How To Resolve Claims While Saving Millions Of Dollars
The Toro Company is a manufacturer of outdoor power equipment and it was the company that pioneered the use of early intervention/mediation of claims as a substitute for traditional claims handling. Because The Toro Company's program has been in use far longer than any other, the data used to judge the program's effectiveness spans almost thirty years. With such an extensive base of information, conclusions can be drawn without risk that they would be compromised by aberrant results or unique incidents.
Below is a comparison of Toro's total claims expenditures prior to, and subsequent to, implementation of the program. The data is based on the company's internal documentation.
Between 1986 and 2001, from the date a claim was opened until the date a claim was closed, the amount that The Toro Company spent in handling each claim averaged $115,620. This amount included attorney's fees, litigation expenses and verdicts/settlements.
After implementation of its program, from 1992 through 2006, that amount was reduced to the sum of $42,839 per claim with no increase in the volume of claims experienced. In fact, the volume of claims actually decreased from year to year. As an added benefit, the cycle time (lifespan of an average claim) decreased by 75%.
The results achieved for Toro since 2006 have not changed as time has passed. Moreover, the results are not unique by any means. Every company that has implemented its version of the program process has experienced similar resolution rates, cost savings and cycle time reduction with regard to the matters diverted to their respective processes.
Below is a list of the efficiency of the process with regard to the various companies that implemented the program.
◊ The Toro Company - 95% settlement rate (1991-2016)
◊ DuPont - 98% settlement rate (2001-2011)
◊ Cottrell, Inc. - 100% settlement rate (2007-2009)
◊ The Tennant Company - 96% settlement rate (1998-2007)
◊ The Home Depot - 96% settlement rate (2004-2007)
◊ Dollar General - 100% settlement rate (1998-1999)
TYPES OF CLAIMS
As noted previously, the process has been replicated by a number of companies in a variety of different ways. Some companies that implemented the program did so to address claims which are/were based on a specific area of the law such as products liability, premises liability or employment. Other companies have utilized the process to focus solely on claims at the pre-litigation stage, while still others have used the process to address claims that are nearing trial. Finally, some companies have opted to address claims arising out of a specific incident.
One thing is certain - whenever someone has questioned whether the process will work in a certain type of legal matter, in certain geographic areas, or at different stages in the claims process, the process has consistently demonstrated its viability and effectiveness. Here are some examples.
Product Liability - Outdoor power and irrigation equipment; electrical products; consumer products; medical devices; industrial machinery and products; and chemicals
Employment - Wrongful termination; Discrimination; and Sexual harrassment
Medical Negligence - Hospice; Nursing Care
Premises Liability - Slips and falls; business Invitee accidents; and security related claims
Commercial - Breach of Warranty, lost profits, loss of future business, diminished reputation, and breach of contract
Fire Losses / Property Damage
Claims Made by Clients (as Plaintiffs)
The process has achieved broad national recognition. Various articles have been published about the process and in 1994, the New York based CPR Institute for Dispute Resolution recognized the process as the year's most innovative application of Alternative Dispute Resolution and presented its creator, Miguel A. Olivella, Jr., with an award for Excellence in ADR. CPR award winners are selected by a blue-ribbon panel consisting of thirty five attorneys, corporate counsel and academics. "The [Toro] program has shown considerable creativity and foresight in developing a multi-level process for addressing conflict," according to the president and CEO of the CPR Institute.
Critics of the program have tried to denounce it by speculating that early claims resolution gives rise to an increase in the number of claims. Much to their chagrin, history refutes this myth. Over twenty years of process implementation at numerous companies directly and convincingly establishes that the process does not give rise to an increase in the number of claims. Not one company that has implemented a version of the program has experienced an increase in the number of claims.