1. Litigation Metrics Helen Gillcrist Preston McGowan © CLM Litigation Management Institute 2013. All rights reserved. The course material presented herein does not represent the views or opinions of any of the individual faculty members or instructors or of any of the companies or entities with which they may be employed or affiliated. Nothing in the course materials presented should be construed as legal or professional advice or the rendering of a legal or professional opinion on any specific factual situation. Always seek appropriate legal and professional business advice in the context of specific cases.

2. Learning Objectives  Understand the fundamentals of performance measurement.  Objectives, measures, metrics, targets  Key objectives categories  Key litigation management objectives and measures  Measuring what counts-qualitative and quantitative.  Managing your litigation with metrics

3. Why Are We “Really” Here Today?  Litigation industry  US tort system cost $264.6 billion in 2010*  Total cost of litigation impacts after tax profit for corporations  Thinning margins and increase cost containment  Desire for more transparency.  What do we want to achieve?  How are we achieving it?  What are the results  Demand for fiscal responsibility and litigation performance *Towers Watson

4. Managin g Legal Services Panel Engagement & Oversight Legal Invoice Management Staff Legal Resource Development Rate Negotiations Client/ Customer Consulting Auditing Quality/ Financial Elements Of Litigation Management

5. Objectives, Measures, Metrics and Targets  Often used interchangeably but they are not the same.  Define your objectives first and work your way down to targets.  Ensure that your objectives tell the complete story of your operation or initiative (financial, customer, qualitative & operational).  Identify the measures and metrics that quantify your objectives.

6. Objectives, Measures, Metrics and Targets TermDefinitionExample Objectives What do you want to achieve?Reduce litigation costs Deliver quality defense Measures What will you observe and track to determine if objective is being met? Dollars billed or paid; Number of cases Metrics What are the set of measurements that quantify results? Cost per case ($/case) Targets What is the performance expectation for the specific metrics? X % reduction Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

7. Key Litigation Management Perspectives PerspectiveObjective Financial Profit, Revenue, Expense, etc. Customer What does the customer value that will drive the financial results? Operational Which internal processes will drive customer and financial results? Learning, Development & Structure What skills / abilities / infrastructures will have to be enhanced in order to change, innovate and improve the operational objectives? Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

8. Framework for Measurement What do you want to achieve? What is the performance expectation? What are the set of measurements? What will be observed and tracked? ObjectiveMeasureMetricTarget Financial Customer Operational Learning, Development & Structure Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

9. Framework for Measurement - Example ObjectiveMeasureMetricTarget Financial Reduce litigation costs Dollars billed Number of cases Cost per caseX% decrease Customer Improve quality of legal services Examiner feedback1 – 5 ScalingX% of respondents scored > 4 Operational Maximize use of internal resources Cases handed by inside counsel Total cases Ratio of inside counsel cases to total cases 80% handled by inside counsel Learning, Development & Structure Capture, analyze and communicate retention results Quarterly reports Time between quarter close and publishing date % of reports delivered within 3 weeks of quarter close 100% of reports delivered Adopted from Kaplan and Norton Balanced Scorecard and Strategy Maps

10. Measurement Challenges  What is the right metric?  What if the data does not exist?  What if the data exists but is in “bad” shape?  How long do I have to measure?  Is it really my job to manage this data and the reports?

11. Measuring What Counts  Designing actionable metrics  Directly relevant to business goals and identifies the success of your inititatives  Provides insight to help improve your operation  What should you do when the data doesn’t exist?  Use proxy data  E-billing  Mine law firm matter management/billing data  Improve data quality  Create data (Excel, Access or off the shelf)  Case study

12. Managing Your Litigation and Your Business with Metrics  Litigation planning and budgeting  Law firm assessment and performance scorecards  Alternative fee arrangements  Operational improvements  Predictive modeling

13. Litigation Planning and Budgeting

14. Establishing Litigation Budgets Challenges Available Information Guides Budget Accuracy Expectations of Client and Law Firm May Differ Managing to a Budget May Restrict Law Firm’s Actions Changes During the Life of a Case Can Require Budget Updates External Factors: Venue Judge Opposing Counsel Law Changes Benefits Helps Client and Law Firm Manage Internal Budgets (i.e. Operating) Necessitates Early Case Evaluation and Strategic Planning Allows Case Strategy Expectations to be Set and Understood By Client and Law Firm Increases and Promotes Communication Provides a Baseline

15. Law Firm Assessment and Performance Scorecards

16. Law Firm Assessment Surveys (@ end of case by claims handlers) Questions that are asked Responses that are obtained Participation levels when aggregation of the data is concerned Consistent In The … Litigation types Case complexities Venues Firm structures Applicable To All … Deciding how a firm compares to others Communicating what the strengths and weaknesses of a firm are Determining whether the continued use of a firm is in the clients best interest Actionable When … Assessments Must Be…

17. Litigated File Assessment Surveys Overall ExperienceLaw Firm InteractionQuality of OutcomeHandling Complex Cases #ProviderPrvd Type RegionStateTotal # of Surveys Overall Satisfaction Intend to Reuse Respon- siveness Compliance w/ Protocol Appropriate Costs Positive Impact BudgetingExecution of Strategy 1Law Firm AOCOC WesternOR110.0 8.010.0 8.010.0 2Law Firm BOCOC WesternCA68.68.48.27.88.69.57.58.3 3Law Firm COCOC WesternTX18.0 4Law Firm DOCOC CentralLA47.8 7.5 7.8 5Law Firm EOCOC CentralIA17.9 7.68.68.18.0 6Law Firm FOCOC EasternNY79.99.7 9.910.0 7Law Firm GFLFL NortheastNY499.09.19.08.88.99.09.39.5 8Law Firm HOCOC CentralLA78.99.08.69.08.48.78.59.0 9Law Firm IOCOC EasternSC110.09.08.0 9.0 8.0 10Law Firm JOCOC WesternNM288.6 8.58.28.18.68.5 11Law Firm KOCOC EasternMD87.87.67.87.5 7.67.58.0 12Law Firm LOCOC CentralMS610.0 13Law Firm MOCOC WesternNA16.04.07.06.04.06.04.06.0 Sample Survey Questions

18. Viewing Data in Context Are there external factors potentially affecting costs and outcomes?  Legislative changes  Wide variations in case mix: very large cases, many small cases?  Aggressiveness of plaintiffs’ attorneys  Customer demands  Brand reputational considerations  Customer risk management philosophy  Claims behavior  Judicial hellholes  Data integrity Understanding your data is an iterative process; litigation data is complex and has many nuances – involve “real” users in data review. If possible, also include actuaries or statisticians

19. Sample Firm Performance Scorecard Founders Insurance Company Firm Scorecard – 3/24/2011 Firm Name: Apple, Orange & Grapes, LLP Firm Score: Respondents: 12 Total Billings: $XXX Total Cases: XXX Average Case Complexity : B+ Quantitative ScoreQualitative Score 3.54.2 3.8 Pricing Effective Firm Rate per Hour Partner Billing Rate/% Utilization Associate Billing Rate/% Utilization Paralegal Billing Rate/% Utilization Legal Expense Ratio Productivity Average Cost per Case Average Duration of Cases Average Case Values Capacity Firm Size Number of Attorneys Billing Founders Legal Skills Case Problem Solving Quality of Legal Advice Quality of Legal Writings Case Evaluation Skills Creativity & Resourcefulness Negotiation & Settlement Skills Use of Dispositive Motions Use of ADR Subrogation Capabilities Trial Skills Appellate Skills Overall Performance Relative to Staff Counsel Overall Performance Relative to Peer Firms Service Delivery Responsiveness to Requests for Information from Claims Candor in Communications Case Preparedness Proactive Case Management Consistency of Performance Across Firm Attorneys Compliance Overall Adherence to Founders’ Litigation Management Guidelines Use of e-Billing Accuracy of Legal Bills Accuracy of Case Budgets Timeliness of Status Reports Note: 5 – High Score; 1 Low Score

20. StateReporting GroupPanel Type Number of Cases Average Legal Cost Median Legal Cost Average Total Cost Median Total Cost Legal Cost / Total Cost Average Cycle Time Median Cycle TimePct $0 Loss Cases Pct Complex / Severe File Assessment Score Surveys Completed Illinois Agency Corporation Personal LinesLiberty Preferred38$9,297$6,798$34,486$20,07127%50840113%19% Specialty Panel5$8,138$7,313$21,379$17,89838%42730720%50% Commercial & Agency PALLiberty Preferred217$19,105$10,835$75,099$20,44925%58347930%45%8.7114 Special Arrangement10$34,171$19,835$133,958$30,15226%73844410%60%7.45 Specialty Panel57$27,084$14,232$86,941$27,35231%55839344%81%8.738 Commercial & Agency WCLiberty Preferred222$7,669$6,373$124,479$78,6376%6873016%11% Specialty Panel1$28,047 100%909 100% PersonalLiberty Preferred136$9,642$6,662$50,900$26,50319%64447415%28% Specialty Panel22$21,058$11,039$92,046$76,82423%6363059%50% 708$18,245.67$12,348$71,926.11$36,21523%62542620%36%8.6157 Illinois Date Range: 6/1/10 to 5/31/12 All Complexities CCO Report data lags by a minimum of 3 months *Construction Defect Cases Excluded As of Date: August 31, 2012 Venue State Two years of closed cases (3 month lag) Bucket by Panel # of cases Average and median fees, expenses and losses Spend to loss ratio Segment by line of business Case Duration % Zero Loss and % Complex

21. When When was the result achieved? Pre-suit, Discovery, Pre-trial, Trial, Appeal How How was the result achieved? Defense Verdict, Plaintiff Verdict, Settled, Dispositive Motion, etc. What What was the last offer? What was the last demand? What was the resolution amount? When When was the result achieved? Pre-suit, Discovery, Pre-trial, Trial, Appeal How How was the result achieved? Defense Verdict, Plaintiff Verdict, Settled, Dispositive Motion, etc. What What was the last offer? What was the last demand? What was the resolution amount? Stages of Litigation Resolution Type

22. Alternative Fee Agreements

23.  Understand what both sides want to achieve and how the success of the AFA will be measured.  Outcomes  Quality  Service  Understand your costs, the customer’s service requirements and your profit targets.  Clearly document the AFA terms/conditions and strive for simplicity.  Invest in the appropriate resources to analyze, manage and enhance each AFA.

24. Operational Improvements

25. Operational Improvement Managing Legal Services Panel Engagement & Oversight Legal Invoice Management Staff Legal Resource Development Rate Negotiations Client/ Customer Consulting Auditing Quality/ Financial Six Sigma Initiatives re Turnaround Time Effective Negotiation Training Legal Background of Audit Staff Provide Customized Legal Service Delivery Utilization of Firms per Jurisdiction Tools to Streamline Process

26. Predictive Modeling

27. What Is Predictive Modeling? “Predictive Modeling is the application of statistical techniques and algorithms to individual risk data to better understand the behavior of a target variable based upon how multiple variables interact.” *Towers Watson, “Predictive Modeling Proving It’s Worth Among P&C Insurers” (February, 2012)

28. Recent Articles Discussing The Use of Data Analytics and Predictive Modeling in The P&C Insurance Claims Process 28 Insurance Analytics: The First Step for Success By Robert Regis Hyle, PropertyCasualty360.com August 12, 2013 The Dawn of Big Data: How lawyers are mining the information mother lode for pricing, practice tips and predictions By Joe Dysart, ABA Journal May 1, 2013 New Power with Predictive Analytics By Karen Furtado, PropertyCasualty360.com April 17, 2013 Five Ways Agents, Carriers Can Partner Using Predictive Analytics By Wade Bontrager, PropertyCasualty360.com February 5, 2013 Analytics, cheaper technology help risk managers with strategic planning By Rodd Zolkos, Business Insurance July 28, 2013

29. Prevalence in P&C Industry  Adoption predicted to increase in next two years.  Pricing and product innovation  Underwriting/risk selection  Claim handling  85 percent of personal lines carriers surveyed are or will use it  97 percent see sophisticated underwriting/risk selection tools as essential or very important  70 percent commercial lines adoption now/< 2 years  Additional uses: rates and pricing *Towers Watson, “Predictive Modeling Proving It’s Worth Among P&C Insurers” (February, 2012)

30. Litigation Management Application of Predictive Modeling  Early defense counsel consultation  Direct investigation  Begin discovery process  Formulation of litigation strategy  Predictive model may influence, provide insight on:  Expert selection  Judge/jury propensities  Opposing counsel tendencies (e.g., settle vs. trial) Provides ability to make better business decisions on litigation go/no- go and go-forward case strategy.

31. Litigation Metrics Helen Gillcrist Preston McGowan