I. Introduction

For good reason, many companies focus their legal and compliance work on matters that require immediate attention, like active litigation and pressing regulatory issues. But matters that come to the company’s attention before a lawsuit is filed—whether by an individual claimant, their counsel, or even the company’s customers—require close attention too. The sheer volume of pre-suit claims and their accompanying legal, regulatory, and compliance issues can be daunting. But they should be viewed as an opportunity. Organizations that thoughtfully and proactively address pre-suit claims can save valuable time, effort, and resources and, most importantly, better serve their customers. Effective pre-suit processes are therefore a worthwhile investment, especially for those companies that manage a high volume of claims. This article provides a general overview of things to remember when navigating pre-suit claims.

II. Laying the Foundation: Identifying Your Team

First and foremost, you must assemble the right team of in-house and outside professionals so that claims are handled properly from intake to closure. Team member selection will of course be highly specific to the applicable industry and topic of the complaint. For example, pharmaceutical companies are subject to Food and Drug Administration (“FDA”) regulations, which regulate processes for documentation, investigation, and reporting.[1] Such entities will, therefore, include quality control along with legal and regulatory affairs teams throughout the process. Organizations may also include third-party administrators to manage certain aspects of the claims management process. There are also legal and ethical considerations at play when identifying who should be involved in the claims management process. The team should include individuals who can ultimately determine whether claims should be litigated or settled pre-suit. Experienced legal counsel can develop an overall defense strategy and help resolve issues such as:

• determining whether the organization disputes liability and/or the essential facts of the claim;
• assessing the likelihood of success in the subject jurisdiction;
• valuing the claim; and
• negotiating tolling agreements to suspend the statute of limitations, where appropriate.

III. Fact Finding: Working Up the Claim

The ability to evaluate claims requires efficient and thorough fact-gathering. Essential data to acquire includes information about the claimant (e.g., name, date of birth, age, contact information, nature of the complaint), pertinent medical information and records, prior settlement offers that have been made by the company or third-party administrator, and whether the complainant is represented by legal counsel. For pharmaceutical and medical device companies, the FDA’s reporting requirements, including regulations governing what must be included in complaint files for medical device reports, will also drive the information-gathering.[2]

Regardless of the industry, an efficient process for claim evaluation includes: (1) establishing a routine method for gathering initial claim intake information (e.g., standardized forms completed by an intake team, phone intake versus online or mail); (2) a general list of key data points that must be obtained for all claims in order to undertake the necessary assessment; (3) a list of information that the company must relay to the complainant about the claim process (e.g., how the process works, next steps once a claim is filed);[3] and (4) processes for communicating and analyzing claim information within the claims management team.

Bear in mind that establishing these processes requires input from all levels of the claims management team. For instance, the quality control cohort may only require a certain subset of information based on applicable regulatory requirements, but the legal team may require additional information to be able to assess whether a claim is ripe for settlement or is more appropriate for litigation. Early and thoughtful discussions with the various members of the team identifying specific needs regarding the claim and obtaining critical information during the intake process (or shortly thereafter) will provide a roadmap for every pre-suit matter. That roadmap, in turn, provides consistency and predictability despite the inevitable variability of claims and prevents bumps in the road as the claims progress.

IV. Leveraging the Law: Legal Considerations for Best Claims Management Practices

The claims management process should not be viewed as an entirely separate world from litigation, but rather as a prequel—indeed, a preview—to litigation. In consultation with trusted legal counsel, organizations should ensure compliance with laws applicable to the claims management process itself, as well as identify legal issues pertaining to the separate claim. Identifying and analyzing applicable law early on helps to value claims, should pre-suit settlement negotiations occur, and arms the litigation team with early factual and legal analysis, which is often unavailable where the claim was unknown before the suit was filed.

A. Federal Regulations

Depending on the industry, federal or state regulations may govern all or part of a claims management process. This is seen with medical device manufacturers, which are subject to regulations governing complaint files, investigations, and reporting.[4] For example, federal regulations require medical device manufacturers to “maintain complaint files,” “establish and maintain procedures for receiving, reviewing, and evaluating complaints by a formally designated unit,” and have procedures to ensure, in part, that “complaints are processed in a uniform and timely manner.”[5] From there, manufacturers must “review and evaluate all complaints to determine whether an investigation is necessary” and report adverse events to the FDA when certain criteria are met.[6] Such regulations are specific about what is required for complaint files and list the types of information that must be documented depending on the situation.

These types of requirements should not be viewed as a box to check or siloed off as a problem for the regulatory team to deal with; rather, they should be considered a foundational part of the claims management process. Not everyone on the claims management team needs to be a regulatory expert, but everyone involved should have enough familiarity with applicable regulatory requirements to ensure that all phases of the process are focused on compliance.

B. Hope for Early Resolution, but Prepare for Litigation

An effective claims management process fosters a smooth transition from claim to case. Organizations can gauge which claims are most likely to advance to litigation by conducting an analysis of key legal issues at the outset. Specifically, it may be prudent to have an initial workup of legal matters such as:

• choice of law issues (e.g., is there a question about which state’s law applies, and if so, what are the substantive differences in the laws of such states regarding the applicable claims?)
• potential claims and proof required for such claims (e.g., what will the claimant likely allege in the lawsuit, and what are the elements they must establish to prevail on such claims?)
• potential defenses (e.g., is there a statute of limitations or repose that will impact the claimant’s ability to file suit, or are there pre-suit notice requirements that the claimant must satisfy?)

From there, the team can delve into related issues like whether the alleged injury is one that has been adequately warned of and whether medical records can help assess notice for statute of limitations purposes. Organizations may find it efficient to retain outside counsel for this crucial step in the claims management process. Once counsel identifies applicable law and prepares an initial workup anticipating the claimant’s legal claims, the team may have a blueprint for potential early dismissal. Even where the law does not indicate a likely early dismissal, preliminary legal analysis will reveal whether the claim is better positioned for settlement and inform the overall defense strategy moving forward.

C. Attorney-Client Relationships

While claims are pre-suit by nature, this does not necessarily—and often does not—mean that a claimant is unrepresented by counsel. If a claimant is represented by an attorney, then normal attorney-client rules apply. This means that the organization’s attorney must communicate with the claimant only through their attorney rather than directly.[7] At times, it can be difficult to ascertain whether a claimant is in fact represented (e.g., they may say something vague about hiring an attorney, then later say they decided not to get one, yet the company later receives a Letter of Representation from counsel). Other problematic scenarios include when a claimant has legal counsel but decides to talk to the company directly to negotiate a claim. Organizations cannot anticipate the myriad possibilities that can arise regarding a claimant’s decision to hire an attorney, but they should, at a minimum, implement processes to identify which claimants are represented by counsel and determine which members of the claims management team are best suited to manage communications with those claimants.

V. Conclusion

Many organizations are legally required to have at least certain parts of a pre-suit claims management system. However, viewing these systems strictly as a legal box to check is a missed opportunity. After all, these systems are a unique chance to improve products and services and strengthen relationships with customers. They have the power to reflect an organization’s culture and inform its public reputation. And they provide a crucial mechanism for pre-suit resolution. So do not forget about the sometimes-hidden benefits to these systems; with the right team, key data points, and careful consideration of the legal and compliance issues at play, they just might have more to offer than you thought.

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[1] See, e.g., 21 C.F.R. Part 803 (Medical Device Reporting).

[2] See, e.g., 21 C.F.R. § 820.198.

[3] Communications with complainants should be consistent and accurately represent the claims process as well as any warranties (and terms thereof) that may be available depending on the nature of the complaint.

[4] See, e.g., 21 C.F.R. §§ 803.1, et seq. (Medical Device Reporting).

[5] 21 C.F.R. § 820.198(a).

[6] See id.

[7] See Tenn. R. Sup. Ct. 4.2 (“In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.”).

Finis