Toro’s Alternative Dispute
Resolution Program
Handling Product Liability
Claims and Lawsuits
J. Lawrence McIntyre
Vice President, Secretary
& General Counsel
The Toro Company
Traditional Product Liability
Claims Management
• In the 1970’s and 80’s : Defend, Litigate and
manage lawyers and litigation.
– Hired trial lawyers and experts
– Gathered volumes of documents for discovery and
answered interrogatories
– Prepared in-house people for depositions
(engineering, marketing, management). The
plaintiff is entitled to depose virtually any
employee
– Attended and testified at trials
Traditional Product Liability Claims Management, Cont.
The Outcome of litigation
– Expense
• Drain on internal resources
• Legal expense through trial can easily exceed $300,000.
• Loss of control over our time, money, and documents.
– Risk
• Win some/lose some
– A defense verdict in one case does not guarantee that the same type of
accident/injury case will not result in a plaintiff’s verdict in different court with a
different jury
• Punitive damages
– An award of punitive damages can wipe out the net worth of a company
• Winning the case
– but incurring extraordinary legal expenses, can be equally devastating to the
company’s bottom line – is that really a “win” for the company?
• Uncertainty
– Juries are unpredictable and often mistrustful of large corporations and executives
– Sympathy factor
The Alternative to Civil Litigation:
Alternative Dispute Resolution
– ADR initially became a popular means of resolving disputes
because of soaring litigation costs and other factors
including:
•
•
•
•
More litigious society; less personal accountability
Savings
Control of the outcome
Civil litigation system broken in terms of producing equitable,
efficient and economical results
– A “win” for the company:
When litigation risk is reduced or eliminated and
litigation costs are controlled
Toro’s ADR Program
Unique 3 step program:
1. Prevention
2. Early intervention/accident investigation
3. Pre-Litigation Mediation
Step 1: Prevention
Product Liability group participates in all aspects of
product safety; including:
1.
Product safety reviews (new product and
issues arising on field units)
2.
Operator safety instructions
3.
On-product warning creation
4.
Safety Watch program
5.
Safety Education programs
6.
Safety Standards creation & compliance
Step 2: Early Intervention/Accident
Investigation Process
Goal: Obtain the information we need in order to evaluate the
claim without having to go through formal litigation procedures.
What we do: product specialists (non-lawyers) respond to
product liability claims or lawsuits involving Toro product
quickly:
– conduct an on-site investigation accompanied by a Toro engineer
– Inspect the equipment/preserve its condition and obtain historical
information about the equipment
– Interview the injured person and witnesses; document the facts of the
accident
– Photograph and document the site of the accident
– Listen and treat the claimant as a dissatisfied customer who has had a
problem with Toro equipment, not an enemy
Step 2: Early Intervention/Accident Investigation
Process, Cont.
Evaluate the merits of the case based on the information
we have gathered:
– Severity of the injury
• How does the accident affect their day to day life
– The history of the product
• Safety record, recalls
• Similar accidents or complaints
– Liability factors including alteration, misuse, negligence,
the law in the state, the favorableness of the jurisdiction
– General damages
– The process does not ignore who’s at fault for the accident
and injury
Moving from Evaluation to Resolution
• Share our investigation and evaluation with the claimant and
his/her attorney
– Lower expectations
– claims are resolved for $0
– In June, 2006 we closed 17 cases, 13 with $0 payout
• Willingness to settle
– reasonableness vs. the moon
• There are no blank checks
• 67% settled or disposed of at this point in the process
• If our product specialists do not resolve the case (the claimant’s
expectations may be too high), the case is referred to Mediation
– Plaintiff may need a neutral mediator’s evaluation to become more
reasonable
Step 3: Mediation
•
Mechanics of a mediation
– Enter into a formal mediation agreement with all parties
– The parties meet over the course of two days and the
plaintiff gives a sworn statement
– Both sides present their position with regard to the facts,
law, issues and arguments. Toro is represented by
National Mediation Counsel, and a local attorney in the
jurisdiction
– Mediation is a less formal process but includes the
exchange of information and preparation of mediation
briefs. We come prepared to defend our product and
lower the other side’s expectations.
Step 3: Mediation, Cont.
• Over 95% of the cases submitted to mediation are
resolved
• If resolved, the terms of the agreement are
confidential between the parties and cannot be
published by the plaintiff
• If the case is not resolved at mediation the local
attorney representing Toro assumes a vigorous
defense of the case
Resolving claims using ADR results:
• Legal fees controlled
• Over 1200 claims diverted to this program
• Reduced average per claim handling expense from
$115,000 to $43,000
• Eliminated animosity with customers and unwanted
publicity from adverse verdicts
• Position of greatest strength - we controlled the
outcome and we decided when to walk away; we
controlled our time, our money, and our documents
Average Per-Claim
Costs/Fees Comparison
• Average Pre -1991
Costs/Fees = $47,252
$50,000
$40,000
• Average 1992-2006
Costs/Fees = $10,607
$30,000
$20,000
• 77% Reduction in
Costs/Fees
$10,000
$0
1992-2006
Pre-1991
Average Per-Claim Verdicts/Settlements
Comparison
• Average Pre-1991
Payouts = $68,368
$70,000
$60,000
$50,000
• Average 1992-2006
Payouts = $32,232
$40,000
$30,000
$20,000
$10,000
$0
1992-2006
Pre-1991
• 53% reduction in
amounts paid to resolve
claims
Comparison of Average
Total Cost to Close a File
$120,000
$100,000
$115,620
$80,000
$60,000
$40,000
$42,839
$20,000
$0
Total
1992-2006
Pre-1991
Average Claim
Lifespan Comparison
• Avg. Pre-1991 Claim
Lifespan = 24 Months
25
MONTHS
20
15
• Avg. 1992-2006 Claim
Lifespan = 9.8 Months
10
5
0
19922006
Pre-1991
• 59% Reduction in lifespan
of average claim
Thank You!