Master Negotiators Always Get Timely Consent to Settle from The Insureds

What’s the difference between spending $10,000 in legal fees in early negotiation and dropping $100,000 on a full-fledged litigation? 

Many times in the EPL and E/O world, it comes down to Consent to Settle and when it is secured by defense counsel.

But based on my experience speaking to thousands of claims professionals in litigation management and negotiation seminars and surveying high-level claims executives, the reality for a large majority of carriers/companies is that 92% of all claims settle and about 1% go to trial. That leads to a very simple question: 

If only 1% go to trial, it is clear that Consent to Settle is being obtained, but the key issue is WHEN—after your attorney bills a little or a lot?

More time equals more money. It seems that, whenever possible, it would be better to secure Consent to Settle as soon as possible so as to limit legal costs. (Of course, this rule does not apply ALL the time, but it does seem to apply a large majority of the time!)

With that in mind, let’s talk about the importance of timely obtaining of Consent to Settle and its impact on your bottom line. 

Then, it’s time to think about whether or not your lawyers have the mindset and skill set to get the job done. In effect, are they framing the issues to the insured in a manner that triggers Consent to Settle?

Let’s disrupt something.

Bill

MASTERS OF NEGOTIATION

Join me for Cruser Mitchell’s Masters of Negotiation series and come away with the skills you need to save legal fees and indemnity by creatively and efficiently resolving cases.

January 17 — Litigation Management

January 24 — Case Study: Send in your case and CM will “Live” evaluate it and collaborate with other claims professionals to assist with evaluation and negotiation strategy

January 31 — Metrics: Understanding and Identifying Key Performance Metrics for Your Company and Your Panel Counsel

Staunching the Money Bleed

The Disruptive Lawyer got a call from two separate Employment Practices Liability clients in the same week, each with the same problem: both claims could not be settled because the insured refused to give consent. One of the client’s cases was in Washington, and the other’s case was in Ohio. This was their story: “We have a likely liability case where we couldn’t get the insured to consent to settle. So, after paying over $200,000 in legal fees, two years of litigation, and losing MSJ, we have a court-mandated mediation. But the problem remains: the insured will not give us Consent to Settle.” 

In both cases, the plaintiff had originally demanded around $250,000 to settle, but now, after all the litigation, the plaintiff wanted $1,000,000. Both clients said the same exact words, “We need to stop the bleeding, but our counsel has not secured consent to settle.” 

So, the Disruptive Lawyer went to work. In the Ohio case, there was a Reservation of Rights (ROR) on punitive damages. But guess what? Ohio law does not usually allow for punitive damages to be an insurable risk. So, the Disruptive Lawyer set up a conference call with the insured and outlined the potential punitive damages and personal exposure to the insured. This was the first time in the 2-year litigation that the insured truly appreciated the potential for a personal exposure. Hence, consent was literally authorized by the end of the call. 

As for the Washington case, there was a breach of contract on a commissions issue that involved an ROR. Again, the insured had not been effectively advised on the personal risk, as it had been under the impression that “the case was 100% the insurance company’s money.” With some back and forth that the damages for the commission had real teeth and would likely be awarded by a jury, the insured ultimately gave consent to settle. 

At both mediations, the cases settled. However, they settled for over $100,000 above the demands that had been made two years prior (due to increased value in the plaintiffs’ attorney’s fee claims) and after more than $200,000 in defense fees. Because the carrier did not RED FLAG lack of consent as a key performance indicator (KPI), in each case, the carrier paid at least an extra $175,000 in legal fees and $150,000 in indemnity to resolve the cases. It was, in effect, a $325,000 unnecessary expense. Meanwhile, in both cases, the Disruptive Lawyer billed under $20,000 to secure settlement and resolve the cases effectively stopping the bleeding.

Note, while both of these cases involved coverage issues, primary counsel had a duty to explain to their client that there was indeed a personal exposure for uncovered damages.

In the professional lines world, less than 1% of all cases go to trial. At the end of the day, virtually all of them get consent. So the question remains: Does your counsel get consent when they bill say $10,000, or after they’ve billed $100,000? If the latter, what changed for them to magically get consent after billing $100,000? 

For insurance companies doing EPL, E/O, and D/O business that requires the insured’s consent before settling, the timing of securing consent should be a KPI to measure the effectiveness of its legal panel. Further, any lack of consent on a major exposure (whether due to legal fees or damages) should be RED FLAGGED and sent to a “Lack of Consent Roundtable,” just like the carrier’s “Large Loss Roundtable.” 

Cruser Mitchell maintains metrics on this KPI, and, over 94% of the time, secures consent to settle from the insureds within 45 days of assignment.

Want to learn more about how hiring a Disruptive Lawyer can help you save time, sanity, and legal fees? Sign up for the Masters of Negotiation webinar via the link above!

In the News

This month, the Daily Mail shared a story of lawtech firm Luminance, which announced that two AI bots negotiated a non-disclosure agreement for the firm all on their own—with no humans involved. The whole process took a few minutes, and all the humans had to do was sign on the dotted line. 

So, should we be worried about the fate of our jobs and the legal profession as a whole? 

Nick Emmerson, president of the Law Society, said, “At present and probably into the distant future AI will be unable to fully replicate the function of legal expertise provided by legally qualified professionals.” 

Why? 

Emerson went on, explaining it’s the human element: people “have different needs and vulnerabilities, which a machine cannot yet master and human judgment is needed to ensure that automated decisions do not result in potential false positives.” 

Funny, my thoughts all along (albeit with concerned confidence) have been exactly that.

In effect, AI can most certainly spot and red flag key issues or unique language. What AI cannot do as well is identify the leverage points of a negotiation, as they are always evolving and changing. As we wrote in The Disruptive Lawyer’s Little Black Book of Litigation Management, a kaleidoscope serves as a great metaphor for this concept: with each rotation, there are new shapes and color combinations to take into account. 

Negotiation is not only about risk identification; it’s also about risk assessment and risk tolerance. And risk tolerance in particular is HIGHLY subjective and can change from deal to deal. Further, great negotiators, like great poker players, can read the room and the other side’s “tells.”

As Emmerson said, “There is also an art in negotiation and ultimately bargaining that AI is unlikely to master.” This Disruptive Lawyer agrees.

The Disruptive Lawyer’s Tequila Corner

The holidays are around the corner, and that can mean an influx of stress in the form of shopping, crowds, loud uncles, and, of course, in-laws. But a perfectly balanced cocktail can take the edge off. 

Enter, the Añejo Manhattan.

You’ll need: 

• 2 oz añejo tequila

• 1 oz sweet vermouth

• 1–3 dashes aromatic bitters

• Ice

• Cocktail cherries for garnish

Chill a coupe glass. 

Put ice, añejo tequila, sweet vermouth, and bitters into a mixing glass and give it a quick stir to cool things down. 

Strain it into your coupe glass. 

Thread your cocktail cherries onto a toothpick and garnish. 

Sip slowly, and let the chaos fade into the background. 

Cheers!

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The Disruptive Lawyer’s Laugh Break

We refer to ourselves as the “unCola of law firms,” but based on the bewildered expressions of my younger colleagues, we might be due for an update.