On October 13, 2006, Bruce Deal, Managing Principal of Analysis Group, presented to attorneys in Redwood City, CA on valuing risk.
Valuing litigation risk is important to manage litigation budgets, set investor expectations, settle the litigation, and establish litigation reserves.
Litigation risk is valued as follows: understand the nature of the claim, how the damages are likely measured; assess the potential financial exposure in win-loss situations.
Establishing reserves may decrease the leverage in settlement discussions. Insurers are increasing their due diligence to limit litigation exposure. They may deny coverage if litigation is determined to be related to a risk known at the time of an insurance application if the litigation is not disclosed early. Different layers of insurance coverage ma apply different standards of coverage.
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