July 20, 2019

Practice Tip #3: Prepare to spend more than in “usual” product liability cases.

[This is the third installment of a planned ten-part series of short and sweet “practice tips” for claim professionals handling product liability claims against medical device and pharmaceutical products.]

As a steak-lover and carnivore, if I dine at Morton’s, Ruth’s Chris or the Capital Grille, I know the meal tab will be substantial. (Please don’t share these dining preferences with my cardiologist!) Such trips are reserved for special occasions. Graduations. Engagements. Job milestones, etc. I know the meal cost will be higher than if I go to, say, Golden Corral.

Budgets

When you handle drug and device product liability claims, you are often paying the higher-end of defense costs.
Drug and device product liability claims aren’t run-of-the-mill cases. You won’t have run-of-the-mill legal bills. Issues are often more complex. Defense involves massive document production and e-discovery. Multiple depositions are needed. Multiple experts may be needed to defend attacks on design, warnings and manufacturing.

You’ll need to recalibrate expectations as to what’s a “normal” legal bill.

This DOESN’T mean handing a blank check to defense counsel. No one suggests that. Adjusters still have a duty to monitor and manage expenses.

It DOES, however, mean we’ve got to be realistic.

If our frame of reference is automobile, slip and fall or other, more “stock” liability claims, we’re in for a rude awakening.

1. Require budgets. Make this a part of your written litigation guidelines for outside counsel. Have defense counsel complete a Litigation Plan and Budget within at least 90 days of case assignment.

2. Have them updated regularly. Budgets can become outdated quickly. They have a limited shelf-life. After the initial budget, have counsel do an updated assessment whenever there are case developments that materially change (up or down) projected defense costs.

3. Consider having counsel develop different budgets for different scenarios, such as Budget A, assuming we win the Motion for Summary Judgment versus Budget B if we take the case through trial. Counsel m ay sometimes say, “It’s impossible for me to budget — it could be $XXX if the case goes to trial but $YYY if we win our Summary Judgment Motion.” Fine. Understood. Then, do a separate budget for each scenario. The adjuster can then decided what to do next.

4. Don’t be afraid to push back on grandiose budgets. If the budget is eye-pooping, don’t be afraid to diplomatically push back. What, you estimate a $50,000 tab to work up a case that is valued at around $25,000? Does that make sense? “Sharpen your pencil and see where we can trim the cost without compromising the quality of the defense effort.”

5. Assess case value and settlement options in light of projected transaction costs. Actually, if it will cost $50,000 in legal and related fees to defend a $25,000 case, maybe you should think again about settling the case.

6. Keep an eye on that Expense Reserve. Budgets aren’t provided in a vacuum. Whenever you receive a budget for these cases, reassess your Expense Reserve. Is it adequate? Does it need to be increased? Can you lower it?

7. Allow counsel to bill time for preparing budgets. Do not expect counsel to do the analytical work to formulate a budget on a drug or device case and to do it on a pro bono basis.

8. Consider sharing the budgets with the policyholder. This keep[s the policyholder in the loop. It sensitizes the insured to the financial investment involved in the defense. It is a figure that enters into the insured’s future loss ratio. Further, in cases of “self-eroding” or defense within limits policies, it shows the insured the diminished dollars available to pay claims.

Of course, if you win the case or leverage a terrific settlement, consider a celebratory dinner.

May I suggest Morton’s, Ruth’s Chris or The Capital Grille?

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