Legal Departments Of The Year: The Hartford's Rigorous Analysis Process Helps Avoid Litigation
When The Hartford gets involved in litigation, its lawyers don't procrastinate.
"We don't just put the litigation on automatic pilot," said Alan J. Kreczko, executive vice president and general counsel at The Hartford. "We do an early strategic assessment of the litigation and make a determination if it's in our best interest to settle early or litigate through until the end."
Kreczko said some insurance companies wait to do this strategic assessment of a case when they are much further along in the process. "At that point, they may have already sunk a lot of costs into it," said Kreczko. "If you front load that strategic assessment, that can really have an impact on whether you opt to go for an early settlement."
It's that sort of no-nonsense approach that has earned The Hartford the Connecticut Law Tribune's Legal Departments of the Year Management of In-House Counsel award.
"We're very gratified to win the award and to be recognized for our in-house counsel work," said Kreczko.
"We're very proud of the way we go about managing our cases and the results we achieve," said Jim Heavner, senior vice president and associate general counsel, who is the Hartford's director of litigation. "It's a cohesive, motivated team of litigators who are spending every day trying to do the right thing for The Hartford, the shareholders and its customers."
The Hartford Financial Services Group has 153 lawyers, 144 of whom work in Hartford or Simsbury. The litigation group is divided into a variety of units, each with particular areas of expertise, such as class actions and bad faith claims; asbestos, environmental, and toxic tort claims; and group benefits, annuities, and mutual fund litigation.
The litigation group handles arbitrations and is responsible for managing the insurance programs purchased by The Hartford. The litigation group reports to a director of litigation and the various units share resources, including those involved in electronic discovery. Most of The Hartford's in-house litigators have significant prior litigation experience in private practice, many as partners at major national or top-tier regional law firms.
"I'm particularly proud of the work our office does to avoid litigation," said Kreczko.
Kreczko offers two reasons for that success.
"First, we bring our litigators in whenever we are considering a business practice that we think could be challenged," said Kreczko. "This ensures we get the benefit of litigation insight and assessment and can take that into account in the development of our business practice. By front-ending that kind of input we lessen the chance later we see litigation we did not anticipate."
Secondly, The Hartford GC's work closely with their claim adjusters.
"Plaintiffs' lawyers look to find vulnerabilities in the claim handling process that they can use to bring class action lawsuits or bad faith claims," said Kreczko. "Our litigation department works very, very closely with our claims department in the development of claims handling procedures, to minimize those risks."
The Hartford's executives pointed to numerous examples over the past year where cases were wrapped up early following a settlement or a successful motion for summary judgment.
For example, Louisiana's attorney general commenced a class action suit in state court in 2007 against 200 insurance companies, including several of The Hartford's companies, alleging improper claims practices arising out of Hurricane Katrina.
After the insurers successfully moved the case to federal court, Louisiana agreed to a stipulated dismissal of its class action, leaving individual claims of about 500 of The Hartford's policyholders in the suit. The Hartford conducted a review of the files of the cases and, based on the strength of the factual record, reached a settlement for a tiny fraction of what the state of Louisiana originally sought.
Some cases inevitably go to trial no matter how much The Hartford tries to avoid it, especially when the legal department believes the insurance claim has no merit. For instance, The Hartford secured a defense verdict in a case brought by a Kentucky policy holder who sought nearly half a million dollars for damage to his house from a fire.
The Hartford had refused to pay the claim on the ground that evidence supported the conclusion that the home owner deliberately set the fire. The Hartford's primary witness, a state arson investigator, testified that his investigation had led to a criminal indictment. The jury deliberated only one hour before reaching its defense verdict.
Reputation On Line?
Kreczko and Heavner explained that The Hartford's lawyers consider a lot of factors in deciding whether to settle a case or go to trial. Among those factors: the impact the case could have on the company's reputation; the potential cost of the litigation; a look at the likelihood of success on the merits; an evaluation of whether other companies in the insurance industry are facing the same or similar litigation claims; who the opposing counsel are, and their track record in regards to settling.
Heavner said the in-depth analysis helps determine the type of outside counsel needed. If it's a case involving a lot of briefing of legal issues, the legal department looks for someone well-known for research and writing. If they expect a trial, The Hartford looks to bring in a savvy litigator.
"We think of ourselves as the senior partner on the case, developing strategy and tactics," said Heavner. "We're heavily managing the caseload from in-house. We find that to be both an effective means to litigate, because we know so much more about our issues and what's come up before than most of our outside lawyers."
Besides litigation, Kreczko credited two other efforts he believed were crucial to earning the Management of In-House Counsel award.
First, he said, last year the company announced it would put up for sale four of its businesses so that it could focus on its core property/casualty insurance, group benefits, and mutual funds franchises. Kreczko said the public announcement drew some criticism by those who predicted it would reduce the company's negotiating leverage during the sales process.
"Not the case," said Kreczko, noting that the divestitures took just nine months to accomplish.
In the end, The Hartford sold its Individual Life Insurance division to Prudential Financial; its Retirement Plans Group to Massachusetts Mutual Life Insurance Company; its Woodbury Financial Services to a subsidiary of AIG: and its Individual Annuity new-business capabilities to Forethought Financial Group.
Kreczko, who noted the company does not have a permanent mergers unit in the legal department, said in-house counsel nevertheless did a tremendous job managing the negotiations.
Also, Kreczko said the company has embraced social media in its business strategies. As such, the company's legal department assists the businesses in its appropriate uses.
"We've developed a playbook… so the businesses can use [social media] to promote its business objectives," said Kreczko. "If one of those businesses decides it wants to start to tweak and put something up on YouTube, we now have a very well developed process and a template with it to quickly activate on a strategy."•