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Bad Debt Reserving:
A Lawyer’s Perspective on
Determining Likelihood of
Recovery
David Weiss, Esq.
White and Williams LLP
Presentation for 2008 CARe Seminar on Reinsurance
May 19 and 20, 2008
Legal Caveat
 The material discussed in these slides and in
this presentation are not necessarily identical
to the views of the cosponsors of this seminar,
nor of White and Williams or its clients.
Question:
 You know you are going to have disputes with
your reinsurer regarding a reinsurance claim.
How do determine the likelihood of
recovery/value of that claim, so that you can
account for that in a bad debt reserve?
Answer - Ask your attorney!
Things to Remember When Talking to Your
Attorney
 Privilege

You should treat any communications with
counsel as being privileged and confidential.


Mark any writing to, from or for counsel, or about a
conversation with counsel, with an “attorney-client
privilege” legend.
Privilege is not necessarily an absolute protection,
so be careful what you put in writing.
What Kind of Answer is the
Lawyer Going to Give You?
 Depends on the nature of the dispute, and the depth
of analysis the lawyer gives the question.

May just give an overall estimate for the case.
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X% chance of winning
Out of $Y, we’re likely to collect $Z
May go through a litigation risk (decision tree) analysis to
give a weighted value for the outcome of the case.

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Ascribe a likelihood of prevailing on each issue in dispute
Determine the value of each possible outcome.
Multiply the probability of each outcome by the value of that
outcome.
Total the weighted values of all possible outcomes to generate
the weighted value for the case.
Factors That May Impact an Assessment
of the Likelihood of Prevailing
 Forum for the dispute resolution
 Court vs. arbitration
 If court, state vs. federal court, and in what state


Quality of judges and jury pools
Impact on law applicable to the case
 Who will decide the issues in dispute?
 Arbitrators
 Judge
 Jury
Factors That May Impact an Assessment
of the Likelihood of Prevailing
 Nature of the parties’ arguments
 Highly technical
 Equitable
 Quality of Supporting/Opposing Evidence
 Documentary record
 Witness testimony

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
Fact witnesses
Expert witnesses
Support in case law or treatises (industry custom
and practice)
Factors That May Impact an Assessment
of the Likelihood of Prevailing
 Signals from intermediate rulings or discussions
with party-appointed arbitrators
 Secondary considerations that may affect the
decisionmaker’s perspective
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Rescission claim
Solvency implications for the parties
Interaction of effects of multiple issues
Availability of intermediate levels of relief
Quality of counsel for both parties
Amount at issue
Factors That May Affect Your/Your
Counsel’s Assessment
 Prior experience with litigating/arbitrating the
issues, particularly with the given reinsurer
 Conservative vs. aggressive viewpoint
 Corporate atmospherics
 Quality of counsel representing you