“SUSTAINING TECHNOLOGICAL
CHANGES”
FOR INSURANCE LAW PRACTICE
Michael Sean Quinn*
The legal profession—the law
biz—has become computerized; this transformation is permanent: the
transformation will continue without stop for decades to come (at the very
least); in fact, the degree of change may be even larger in the coming decades.
So, what are some—a few--of its major
changes that have started. Keep in mind: some of the already occurring changes
are larger and harder to deal with than others.
Technological innovation and
spread has had and is having two types of serious impacts on the legal
profession and therefore on insurance lawyer. Richard Susskind calls one of
them “sustaining technological change.” He calls the other “disruptive
technological change.” Very roughly a sustaining change is a substantial change
but one that isn’t revolutionary and does not turn an existing system into
unrecognizable chaos. A “disruptive technological change” the opposite. I will
talk about the former in this essay, and the latter in another, later post. It
will be more explicitly about the views of Richard Susskind.
New Training Required. When I started
out, right after “subrogation boot camp”
from “’Professor’ Jerome Gette,” I passed on with Richard Arnold to
property damage cases involving black liquor recovery boilers. I studied for a
while. A German engineer was hired for me; he taught me how lots of things, e.g., how BLRBs worked, and he (or somebody beneath
him) taught me how to read design documents and weld so I could depose opposing
experts, and his ilk It’s a new world now, and I suspect that that
kind of rough-and-ready training—basically built on nothing--has, died and
departed “eons” ago, measured by Palo Alto standards of temporality.
For example, in September 29,
2016, the Florida Supreme Court ordered that required CLE combinations include
a course of high tech stuff. New language in the Florida “Ethical Rules” will
“add language providing that competent representation may involve a lawyer’s
association with, or retention of, a non-lawyer advisor with established
technological competence in the relevant field.” By itself this does not strike me as a very
big deal, except that is expand lawyer discretion when it comes to disclosures
of confidential information. (Advice: Get client consent.) But that’s not even
half of the story. In addition, said the Court,
“[c]ompetent representation
may also entail safeguarding confidential information related to the representation,
including electronic transmissions and communications. Additionally, we add
language to the comment providing that, in order to maintain the requisite
knowledge and skill, awyer should engage in continuing study and education,
including an understanding of the risks and benefits associated with the use of
technology.”
The explicit language of this order pertains to
the protection of electronic data with “belongs” to the client but which the
lawyer/lawfirm possesses. But the implications are much broader. The
requirement as to lawyer knowledge is driven up. The ability of the lawyer to
turn over file-guarding work to another is restricted. And eomputer competence
is presumed.
Notice that the additional
CLE course is a mere minimum. Notice, in
addition, that in various ways other states are similarly oriented. Rules of
legal ethics are being impacted enormously. All this changes the practice of
law, as well as the procedural aspects of law, substantially and forever. It’s
arrival is immensely more significant than the arrival of the standing desks.[1]
This court was not far behind a broader ethics opinion
in California asserting definitely and at some length that the ethical rules
require attorney competence and that this requires that a lawyer doing ESI
related work must be competent as to handling it. Thus bar rules as to a non-legal area of
being require knowledge by lawyer. (Of course, that’s not really much new.
Lawyers who handle car cases need to know about cars. Still, its sound dramatic.)[2]
How will this affect the true,
real, and actual responsibility of lawyers in general and insurance lawyers in
particular? The implied point is that
the impact will be enormous. E-discovery
has and is creating a whole new sub-profession within the legal profession, and
this point is not just applicable to litigators. Attention to e-discovery will
return presently.
Obviously, coverage lawyers will continue writing opinions,
giving advice, counseling cyber clients, initiating and responding to coverage
litigation threats, discussions and actualities, dreaming about having
nightmares concerning statutory bad faith causes of action, conducting
litigation, and likely negotiating settlements. Few coverage cases will get
tried, but not many are anyway. So what’s really new about all this? Well,
maybe, the language has more difficulty involved than I’m letting on.
For one thing, the required
new learning has uncomfortable complexities. Who really wants to go back to
lower school and study Greek and Latin? Lawyer learnedness doesn’t require that
much, surely. Alas, false.
Applicable cyber language is
quite unknown, obscure, subject to rapid, odd changes, and involves diverse
usages and meanings. Knowing this vocabulary is necessary for doing the business
of law and competing for customers-then-clients in the concentrated cyber
world. It is also necessary for understanding the sorts of insurance policies
found in that world. Most of them define
new terms in ways that are not always self-evident, or they define in new ways.
what appear to be “old” and much used
terms which lawyers think they understand, but actually may not. Thus, the maxim coverage lawyers are taught
from the day they start, “‘READ THE WHOLE POLICY CAREFULLY’ (and then be ready
to read it again and again often in pieces while remembering the rest of it),”
becomes especially important—more like an axiom.[3] (This is repetitious, I know, but the
significance of there being a lawyer obligation and practical necessity with
regard to knowing the cyber-digital
language is so great that it must be said, at a minimum, many times.)
More Definitions in Policies. Second,
it seems to me that the number of definitions has gone up. I’m not sure about
this. Maybe I just feel
overwhelmed. Of course, some of the best
“New World” coverage lawyers, who are also accomplished as making digital-rain
for the Cyber-Insurance Peninsula, lawyers like Roberta Anderson, for example,
are doing fine and remember much from their archival cyber-memories.
New Discovery Dimensions. Imagine taking the deposition of a software geek or a mathematical wonk in change of
algorithm design and improvement who has a Ph.D. from MIT (and maybe another
from Stanford). Of course, some lawyers
are already fit to do this. A few more will get those degrees and bail out so
they can go to law school. Obvously, this number is not high. Some people people are growing into this. Most are not
and will not. Maybe not many such cyber world “legal geniuses” are not
needed. To be sure, I guess. But
consider the following.
E-Discovery. Electronic discovery, or discovery searching
for Electronically Stored Information (“ESI), has to some degree and in some
ways been around as something rule-regulated since 1970, at least. That’s 46
years. In some senses e-discovery is therefore nothing new. I know a good number of lawyers younger from
birth than that. The trouble is that the
rules governing relevant components of the Federal Rules of Civil Procedure
have changed considerably over those 46 years. In the FRCP, for example, there
have been nine (9) amendments, the last one taking effect in December of 2015.
In addition to the FRCP, there are local rules, and various
governmental agencies have rules of their own.
And then there is Federal Rule of Evidence 502. This can be a serious
matter for lawyers since a lawyer can be sanctioned for citing out of date
rules, and if a lawyer exposes a client to a sanction for negligence discovery
practice, there may be a malpractice case in the offing. Spoliation and
satisfactory versus negligent failure to avoid or present spoliation can be
sanction-creating the lawyers. The pile
of new responsibilities is enormous, and some of them carry immense
responsibilities for all sorts of lawyer, including insurance lawyers. What is
called “information governance” is one of these.[4]
Perhaps
the situation can be nicely summed up in a paradoxical sounding remark by
Shannon O’Malley at the Zelle. He said that his first interaction with serious e-discovery
was in 2007 and that the “serious attention to e-Discovery was really just in
its infancy at that time.” [5] Thus, the framework of the e-discovery system
is an old one, by cyber cyber standards. The frame, however, hold a new
multi-dimensional cyber-digitally-produced picture, with moving parts.
Granted most lawyer errors do
not lead to sanctions or malpractice; even bench sarcasm is relatively rare;
still, it’s new world, and gospel gets
around. In some ways, the sanction threat is smaller in terms of amount and
probability than having the pay the attorney fees of the flashy cyber practitioners
on the other side.
One might think that the practice of e-discovery is involved
only in quite large cases, but this is not always true. The most famous of all e-discovery cases—5
published opinions in one case--involved an employment discrimination suit. See
Laura A. Zubulake, SUBULAKE’S e-DISCOVERY:
THE UNTOLD STORY OF MY QUEST FOR JUSTICE (2012).[6]
Moreover,
it can be reasonably speculated that the amount of reasonable, proportionate e-discovery
increases more or less at the size of the case created. Small cases usually do not
tend to need predictive coding[7] or very much in the way of
concept grouping, near-duplication detection,
nor, probably, a good “taring,” i.e., a “technology assisted review
(TAR), nor even the production of a TIFF imagery.[8] However, no lawyer doing e-discovery things
should every forget the significance of “metadata.” Sounds simply enough,
doesn’t it. Now, how does one make sure
she gets it and all of it.
Coverage
cases can involve an all-out search for emails. In other sorts of cases not
long past, emails proved to be smoking guns.[9] The same has proven true
time and time again in bad faith cases. An email search will include emails and
email threading, at least. It will also
involve the historically significant practice of manual review—history never
dies—and the use of search terms of all files—how primitive. Established
procedure to be sure. But parties to lawsuits can hid self-damaging documents.
Searching for them is a sophistical enterprise, and it requires extensive
antecedent knowledge.
Email searches are certainly involved in
litigation where insurance companies are involved. This is obviously true when an insurer is
conducting/controlling the defense of an insured under a liability policy. It
is also true when there is a coverage case. In the latter type of case, the
policyholder is likely to have more “edata” to preserve and present, and it is
worth remembering that that the duty to preserve can extend to third parties,
e.g., all sorts of companies that serve the policyholder.
The insurer, however, is not “off the hook.”
Its discovery questions directed to the policyholder must be reasonable,
“proportional” to the probably size of the case, and specific. All of this
means that lawyers representing insurer are under as much pressure as lawyers
representing policy holders when it comes to e-discovery obligations. In
addition, of course, the duty to preserve may extend to brokers, claims
administrators, and some underlying counsel sometimes. Thus insurers may have
the same types of duties policyholders can have when it comes to keeping third
parties in the discovery loop.
Besides, in some coverage
cases the insurer’s cache of document may be every bit as large as that of the
policyholder. Consider the insurer that contests a business interruption claim
of a multi-billion-dollar corporation. The insurer’s stash of electronic data
is likely to be huge. Even its list of emails is likely to be long.
E-discovery can be a complex
process requiring considerable planning, negotiating, and management by
lawyers. This includes even relatively simple insurance coverage litigation involving
only the policyholder and the insurer. Of course, the size of a suit matters
when it comes to determining appropriate electronic discovery.
In
the FRCP, the principal rules are 26, 34, and 37, but these are not the only
three, and they are neither brief nor simple. Observes of this “new kind” of
discovery remark from time to time that seasoned litigators can be as confused
and confounded as novitiates. (In fact,
in my opinion, new comer lawyers can sometimes start in better shape than the more
experienced lawyer, since it is more likely that they will have actually
studied the subject of discovery in law school, where there are whole courses
on it now, whereas even in the 90s where weren’t any—or only a few--even at the
best law schools.[10]
Having read all this, does it
comfort the reader to know that there are barely any reported courts cases
pertaining to e-discovery problems in insurance cases? It’s true. However, I
recommend taking no comfort, since there are a good and growing number of such
cases in lower federal courts, especially district courts and magistrates. What
goes around spreads out and around.
The law in Texas regarding e-discovery
is much more stable, moderate, flexible, looser and maybe more discretionary, plus probably often
less expensive than federal procedural law. Perhaps it is also more in line
with a philosophy of law that’s founded on individualism, entrepreneurialism,
and privacy-as-extended-to-business entities, whereas the FRCP are more
disciplined, oriented to a kind of Progressivism-based , regulatory federalism.
In any case there are certainly fewer amendments to the
governing Texas Rule, to wit: Rule 196.4
is not lengthy; it does not sound complex; indeed, it sounds simple. Roughly
here is what it says:
· The requesting party (RqP)
must specifically request ectronic/magnetic data;
· It must specify the form
in which it wants it produced;
· The responding party (RpP)
must produce responsive data that is reasonably available to it in its regular
course of business;
· If RpP cannot through reasonable
efforts retrieve or produce in the form requested, RpP may object;
· If the court orders
production, it must also order RqP to pay the reasonable expenses of any
extraordinary steps required to regtrieve and produce.
. This rule is anything but
simple; it is nothing if complexity is not hidden in the language of the rule.
One could argue that the some of the terms in the rule’s generalistic overall
formulation create avenues for a court’s requiring plenty of clarity and specificity. At the same time, if a pair of litigators is
aware that the court in charge is unsympathetic to trying to hide data or
trying to get way too much you don’t need, the pair is likely to work hard at
negotiating a result. Making sure there is a reasonable result is what energy,
negotiation talent, knowledge of discovery rules, cyber knowledge
concentration, time and stamina are about.
The matter gets more complicated as to negotiation when the set of
litigators in increased beyond a pair.
The generality of this rule
governed by itself, with the assistance of lower courts, for about 10 years.
From then until nearly now, Rule 196.4 has been supplemated and explicated by a single case, In re Weekley Homes, L.P., 295 S.W.3d 309 (Tex. 2009). (At the same
time, this crucial case states that it is not inconsistent with the federal
rules, just more practical and less structured. Some might think it sounds like
a critique of federal regulations in general.)
I say “nearly now” because
the Texas Supreme Court ruled in a purely procedural e-discovery case that
e-discovery would be stayed pending a ruling on a petition for a writ of mandamus. The
insurance company’s arguments were vivid
and dramatic. In re State Farm #
15-0905 (Tex. January 8, 2016)(hail loss claim: insurance coverage + insurer
bad faith). The stay was lifted by a court of appeals in an opinion dated
September 16, 2016. That opinion is very
educational. In re State Farm Lloyds, # 13-16-00362-CV (Tex.
App.—Corpus Christi, 2016). Its technicalities are outside the scope of this
discussion, since they do little explore the impact of e-discovery on the
professional lives of insurance coverage lawyers, except to reinforce by
implication the point that e-discovery is inevitable, pervasive, and transformative,
even in relatively minor insurance coverage cases.[11]
E-Testimony Given E-Discovery. One might think that the uses of video
communication techniques are not part of the cyber revolution. Maybe not, but
they go hand in hand. There was an issue
raised in the recently settled case of Trump University as to whether “The
Donald”—by then “President Donald”—could testify by video, presumably
Washington to San Diego.
How is this changing the
professional insurance coverage lawyers?
Learning, doing, machining, negotiating, constructing investigative
systems, insisting, and so forth. Sounds like what we already do? Read the
FRCPs again. Think of the more general and flexible law of Texas law as if it
were FRCP + 502(c)-(e) law. Now, do you really think there is not a radical
change? Think again.
[1]
For an amusing and helpful introduction to legal ethics and e-discovery see the
lengthy outline of a presentation by Amy Dashiell (of Scott Douglass &
McConnico LLP) and Robert Schmidt (of the Crews Law Firm, P.C.) entitled “Electronic
Discovery (and Privacy Issues) (emphasizing Texas law and easily findable on
the Internet). This is a truly excellent starting place.
[3]
Vocabularial changes, new terms, and new systems of terms have had something
like a retro-impact on non-cyber litigation.
One good place to observe this is in currently used definitions of terms
like “documents” in relatively routine litigation.
[4]
To show you how far the reach of electronics reaches into the practice of law,
I will note an electronic source. Learn from it, but “heavens to Betsy,” don’t
cite it yourself. “Electronic Discovery,” WIKIPEDIA (last revised August 21,
2006). Don’t trust it for long—a few weeks at the most; it’s getting old and
therefore stale.
[5]
“Will Texas Stay Moderate When It Comes to E-Discovery?” (Texas Law 360, April
8, 2016)
[6]
These cases were the “infant,” according to Shannon O’Malley that brought
what he calls “serious attention” to e-discovery.
[7]
See H. Christopher Boehning and Daniel J.Toal, “Court Praises Predictive
Coding, But Ultimately Rejects It” 252.24
NEW YORK LAW JOURNAL[--]TECHNOLOGY TODAY, August 5, 2014.
[8]
“To TIFF or Not to TIFF—That Is the Question,” An Ad for WARROOM DOCUMENTS SOLUTIONS (September 11,
2013)
[9]
See Theodora R. Lee and Littler Mendelson, “Ethical Minefields and e-discovery:
A Perfect Match,” ABA ANNUAL MEETING: SECTION OF LITIGATIN (August 7-11 (2014)
(Quoting from a 2005 trial court order, “’Electronic data are the modern-day
equivalent of the paper trail. Indeed, because of the informalities of e-mail,
correspondents may be less guarded than with paper correspondence.’”) Tell it
to John Podesta. Sources of Authority: Any national newspaper you like in the
any English speaking countly during dates falling into late October and early
November 2016.
[10]
This is all in addition to the fact that many experienced litigators want to
fob off document discovery on the “lower classes.” (“I try resolve or try
disputes. Others help get me ready.”)
[11]A
reprint BusinessInsurnce.com opened with the headline “E-discovery falls
hardest on insurance industry.” (October 22, 2016). The newspaper-like piece
contains a lot of interesting tid bits. One of the most interesting is this:
“Insureds. . .are expected to face increasing scrutiny from underwriters of
liability and D & O policies about their own data management programs,
which may be reflected in future insurance premiums.” Might one hypothesize
that coverage lawyers, and the like, might be involved in dealing with this
demand, or qualifying it?
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