Easy-to-use computerized models can now be specifically tailored for large volumes of claims that share a similar underlying legal “structure” (i.e., common liability issues, defenses, and damage elements). Even though a company may have thousands of claims, these claims will usually fall into just a few “categories.” Our approach in these situations is to develop computerized Litigation Risk Analysis Software Models for each category.

Model Development

Each Litigation Risk Analysis Software Model is developed by Marc B. Victor, Esq. based on his questioning of the company’s most experienced claims managers and attorneys — thus combining Mr. Victor's expertise in risk analysis modeling with the company’s practical experience with each category of claims.

The focal point of each model is a Decision Tree incorporating the major uncertainties the company faces in the majority of claims within any particular category. By using decision trees, a company will increase the consistency with which claims managers and counsel consider all the key uncertainties, as well as ensure the correct application of probability arithmetic to the overall quantitative evaluation of each claim.

The resulting computer models will put the power of Litigation Risk Analysis into the hands of the company’s entire claims staff and counsel, with a minimum of training and a minimum of time needed to produce better evaluations.

Then, even more sophisticated models can be developed by adding sets of Prompts for each issue in the tree. The prompts are seamlessly integrated into the tree itself, and at the click of a mouse outline the major factors that would typically affect the possible result on the issue in question. The purpose of the prompts — which are also developed in reliance on the company’s most senior claims managers and attorneys — is to capture "on-line" the wisdom of these experienced advisors.  By doing so, when more junior analysts/counsel assess the likelihood of a good versus bad result on any of the uncertainties in the decision tree, they will not overlook ideas which their more senior colleagues have identified as potentially germane to the assessment.

Model Features

As claims managers or attorneys use a Model, they record in the software not only all their Probabilities and Award Estimates, but also their detailed Reasons — that is, those facts and other concerns which drove their assessments on each issue. In this way, a supervisor is able to open the computer model of any claim and see not only the analyst’s/attorney’s inputs and results, but also much of the thought process behind their numbers.

Litigation Risk Analysis Software Models are extremely easy to use and generate the following important quantitative results with just a few clicks of the mouse:

EXPECTED VALUE — This is the probability-weighted average of all possible outcomes of the claim based on the assessments of the claims manager/attorney. It can be thought of as the average outcome of the claim if it were tried 100 times. This figure represents an excellent starting point for thinking about settlement, especially once adjusted for future (“avoidable”) litigation costs.

PROBABILITY DISTRIBUTION — This is a bar chart that summarizes all the possible results of litigating and their respective probabilities. By presenting a clear picture of the full range, the chart provides the basis for a client to decide whether it can afford to “play the averages” (i.e., stick close to the Expected Value) or whether it should instead be willing to pay a “settlement premium” to avoid completely the chance of even more onerous results.

SENSITIVITY ANALYSES — These graphs show how the value of a claim would change as the probability on any key uncertainty changes. Such graphs allow colleagues to appreciate the dollar significance — or insignificance! — of their different assessments on key issues.

Our tailored Litigation Risk Analysis Software Models can bring the best of a company’s thinking to bear on every claim, and then show the most logical conclusions from the application of that knowledge. And computerization ensures that it is done quickly, consistently, and correctly. The benefits are tremendous.

Click here for an illustration.

To inquire about developing Models for your company's most frequent claims, please call us at the number shown below.