October 16, 2021

Risk Managers: Spoliation Prevention has Insurance Underwriting Implications, too!

[In recent weeks, we have briefly discussed aspects of evidence preservation and spoliation prevention, all from the context of claims handling, particularly but not exclusively in the arena of product liability claims area. This week, we shift the focus to building strong spoliation prevention and document retention systems that yield benefits and return on investment not just in the claim defense arena but also in the underwriting arena.]

E-discovery costs make product liability coverage more expensive. Increasingly, a disproportionate chunk of defense and claim costs for product liability is comprised of electronic discovery through discovery. It is not unusual or unheard of for companies to up to settle dubious product liability claims, simply because the crushing costs of prospective the discovery argued as so intolerable.

risk management

Dollars are dollars, and they can balloon an account’s loss ratio if the company must spend an inordinate amount of money because it is unprepared for electronic discovery, or has spoliation of evidence issues posed against it. These dollars can balloon an account’s loss ratio which, in turn, may impact the availability and pricing of financial protection in the form of product liability insurance.

The takeaway, therefore, is that companies with strong e-discovery, document- and evidence retention systems represent better risks.

One prime job duty of any risk manager is to evaluate and procure insurance protection at the broadest possible terms and at the lowest possible cost. One way to do this is to strengthen the company’s document preservation and spoliation prevention systems and to be able to present a compelling case to insurance underwriters that the risk manager’s company is a sound risk for the underwriter and insurance company. Underwriters are the gatekeepers who determine whether or not a company represents an acceptable risk and at what price.

Thus, we can increasingly expect insurers to probe and ask about systems that facilitate efficient e-discovery, thwart spoliation and maximize retention of evidence.

This will be part of any insurance company’s due diligence process in assessing the fitness and desirability of an account for insurance placement or renewal. Questions about document preservation systems and e-discovery preparedness could be on the insurance application, could surface in pre-underwriting reviews, or arise during discussions with underwriters.

Risk managers should be prepared by having strong systems in place and make a convincing case as to why you’re a GOOD RISK from this standpoint.  This may not necessarily be the current standard of care, but is an aspirational goal toward which companies and risk managers should strive.

Bottom line – your “fitness” on spoliation prevention not only helps in defending claims, it can help leverage better coverage price and terms. IT’S NOT JUST A “CLAIMS ISSUE”!!


  1. Strong systems are essential to modern underwriting, especially as client needs become more complex. A system that is years behind or barely working isn’t going to cut it for modern day clients. You need to be ready with the right data and the right processes at the right time.


  1. […] article — Risk Managers: Spoliation Prevention has Insurance Underwriting Implications, too! (LINK) the author asserts that companies with strong record retention policies and well-defined filing […]

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