As electronic discovery continues to affect payments on a file and loss runs reflect these payments, under- writers are asking questions about the insured’s elec- tronic discovery preparedness plans.
An underwriter may ask a corporation whether it has data maps in place or designated individuals respon- sible for litigation holds to learn more about their liti- gation readiness program. Underwriters have found it important to find out whether there are retention policies and compliance measures to ensure that the data collected will be from the smallest defensible universe.
Adding questions about the insured’s experience with electronic discovery and the costs incurred in previous litigation will also give underwriters a bet- ter sense litigation costs. Proactively preparation is reduces risk and costs and may make insurance cov- erage easier—and less expensive—to obtain.
The Claims Process Once a policy is in place, and a claim is made, a claims professional at the insurance carrier re- ceives the file and reviews the complaint along with the policy. The claims professional will as- sign counsel (if the policy provides a duty to de- fend) or the insured may select its defense team.
Claims professionals are not always familiar with electronic discovery. The claims professional should ask counsel whether the retention of an electronic discovery vendor has been considered. Best practices as well as recent court decisions (Victor Stanley, Inc. v. Creative Pipe, Inc., et. al.) support the retention of an independent third party vendor for several rea- sons: 1) counsel should handle the strategies related to defense and should not be focused on technical aspects; 2) an independent party eliminates any con- flicts; and 3) the liability risk may be shifted away from counsel.
Some carriers have a designated approved list of electronic discovery vendors and the retention of one of these firms should be considered the same way panel counsel might be considered. Counsel and the insured’s IT department should work with the vendor and be prepared to answer questions.
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There are at least five questions to ask at this stage:
1) Does the insured have a data map; does
it know where all the data is stored? If not, it is likely that there will be additional costs and time expended to locate the data that needs to be col- lected.
2) How many custodians are involved?
The more custodians targeted in the litigation, the more data to collect.
3) Who is planning to do the document
review – associates, contract attorneys or out- sourced document reviewers?
4) When is the meet-and-confer confer-
ence set? Knowing this deadline is important because it marks the event when both sides will agree to criteria which will help reduce the data population.
5) How much data was collected? How much is e-mail?
The claims professional may feel confident that the insured is being provided with a sound de- fense, as first responses and early motions are probably being filed, and a coverage determi- nation will be issued. The entire claim may be covered or just the defense costs. However, it is essential for all parties to recognize that defense costs typically include electronic discovery costs and if these costs are not being billed in a sepa- rate invoice, then line items should be reviewed for the electronic discovery charges. Collection, filtering, tiff review, and native review are some of the keywords in any line item that may indicate electronic discovery charges.
Litigation Once a coverage opinion is issued and the ini- tial data collection is completed, an electronic discovery vendor is able to measure the data and offer an initial estimate of the cost of processing the data. In general, processing the data means removing system files, eliminating duplicate documents and filtering the remaining documents
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