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Transportation Accidents: Operators, Lawyers, and Underwriters

By: Ned Einstein
As Originally Published By National Bus Trader, December 2010
Tel: 212-766-1121
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This title makes me think immediately of funerals. This is not what this installment is about, although problems in the office and on the road often translate into funerals for operating companies, not just their accident victims.

In this installment, I intend to outline a handful of serious problems that flow from the fragmentation of "players" involved in defending an service provider, manufacturer or supplier in a law suit, much of which is related to their conflicting agendas and profit goals. Then I will suggest some ways to at least soften these conflicts so that the defendants in a case will have a better chance to both win the lawsuit and lessen the damage award.

Who is In Charge

When an accident or incident occurs, two normally peripheral players suddenly emerge to "take over" - insurance underwriters and attorneys. Unfortunately - and this is a critical misunderstanding most operators have - these players have completely different agendas and may not always do what is best for the operator. Generally, the underwriter's goal is not only to minimize its potential damage pay-out, but its costs for defending its client along the way - costs that include attorney and expert witness fees. There are also attorneys whose agendas - at least when working on the defense side - often include (1) making the underwriter happy (for example, by settling for a moderate sum when the case could have been won outright), (b) improving cash flow (by paying its attorneys and their experts unconscionably late) and (c) blurring the operator's understanding of its risks. We have recently seen newsworthy insurance industry giant come perilously close to having no capital to cover its insurees risks altogether.

Underwriters or Undertakers

As a member of the transportation community, I obviously help defend numerous agencies and companies. But there are some I will not assist simply because of the insurance carrier involved. Even though my contract is always between my company and a law firm, law firms working for insurance carriers typically pay their bills only after they receive reimbursements from the carriers. I have dropped out of many a law suit and filed for collection; I have lost only once (years ago, before fortifying my Engagement Agreement). But this meant that my attorney would then have to engage a replacement expert - if the judge even allowed it - or proceed without one. In the best of cases, the replacement must be paid to "read into the case" all over again, and is often far less skilled and savvy. On my part, when the initial phone call occurs, I generally ask a defendant's counsel who the insurance carrier is. Depending on the answer, I often refuse to take the case, even when the initial facts appear to lie in the defendant's favor. None of these dynamics help the operator being sued.

Unfortunately, these are the happy endings. Often underwriters do not do what is best for their clients, whose interests, after all, are not consistent with their agendas. Underwriters often place their attorneys on a short spending leash, which hampers their ability to manage the case correctly. They order attorneys to engage experts only at the last minute - obscenely too late when one realizes that the defendant can expect a pending lawsuit the instant an incident occurs, and at least in theory, has an advantageous head start which is usually squandered.

In contrast, on the plaintiff's side, when my counsel lets me examine the vehicle and incident scene, interview the client, and assemble and review those items submitted in a voluminous discovery request that only an industry insider like myself can assemble - all before depositions of the defendant's witnesses have been taken - the defendant's case begins in a deep hole. Finally, underwriters often instruct their attorneys to engage an expert witness only as a last resort - often when the plaintiff's expert has already effected tremendous damage, and usually after the discovery process (the period during which information must be exchanged) has long been concluded, and no additional evidence can be obtained and examined.

The multi-tiered structure of most insurance arrangements often works to the advantage of underwriters, not their clients. One large underwriter actually extorted one defendant I was assisting into settling a case I and my counsel would have almost certainly walked them out of, Scott-free. But the potential damage payout was huge. So rather than risk its deep pool of money in the "catastrophic tier" it covered, the underwriter extorted the defendant into handing over its $1,000,000, "first tier" of self-insured policy limits - or risk finding itself with no source of insurance in the future.

Hamstringing your attorneys and limiting their access to outside experts is no way to win a lawsuit. Particularly with small operators, I have seen many vanish from the scene from the loss of a single lawsuit. In a nutshell, you need to make sure that your carrier is protecting your interests rather than promoting its own -- or find another way to make a living.

Attorneys and Agendas

Unlike plaintiff's counsel, motivated by contingent fees that usually grant them one-third of the damage award after their experts' expenses have been deducted from the client's share of the winnings, defendants' attorneys are almost always paid simply by the hour. Under this arrangement, one defense attorney dynamic that conflicts with some others is to draw out the case to increase his or her billing - rather than settle much earlier for less money than the defendant is likely to lose. Of course, when an operator is forced to settle a case he/she should have simply won, the operator's premiums are likely to rise. When the facts are in the operator's favor, the thing to do is go to court, not settle simply to protect your underwriter's risks.

Another common practice is to stonewall plaintiffs' attorneys on their discovery requests - a strategy that works effectively against under-funded, lazy or overly-thrifty plaintiffs' attorneys, and is facilitated further when they engage sub-par experts and/or encounter recalcitrant judges. Since judges are typically weak in forcing defendants to turn over evidence, this tactic may keep plaintiff's counsel from obtaining damaging evidence (which, instead, is often "lost" or shredded). But it can also stretch a simple case into a marathon.

I have also worked for many a plaintiff's attorney (I have gradually learned to sniff them out during the initial phone call) who contact me only after their initial efforts have proven unsuccessful. All too often, if such an attorney can settle a case early on - before having spent any serious time or money on it - he or she will settle for 10 cents on the dollar of what the case is genuinely worth, effectively "selling out its client" in the process. When this dynamic is operating, you - as a defendant - want your attorney (and underwriter) to get moving on a case quickly - not drag its feet to minimize its defense costs.

Finally, because defendants' attorneys often enjoy unlimited free access - particularly for analytical purposes - to an army of their clients' technical personnel, they are not nearly as dependent on expert witnesses, and typically do not engage them. As a poor trial tactic, most defendants' attorneys often ask me (obviously when I am assisting the plaintiffs) what percentage of work I do on the plaintiff's side of a case compared to the defendant's side. I generally respond by stating that, "Naturally, I do most of my work on the plaintiff's side." Practically begging to be sucker-punched, opposing counsel always ask me what I mean by "naturally." I then calmly explain to the jury all about the access they have to their client's technical personnel. This answer generally sabotages this stupid question.

Safety and Liability

What has all this to do with safety? Everything. For one thing, the way to avoid lawsuits and damage awards is to not have accidents or incidents in the first place. Instead, sloppy and uncaring operations are prolific, and operators rely instead on the life rafts tossed to them by their insurance carriers. As the comments above illustrate, these brittle life rafts may be rife with loopholes, snags and shenanigans, and may not be in your best interests. So these rafts do not pull you back toward your boat (or coach): They pull you into line with your attorney's and underwriter's agendas. As I have often argued as a marketing matter, safety pays.But its corollary is also true: It pays to spend money on safety. Put your money into your operations, not into litigation.

All this does not mean that an operator is defenseless. After all, insurance carriers are in competition with one another, at least nominally. So there are certain things you can insist upon in your policies. One of them is having a voice in certain key decisions - like a voice in the selection of an attorney and his or her expert. On the defense side, human nature often works against hiring a good expert: Were I an underwriter, I would want the expert who, in his last case against one of my clients, kicked our backsides. In contrast, most underwriters tend to punish these experts by excluding them from the "pool," and often hire those who haven't hurt them in the past, or who are parrots or shills - which few genuinely good experts are. These are part of the reason that most good experts do most of their work on the plaintiff's side. Intervening in the expert selection process can help mitigate this imbalance.

One clever and surprisingly rare approach to finding a good attorney is to ask a bona fide and honest expert witness for a recommendation - instead of allowing your insurance carrier to select one. I have a short list of brilliant and honest attorneys in many states (the list contains none in a number of states where I have done a considerable amount of work). An honest expert will not simply recommend an attorney who will, in turn, hire him or her. There are a handful of terrific attorneys I did not enjoy working with, and would not work for again. But they were effective, and I would highly recommend them.

Playing Time and Bench Warming

Other conditions an operator should insist upon from its insurance carrier is a long leash (i.e., financial support and flexibility for its attorney), and an immediate start. Again, you know instantly after certain incidents occur that a lawsuit is likely to follow. As noted, when the plaintiff's counsel gets ahead of you, your counsel must play "catch-up" for the remainder of the case - often a huge disadvantage. And, as noted again, starting late results in missed opportunities to settle for far less than a case may be worth.

Operators should also insist on conducting their own incident investigations - even though their carriers advise them to do nothing and let them and/or the police "handle it." This is almost always a mistake. Police investigations are often conducted at a crayon level by relative amateurs who know practically nothing about transportation, and even less about accident reconstruction. Such skills are rare, and rarely employed where they exist. While such incompetence is handy when school districts and transit agencies are involved - police reports are often shabby because they are deliberately protecting their fellow civil servants - these same dynamics do not often apply to private sector operators like motorcoach companies, particularly in big, congested cities where their 45-foot-long behemoths get trapped in intersections and create gridlock. (This dynamic is partly behind the eagerness to cite motorcoach operators for idling and parking violations.) Regardless, jurors do not think highly of defendants' witnesses who admit, one after another, that they did not even conduct a serious investigation of the incident - much less an investigation at all. This position reinforces the notion of "reckless disregard" - in many states, a doorway to the assessment of punitive damages that can greatly exceed the magnitude of genuine damages.

Accountability and Oversight

Another useful approach is to demand to see an accounting of what your attorney is doing, how much he/she is spending, and what he/she is spending it on. If this fails to make sense, or the effort seems lacking, you should contact your carrier and threaten to select a different once after the case is over. This tactic obviously cannot backfire since your case has the carrier's money involved, not yours.

Along similar lines, you can research the experts employed. While few defendants know this, plaintiffs almost always must approve of the experts their counsel employ - if for no other reason than the expert's fees are deducted from the damage award if the plaintiff wins. But why should only plaintiff's enjoy this right of approval, while defendant's attorneys often engage parrots and shills, while striking your counsel's use of better ones to "get even" for the past damage they did against the carrier's other clients.

I would also suggest that you insist that your counsel share his or her strategy with you - as well as allow you to meet and interact with his or her expert. When helping plaintiffs' counsel, I generally ask to interview the victim, from which I learn a great deal that helps me in my efforts. Sometimes I get to interact with defendant's clients - but not often enough, and rarely at the level I need to. This is particularly true in paratransit cases, where an in-depth knowledge of scheduling and dispatching procedures is often essential. But it is also valuable, for many reasons, in motorcoach cases. Yet in these cases, I rarely meet the defendant.

Another valuable trick - if your carrier permits you this leverage - is to identify and find the expert witness you want, and ask him to help you enlist the attorney. Few carriers will entertain this approach because it tends to juggle the agenda in your favor rather than in the carrier's. But just as good attorneys know good experts (whom they may or may not prefer to engage), good experts know good attorneys. You are already stuck with your insurance carrier. But you need not get stuck with its choice of an attorney. And you certainly do not want those experts who blasted your carrier in the past from being considered as a resource to assist you.

Overall, an operator must stay involved in the case, and play as active a role in key decisions as reasonable and possible. Losing a lawsuit can result in far more problems than simply higher premiums. It can cost you business and sully your company's reputation, particularly when there is press coverage of the accident and, occasionally, of the trial. In the worst case, it can scuttle your business altogether. So always keep in mind your interests and the difference between them and those of your underwriter and its attorney. In the end, the operator is the one who always pays.

Ned Einstein is the President of Transportation Alternatives, a passenger transportation and automotive consortium engaged in consulting and forensic accident investigation and analysis (more than 600 cases). Specializes in elderly, disabled, schoolchildren. Mr. Einstein has been qualified as an Expert Witness in accident analysis, testimony and mediation in vehicle and pedestrian accidents involving transit, paratransit, schoolbus, motorcoach, special education, non-emergency medical transportation, taxi, shuttle, child transport systems and services...

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