KCIC is pleased to present this guest post by Joseph W. Bauer, Principal of Bauer Advising LLC.
For 20 years I served as the general counsel of a global company. NYSE traded. Eight thousand employees in 30 countries. Complicated manufacturing processes. Our products and components were used in everything from wall coverings to transmission fluids; flooring to electrical cable; cosmetics to over-the-counter drugs.
I know a little about things that keep you up at night.
Now as an advisor to companies on risk management, insurance content, and insurance dispute resolution, I’ve come to learn something I wish I had better understood when it was my job to worry.
It’s this: When you get a true grip on the data and information relevant to and influencing existing or nascent complex liability problems, you can understand and analyze it. You can realistically assess its scope and importance. You can know what to be concerned about, and what not to be so concerned about. Knowledge, secured through organized and digitized data, is more than power and might. It’s a good night’s sleep.
Your company uses Substance X in much of its manufacturing processes, and has been since the 1960s. Concerns about the toxicity of this substance were, at best, vague and unsubstantiated until the 1990s. But now it is clear that a small, but perceptible, percentage of persons exposed on a regular basis to this substance can be expected to develop a serious disease. So far, the liability problem has been manageable. A few suits were filed; a few settlements have been made. But what does the future hold?
This hypothetical company, whether it appreciates it or not, possesses historical information that, properly organized and interrelated, can provide it with realistic—and ongoing—analytic reports that will greatly clarify the true (versus imagined) potential risk it faces as an enterprise.
The Usual Approach
Wise business leaders know that hope is not a strategy—neither is “wait and see.” But far too many companies adopt these approaches, because their professional advisors—usually at a trusted law firm—really have no other strategy to offer. Litigators are good at litigating. When accurate information is available, they can assimilate, synthesize, and present it to fashion effective defenses. But litigators are neither forensic or technology experts. They need accurate information to do their job well, but don’t have the skill sets required to find, organize, analyze, and digitize that information in a relational database so that it can be used to most effectively protect the company. This is true even when National Coordinating Counsel has been engaged, and perhaps utilized for years.
So what happens? Matters are examined individually, often by starting with cases that look particularly ominous. Cartons of miscellaneous records are plowed through by staff attorneys and coded for reference. But it’s not realistic or economical to take a holistic approach this way. Most importantly, errors and unfounded presumptions will be made. Many records will never be reviewed that should be, and many that are studied will be misinterpreted without the context of all the data and projections and modeling that can be performed on the basis of the entire picture.
A Better Way
There is a better way. A specialized resource can work with your legal counsel—a resource with deep skills and experience with technology to capture miscellaneous complex data and build it into a relational database. I call them “liability data masters.” The best combine strong accounting backgrounds with technology savvy and deep programming skills. These attributes allow them to analyze and report out the information from unlimited perspectives: geographically, demographically, sensibly. Whether you appreciate it or not, if you have substantial legacy or ongoing liabilities, you’re already paying someone for an attempt to capture and use your information. You may be very surprised at what it will cost to do it right, instead of the way it is being done for you now. And you will probably find that the benefits of your new ability to accurately forecast and understand trends—and report them competently to senior management to formulate moderate and long-term strategies—far outweigh any incremental increase in outside expense.
The Small Stuff Counts Too
Even if your company does not face obviously serious exposures in the nature of mass torts, you can achieve important benefits and reduced long-term expense by expertly digitizing and understanding your information for more routine exposures.
For example, if you have ongoing voluminous employment law matters because you have a large employee base, or unavoidably high numbers of parking lot liabilities, you’ll find that these expert resources can help you identify and address trends and track and forecast future financial implications much more accurately.
What is the value in knowing and being able to prove that if future store locations are managed wherever possible by persons over the age of 50, then employment law expense will be reduced by 50% for those locations? Or that, based on 10 years of history and incident reports, parking spaces that are 12 inches wider result in 60% fewer injuries to customers and visitors in your locations?
It may just be a good night’s sleep. But it will also improve your bottom line.
For 20 years Joseph W. Bauer was the Chief Legal Officer of The Lubrizol Corporation, prior to its acquisition by Warren Buffett’s Berkshire Hathaway, Inc. in 2011. Now his firm, Bauer Advising LLC, offers independent help to companies in understanding and optimizing their insurance, and facilitates the settlement of large coverage issues. It also assists companies by matching insurance technology resources to risk management and claim management needs. Visit Bauer Advising’s “The Fine Print” blog here.