When Knowledge is No Longer Power: Knowledge Management in Insurance Claims Litigation

Back in 1597 when Sir Francis Bacon wrote “scientia potential est,” which translates to “knowledge is power,” he could have never predicted that technology would eventually paralyze large companies with too much knowledge. Today, knowledge is weakness unless it is managed. While knowledge was power in 1597, knowledge management is now power in 2014.

According to a study conducted by International Data Corporation, in 2020 the world will have fifty times more data than it does today. The IDC also found that 90 percent of this data will be unstructured. Despite this data explosion, the number of Information Technology professionals is only expected to grow by 50 percent by 2020. Gathering knowledge is no longer a problem—managing the knowledge is.

Knowledge management is a simple concept that everyone understands. “Knowledge management” consists of the strategies and tools an organization uses to capture, structure, improve, and share information. For law firms, knowledge management means “[w]ho we know, what we know, and how we do what we do.” Patrick DiDomenico, KM 101: Introduction to Legal Knowledge Management, LawyerKM (Dec. 30, 2008). The goal of knowledge management is to make data that was once hidden more accessible, as well as to integrate that knowledge into tools that improve legal services and decrease costs.

You may not even know that you are already using knowledge management principles. In Law Firm Knowledge Management: A Selected Annotated Bibliography, by Andrew M. Winston provided the following list of knowledge management tools and services:

• Collections of precedents, model documents, legal research, and legal opinions;

• Intranets or portals;

• Automated document assembly;

• Web 2.0 collaboration tools, such as wikis, blogs, and team sites;

• Enterprise search;

• Document Management systems;

• Transactional and litigation matter information systems;

• Extranets.

I caution you to not get too excited if you think your company or law firm has all of these tools. Although you may think you use most or all of these tools, you will be surprised to learn that there is one not-so-obvious obstacle that’s in the list, but not emphasized enough.

Here is another helpful outline for knowledge management. This outline describes the stages of knowledge management. It may seem easy to assess whether your company is effective at knowledge management. In Stages of Growth for Knowledge Management Technology in Law Firms, Peter Gottschalk described the four stages of law firm knowledge management:

After you read this list, you may think your company or law firm is in Stage 3. Once again, use caution because there is one obscure obstacle that you may not notice.

Although you think you can classify your company as being in Stage 3 or 4, homeowners insurance litigation creates one major complication: law firms and insurers use different systems. Each could have all of the tools and be in Stage 4 of Knowledge Management; however, if the insurer and all of its attorneys are not using the same system, then users will bridge these tools with problematic emails and Word documents. The result: no comprehensive knowledge management system!

This segregation should not exist amongst the involved parties. In reality, homeowners insurers and their panel counsel act as one in defending insurance claims litigation. They collaborate to try to resolve the case, they formulate strategies, and they share strategies that are successful.

Although they may act like one organization, their knowledge management processes indicate otherwise. Even if they use a document management system to share documents, insurers and their lawyers cannot control the information that is placed in the documents, they cannot retrieve the information, and they cannot use the information to automate parts of future litigation. Insurers and their law firms have just one knowledge management process: hope that they copy and paste case information from an email to somewhere where they can eventually find it.

What good is a law firm’s internal case management system to an insurer if it does not include the data from the other fifteen law firms handling the same types of cases?

How does a law firm’s internal case management system help an insurer avoid paying its other fourteen law firms to perform legal services that one firm already conducted?

What benefits does a claim system have if the law firms defending the claim are not able to search and see how many lawsuits have been brought by the same attorney, and what the results were?

There is no sign of a slowdown in the amount of data homeowners insurers can expect to receive in the coming years. Until homeowners insurers take control of how they receive and store information, their litigation teams will remain in Stage 1 of Knowledge Management. To quickly jump to Stage 4, insurers should provide their legal department and law firms with one customized software portal to exchange case information. By using collaborative software, they will capture the data they need to leap to Stage 4. Once in Stage 4, insurers can automate legal knowledge processes, including automating legal documents, projecting settlement amounts based on prior cases, and estimating which defense attorney will resolve the case most efficiently by using prior case data.

Now can somebody ask Sir Francis Bacon how to say “knowledge management is power” in Latin?

This is the fourth in a series of articles by Wesley Todd on Digitizing Claims Litigation: Providing Insurers with the Power and Control They Deserve.Additional articles will focus on predictive analytics, alternative fee arrangements, transparency and more.