This article is the second of a four-part series. The first installment, published in April, surveyed the structural, strategic and tactical ways that major corporate defendants may successfully manage their way through mass-tort liabilities.

The article examined three paths: 1) restructuring and sale to a third party; 2) bankruptcy solutions; and 3) business as usual. It also listed 17 best practices that every defendant should adopt, irrespective of the path chosen. I promised to explain in a future article the rationale for each step.

This article is the start of fulfilling that promise. It only focuses on the first step, with the others to follow in two subsequent posts.

Whatever else you do (or do not do), at least please take this first step:

1. Create a database of all complaints served on the company and relevant details of case resolutions.

Creating such a database is easier said than done. In hindsight, all risk managers and in-house counsel would have built a beautifully designed database structure to house these details from day one. However, that is not the way in which high-volume products liabilities typically develop. More often than not, they develop slowly with only a few claims to start — then some more, followed by many more.

With luck, your primary insurance carrier will have stepped up to defend the losses and begin sending periodic, usually incomprehensible, loss runs. Maybe there is an in-house litigation management or risk management software on which you track everything from workers compensation claims to auto claims to, yes, the product liabilities. A few different product defense firms may be in the mix, and perhaps your insurance broker has taken a stab at maintaining records. If the primary insurance carriers have been taking on the lion’s share of defending the cases, quite a long time may have elapsed since the first claim was received.

In other words, constructing the comprehensive claims database will require working with a mishmash of imperfect sources to put together the best evidence in an organized way. It is unlikely to have the same level of accuracy as a database project initiated on Day One of the litigation, but “good enough” is the standard that should be achievable.

Good enough for what? Good enough to manage a major liability in close to real time. This means being able to identify relevant data such as: jurisdictions, plaintiff firms, disease types, medical records, defense costs by case, settlement values by disease, jurisdiction and plaintiff firm, dates of product exposure, identity of product, and location where exposure took place. By analyzing this data, the defendant is well placed to risk-assess each claim, from the most dangerous to the most defensible.

Hopefully an extensive, solvent insurance program is also there to provide a defense or reimburse costs and indemnity payments from excess layers of coverage. For excess insurers to agree to participate (or to “come onto the risk”), it will be necessary to demonstrate convincingly that the relevant policies “attach”.  To do this, the defendant (or their intrepid consultant) must allocate every claim — from the very first to the coverage, potentially according to a variety of methods depending upon state law. The goal is to show that the latest claims exhaust underlying coverage but do not exhaust the coverage being billed.

A claims database not only provides management with the information needed to oversee a multifaceted liability, it is also essential to match liabilities to a potentially comprehensive contingent asset - insurance coverage. This is why I am of the view that a claims database is the single most important best practice for every defendant.

I will provide the rationale for the remaining steps in two subsequent articles this month.