck case. It can go on for years if the court allows it. On average, I would say 9 to 18 months is pretty typical for most cases to get through the discovery process. As a rule of thumb: the more complex the case, the longer discovery will take.

Two other major time sinks in the litigation process are alternative dispute resolution (aka "ADR") processes such as mediation and/or arbitration and "motion practice" where motions for summary judgment, motions to dismiss, venue challenges and other legal minutia gets argued before the court.

Generally speaking, courts are reluctant to dismiss a plaintiff's claim(s) on a motion regardless of the validity of the motion or the soundness of the legal position upon which it is based. Some of that is due to a trend of increasing "liberal" or plaintiff oriented bias on the bench which is an outgrowth of the popular election of judges in most states. Where you have executive appointment of judges (such as at the Federal Court level), you tend to see more motions for summary judgment granted than in courts where judges have reelection to consider. Typically, a court will not entertain a ruling on a motion until the majority of discovery has been completed. Part of the reason for this is the nature of the motion for summary judgment outcome. A motion for summary judgment (or dismiss, etc.) basically argues that there are no issues or material fact for a jury to decide and that the plaintiff's (or defendant's) claims should be denied or dismissed as a matter of law. Judges generally have significant latitude and discretion on when and how to rule on a motion. Many will "take the matter under advisement" which sometimes is code for "I don't know what to do with this mess" or "I'm going to hang onto this issue until I think I can leverage it into forcing one side or the other to get more reasonable and settle this mess without the need for a trial" or "my lunch is talking back to me and I need to go to the can RIGHT NOW." Bottomline is that the judge can rule or not rule on a motion at his discretion in his own sweet time (appellate judges are even worse).

The other major time sink which courts have really taken a liking to is ADR because it disposes of the vast majority of cases through negotiated settlement or a binding arbitration decision. ADR usually takes place after the majority of written discovery has taken place but typically before the expense of expert discovery is incurred. Expert discovery can be very expensive and time consuming. So, most smart people try to see if there is a chance to settle the case before incurring costs that will potentially put the case out of reach for a reasonable result (we'll talk more about the economics of this shortly). Frequently, parties will schedule a mediation after a motion for summary judgment has been filed but before the court has ruled on it as a means of using the uncertainty of the judge's ruling as negotiating leverage.

This is not to say that ADR is the be all end all of resolving litigation. My experience has been that only 30 to 50% of cases settle or resolve at the first mediation or arbitration (some arbitration agreements have a "de novo" right of appeal to the traditional court system). The remainder of those 90+% of cases that settle or resolve short of trial do so via informal negotiations between the parties. But, ADR is usually key to facilitating those negotiated resolutions. 

Now, if you've negotiated the discovery waters, shot your wad in ADR without getting a settlement you can live with and had the court ignore or deny your motions for summary judgment long enough to reach the front of the trial docket.... Oops. I forgot to mention the hidden time sink in all this...the court's docket. Every case that is filed gets set on a court's docket. Each court will eventually issue a document sometimes a case management order, scheduling order or something to that effect which sets out the deadlines and timeframes for each case. It's important to note that these deadlines and timeframes are subject to change for any number of reasons including conflicts with other cases, the court's hearing and motion docket, etc. In some rural counties, there is one court for the entire county including criminal, family and civil matters. In those counties, criminal matters take precedence followed by family court with civil matters getting the leftovers of whatever time is available. Woe be to the person awaiting trial in a rural venue serviced by a circuit judge who presides over the courts of multiple counties (yes, they still exist) due to sparse population.

You may have a scheduling order that says your case is set for trial on date X; however, your case may be sharing that date with 15 or 150 other cases. This is particularly true of counties where there are large metropolitan cities such as Dallas or Houston. If you are number 150 on the docket for a given trial date, you are not likely to get reached and your case will be continued to the next available trial setting. If you are number 15 on the docket, there is a very real chance you may go to trial as other cases ahead of you settle or continue for various reasons. If you are number 1 on the docket or have a "special setting", you are going to trial unless you cough up a lung or have a death in the family or can give the judge some other REALLY good reason why you can't go to trial that day. Resettings typically get punted 6 months or more down the calender. How much further down the docket depends on how annoyed the judge is with one or both of the parties. This cycle of continuations and resettings can go on indefinitely if the judge allows it.

So, anyway, digression over. You've made it to trial. Go buy a lottery ticket. Your odds of getting the result you expect or think you deserve are roughly the same. I've been doing this a long time, and one of the first things you learn is that NO ONE can accurately predict what a given jury will do with a specific set of facts on any given day.

Trial can last from a day or two start to finish for a simple, two party, car wreck case to months for more complex cases. Trial starts with voir dire (don't ask me to pronounce it, i've heard at least three different ways to pronounce, and I'm not sure which is correct...nor do I really care). It's a Latin derived term. Lawyers love Latin terms for some reason. Anyterm, VD is when a panel of prospective jurors are brought in to be quizzed by the attorneys (and sometimes the judge too) about various topics related to the case and the jurors' potential suitability or lack thereof to serve on the jury panel.

If you want to get out of jury duty, the most reliable way I've come across is to be vocal and opinionated during VD. It's the quiet ones who typically get stuck on the jury because that haven't said anything to annoy one side or the other enough to make them either petition the court to strike them for cause or to burn a preemptory strike on them. You can tell when you've said enough to annoy an attorney when they tell you that they "want to hear from some of the other potential jurors." That's the signal that they know exactly who you are and what you stand for and they will probably gladly give you a hall pass to get off their jury.

The bigger the case, the bigger the jury pool, the longer VD takes. I was called for a pool on a capital murder trial about 17 years ago. The pool was 250 potential jurors. VD took three weeks. The first day was just filling out a 20 page jury questionnaire. Day two was general question of the group at large. The remaining time was taken up by the prosecution and defense conducting one on one interviews of each of the first 60 jurors before the court.

Why the first 60? It's like this...the jury that gets seated to hear the case (any case) is not the best and the brightest. It's the first 6 or 12 (depending on the court not including alternates) people from the pool who are not disqualified or struck for one reason or another. If you are in the low numbers of a pool, your odds of getting selected are substantially greater than if you are in higher numbers.

That capital murder trial? The court didn't want to waste resources interviewing all 250 if they could seat 12 plus three alternates out of the first 60. I was number 16. Fortunately, the defense didn't like me enough that they used a preemptory strike on me. It might have had something to with my comment about not trusting sleazy defense attorneys. Perhaps. Same principles apply in civil litigation although civil courts don't always use 20 page jury questionnaires.

After a (now disgruntled) jury is sat (empaneled is the proper term), we get to the nitty gritty of trial. First, both sides make an opening statement for the court in which they hope to show the judge and jury what they intend to prove with the evidence. Opening statements are not testimony or evidence although attorneys frequently try to use them as a vehicle to slip little nuggets in that they may not be able to get in front of the court otherwise. Plaintiffs always go first. Defense is second.

After opening statements, the plaintiff gets to present their case in chief. They call witnesses to provide testimony and introduce evidence. Let me take a moment to disabuse you of a notion here. Every witness is sworn in by the judge with the traditional "do you swear to tell the whole truth...." oath. The sad reality is that a game is being played out behind the scenes out of the jury's presence in which the parties file motions in limine in which the court determines ahead of time exactly how much of the truth the jury gets to hear (or see). If an attorney strays out of bounds during the questioning of a witness, the opposing attorney will make an objection. The judge then rules on the objection by either sustaining, overruling or admonishing the attorney to redirect. Particularly egregious violations of the rules of the game can lead to mistrial and/or sanctions against the offending party. So, to recap, the jury never gets to hear the "whole truth". They get to hear what the judge and the attorneys have agreed they can hear. Fair rarely enters into it.

Back to witness testimony. The opposing attorney can question the other sides witness on cross examination. This will go back and forth on redirect or rebuttal until both sides are satisfied that they have made their points with a particular witness.

After the plaintiff rests their case, the defense can file a motion for directed verdict asking the court to render in their favor usually arguing that the plaintiff did not provide sufficient evidence to prove their case. It is rare to see a court grant a directed verdict. Following the denial of the motion for DV, the defense gets to put on their case in chief if they so choose. Same rules apply as before. Plaintiff can cross exam the defense witnesses.

Once the defense rests their case, there is the charge conference in which the attorneys present proposed jury charges to the court. The court hears arguments on the respective charges and eventually a decision is made as to the final charge which will be given to the jury.

After the charge has been decided, the attorneys are ready to give their closing arguments. This is where they have the final opportunity to give the jury a road map to what they think the evidence proves and any damages that should be awarded. Here again, plaintiff goes first and defense goes second. There is one exception here. After defense gives their closing argument, the plaintiff has the option to give a rebuttal (if they have reserved some time for it). The plaintiff is, in effect, given the last word before the jury begins deliberations.

Jury deliberations are an interesting animal. I have had the pleasure of watching a mock trial involving three full jury panels in which the "jurors" believed that they were actually rendering the verdict in a case. The first thing that happened when deliberations began was that the jurors ignored the judge's admonitions and talked about everything they were told not to discuss or consider.

One of my co-workers (a woman) has a theory about jury deliberations. Her theory is that the most opinionated woman on the jury will sway the panel to her position. Here's how she gets there (and she has been on a jury herself): Men, when arguing, tend to state their position, say what they have to say and then fold their arms across their chest. At that point, men are done arguing. They have nothing else to say. Women, on the other hand according to her, will keep yapping until everyone gives into her just to get her to shut up. Frankly, I'm not entirely sure she is wrong.

Jury dynamics and feedback is a whole 'nother other can of worms. Needless to say, jury verdicts very rarely hinge on the facts or evidence and oftentimes have more to do with something completely unrelated to the case than anything else.

Now, after the jury is done messing around, you get a verdict. Let's talk about the economics of that verdict for a moment.

Let's say for the sake of argument that the amount of the verdict is $1,000,000. Does that mean the plaintiff gets $1,000,000? Hell no. First off, on the plus side, the verdict is subject to pre- and post-judgment interest. Here in Texas, for simplicity's sake, it's 5% per annum simple interest (i'm not going to bore you with all the details of when it starts accruing). So, if it took you 2 years to get to trial, that's $50,000 per year in interest (again...for the sake of simplicity). So, we are up to $1,100,000. Now the fun really begins because that $1.1 million has to pay the attorney, the experts, the expenses and cover any unresolved economic damages (such as outstanding medical bills or workers compensation benefit liens).

Plaintiff attorneys typically work on what's called a contingency basis. This has its benefits and drawbacks as I will attempt to explain. A typical contingency contract states that an attorney will take a percentage of the total recovery plus expenses. The plus side is that the attorney takes nothing if they recover nothing. Most of the contracts I've heard of use a sliding scale. The attorney will take 33% if the case resolves before suit is filed, 40% if it resolved after suit but before trial and 50% if the case goes to trial and verdict. That percentage is taken often calculated AFTER expenses have come off the top. So, if an attorney spends $100,000 on things like court reporter fees for depositions, expert fees, exhibits, advances, travel, etc., he or she is going to take that $100,000 off the top and then take their percentage of what's left. Using our hypothetical verdict, that means that the plaintiff would be netting $500,000 from a $1.1 million verdict BEFORE any unsatisfied economic damages have been paid.

The drawback to a contingency fee is that, in smaller cases, it is frequently possible and even highly likely for the attorney to make more than their client and even for the client to net NOTHING. You mean to tell me that I could be patient, wait all that time, slog through trial after beating the odds to get there and still get nada, zip, zero?

Yep, you betcha.

So, why don't you hear more about that?

In a word, ethics. Most insurance claims professionals are ethically prevented, if not legally prevented in some states, from encouraging or discouraging someone from engaging the services of an attorney. It has to do with conflicts of interest and the unauthorized practice of law. I can get away with it here since I am not advising anyone on the specifics of their particular case or trying to dissuade them from seeking the advice of counsel as I am just merely presenting factual information for your enjoyment and edification.

In fact, I will go one better. I encourage you, should you find yourself in a situation in which you may need to consider litigation, to consult an attorney. Actually, you should probably consult at least three (many will offer the initial consultation for free or for a small fee) to comparison shop not only their opinions of your case but their fees as well. Then, you can make an informed decision of whether or not it is a wise investment of your time and money to pursue your claim further.

Just know that the value of your case is not likely to magically increase in value for the claims person just because you've retained an attorney.

Thus endeth this lesson.  


  1. Dear Sweet Jesus - i thank you for all that i have learned from this post. i have learned much. but in reading this thing in it's entirety, i believe that i should be compensated for losing 5yrs off of my life-span. now i am going to go and hire a lawyer and sue you Daddy Hawk. even though it will probably take 17yrs to come to court (international law suit and all of that!) but i am sure to get at least $50 bucks of of the $15,000 settlement.

    now because i actually read through all of that - i will make you read through all of this and you BETTER read it!

    back in the city we lived next to an empty lot that was for sale for a million years. we had a 25ft hedge that ran between our two properties. someone bought the property next door and one morning i woke up to hear a chainsaw. someone was cutting down one of the last white pines in all of ottawa. i called the police. they told me to call the bylaw office. someone would come out in a day or three. i told them they were out there cutting down the tree now. crickets. tree down. then 2 days later a backhoe started digging and knocked out 10 full feet of those fully grown hedges along with about 40 feet of our fence. i called the police. crickets. i called the bylaw office. crickets. and then i called a LAWYER!!!!! by the time it was all over, the majority of our fence and hedges had been ripped out, a McMansion had been built on top of the property line, and for $7500 our lawyer sent 2 very-strongly worded letters. actually, that's a lie. the letters were bland at best. we learned our lesson.

    thank you for reminding me of that lesson.

    your friend,

    1. kymber, I will make you a one time settlement offer of 50% off your next subscription renewal to this blog.

      You are welcome for the reminder of the lesson learned. It still sucks that your new neighbors in the city didn't have the courtesy to consult with you before tearing things up. While we are on the subject, how can they build right on the property line? Down here, most zoning laws include a "build line" which leaves a buffer zone between the building and the property line to avoid this kind of nonsense. If they had thought about it, any problem on that side of the house would require them to get the permission of the neighboring property owner for repair people to go on the neighbors property o fix anything. Otherwise, it would be trespass.

      For future reference, people running chain saws typically don't get paid enough to argue with someone pointing a shotgun at them.

    2. Daddy - make it 75% off and i will call the lawyer back and tell him to cancel the lawsuit.

      i don't even know where to begin to be able to answer your questions. apparently the city of ottawa wants new construction and will overlook all kinds of zoning things. the nitwit who built almost right on top of us had our whole street shut down for two days while digging out to the city water supply?!?!?!? apparently that was ok. our lawyer did put us in touch with the contractor that ripped down our fence and hedges but they said that once they were finished of the 250 million other contracting jobs that they already had lined up they would come out and repair our fence.

      anyway, after all of that happened we got the house ready to sell in about a month and sold it to the first couple who came to our only open house. they made an offer for full asking price the next day. and we showed them and explained to them all that had happened. they asked if they could back on the weekend with some family members - about 200 cars showed up in our driveway and our house was packed. the girl's family were a very tight-knit greek family and her father walked along the property line with a measuring tape. he told us that he would put buddy through hell as he was a big property owner in ottawa. needless to say, before we even moved, our next door neighbour had to remove his air conditioning unit to the other side of the house and a whole row of new hedges were planted - all of which came from her father making complaints to the right people. when jamie went back to ottawa the following year, he drove by our old house and the fence was completely rebuilt. we are pretty happy that the buddy who built a mcmansion on top of us is now dealing with next door neighbours who have clout. i am sure that her father has all kinds of complaints against that guy with the's like karma really works or something eh?

      much love to you, The Queen, and sweet M&M always! your friend,

    3. kymber, 62.5% off my normal, low, low subscription rate is my final offer.

      No offense, but it sounds like y'all picked a crappy lawyer. He put YOU in touch with the contactor?? Why didn't HE get in contact with them and give them a chainsaw enema? $7500 Canadian must not buy as much as I thought. I'd be asking for a refund if I were you, 'cause he did exactly jack squat nothin' for y'all.

      I'm glad y'all were able to give the nitwit an epic karmic beat down with the big, fat, Greek neighbors.

    4. Daddy - we can't go lower than 68.5 %....and that is our final offer. otherwise i am calling the lawyer.

      crappy lawyer? we called the bestest and mostest known lawyer's office in the city and were handed to a 28yr old guy who just passed the bar exam. but we still had high hopes for him. we thought he would, at the very least, write strongly worded letters. WRONG! as for the karmic beatdown....teeheehee. the girl's dad had worked in construction in ottawa for some 40 can bet that for over the past few years he is putting that nitwit through hell. teehee. yes, i know that i am bad for giggling over that.

      as always, much love to you, The Queen, and baby M&M! your friend,

    5. kymber, my offer is now 60%. You will actually net more if you accept it than if you hire your lawyer and pay him 33% of whatever you hope to get.

      Bestest and mostest known lawyer huh? That was your problem. They have egos and refuse to supervise their minions. Also, you bring up a great point I didn't get into which is the internal workings of lawfirms. Partners very rarely do any grunt work instead passing off mundane tasks to "baby lawyers" so they can get some billable hours in, get experience, etc. Baby lawyers need to be supervised and given direction. Good partners can do this effectively. Bad partners or partners with severe ego issues...not so much. Your baby lawyer wasn't getting the supervision and direction he needed.

  2. Great information! Insurance companies don't like to pay claims and some inspectors or adjusters are invented to deny claims. With this said, if you have a legitimate claim, you should expect to be treated fairly and expect the insurance company to honor the claim. Claims Pages

    1. Sophia, I'm not sure what you mean by "some inspectors or adjusters are invented to deny claims", but I will say that claims people tend to be a jaded and suspicious lot by nature (it comes from too many dealings with sleazy lawyers and angry claimants). Insurance companies are in business to make money like every other business. As such, saying they don't like to pay claims is almost akin to saying the Pope is Catholic. Having said that, some companies have a well deserved reputation for being difficult and reluctant to pay claims while others are less difficult. Perhaps my next articles in the series will be on insurance companies and adjusters.


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