Q: How will the new e-discovery rules, which took effect Dec. 1, 2006, impact insurance companies? What challenges do the new rules pose to carriers?
A: Fred Danback, Integro Group: It means we have to build an infrastructure that is able to quickly and cost-effectively search many terabytes of information given very little notice. But more important, it means we need to have a more disciplined set of policies in place to ensure that we do not discard information that could be relevant in future litigation. The challenges we face are the demand factor that this puts on our operations teams. E-discovery quickly makes its way to the top of the priority list, which imposes a liability on those projects that are planned and scheduled for implementation.
A: Ben Wright, Attorney and Author, "The Law of Electronic Commerce": The rule amendments are not a dramatic change in and of themselves. Many of the specific ideas contained in them have been emerging on their own in litigation. But they signal a dramatic social change that has been unfolding for more than a decade. Electronic records have become central to modern litigation. Wise insurance companies will learn to think differently about the management of their own records, as well as the role that records possessed by others (adversaries or third parties) play in resolving disputes. Ultimately, strategic thinkers will change their assessment of risk, their methods for conducting investigations, the way they budget for litigation, the resources they employ to resolve disputes, and their whole style of negotiating with customers and opponents.
A: Paul Chen, Fortiva: A recent survey conducted by Fulbright & Jaworski found that insurance companies face an average of 1,696 lawsuits a year, making insurance the most litigated industry worldwide. This suggests that the insurance industry needs to be more prepared than any other industry to handle the heavy burden of litigation. Since the new e-discovery rules require all parties involved in a civil dispute to meet before the trial to discuss issues related to electronically stored information, including e-mail, insurance firms need to ensure that they have an effective electronic records management system in place that allows them to quickly retrieve relevant data in a form that can be read by the opposing party.
A: Cliff Shnier, Aon Consulting: All companies, not just insurers, need to consider how quickly they could respond when confronted with a discovery request, which will now almost certainly require collection and disclosure of electronically stored information. Systematic structuring of electronic data in clear and meaningful ways will be even more important than it was in the past. In addition, a sound and defensible records-retention policy will become significant as well. There is a misconception in the business community that these amendments now mean that all companies must hold on to all electronic data they ever had or ever will create. This is not true, and impractical. In one week a company with 10,000 employees generates 2.5 million e-mail messages. If not routinely purged in accordance with guidelines that take into account the company's ongoing business needs and the requirements of regulators, the accumulation of electronic data will choke any company. However -- and this is critical -- once a company is notified that it faces potential litigation, it must suspend any automatic processes that might delete relevant material. Finding and identifying the sources of the potentially relevant material and removing it from the automatic deletions that would otherwise occur (without having to suspend all purge and deletion of the 90 percent that is still irrelevant) will be crucial.
Q: Are insurance companies' systems prepared to deal with the e-discovery rules?
A: Danback, Integro: Very few companies can claim they are where they need to be. The bottom line is that everyone will produce the documents when they are requested, but it will cost some much more than others to do it. This cost will continue to grow unless significant steps are taken to manage them. Many technologies can be used to mitigate the disruption to the business. At Integro we are building an extensive enterprise content management solution that will allow us to search and collect information on a very granular level.
In the past it was OK to store information indefinitely; it was also OK to delete it. The rules have changed and, therefore, our policies must as well. Shortly before the e-discovery rules took effect in December, our legal, HR and IT teams collaborated to form a document-retention policy. I am sure there will be many iterations of this policy as these rules become tried and tested.
A: Wright, Attorney and Author: The new rules are a reaction to a larger development -- the age of abundant records. Our society is generating massively greater quantities of records than in the past. At the same time, society increasingly expects institutions such as insurance companies to be able to account for their records in the event of some kind of an investigation. As a consequence, insurance companies will be (and are being) penalized if they lack the resources to archive and manage their records. But more important, the institutions that thrive will be those that deeply understand and know how to use the colossal ecosystem of records under their domain.
A: Chen, Fortiva: Increasing numbers of insurance representatives are conducting business with their clients via e-mail, and these records must be properly managed and stored. With the new e-discovery rules, the legal system has officially acknowledged that evidence is more likely to be sitting in an e-mail chain than in a filing cabinet. Given the volume of e-mail that can be generated within a company, insurance firms that do not use technologies such as e-mail archiving will waste precious time manually finding and retrieving relevant e-mail evidence in the event of a civil lawsuit.
Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio