1. Toro’s Alternative Dispute Resolution Program Handling Product Liability Claims and Lawsuits
J. Lawrence McIntyre
Vice President, Secretary
& General Counsel
The Toro Company

2. Traditional Product Liability Claims Management
In the 1970’s and 80’s : Defend, Litigate and manage lawyers and litigation.
Hired trial lawyers and experts
Gathered volumes of documents for discovery and answered interrogatories
Prepared in-house people for depositions (engineering, marketing, management). The plaintiff is entitled to depose virtually any employee
Attended and testified at trials

3. Traditional Product Liability Claims Management, Cont.
The Outcome of litigation
Expense
Drain on internal resources
Legal expense through trial can easily exceed $300,000.
Loss of control over our time, money, and documents.
Risk
Win some/lose some
A defense verdict in one case does not guarantee that the same type of accident/injury case will not result in a plaintiff’s verdict in different court with a different jury
Punitive damages
An award of punitive damages can wipe out the net worth of a company
Winning the case
but incurring extraordinary legal expenses, can be equally devastating to the company’s bottom line – is that really a “win” for the company?
Uncertainty
Juries are unpredictable and often mistrustful of large corporations and executives
Sympathy factor

4. The Alternative to Civil Litigation: Alternative Dispute Resolution
ADR initially became a popular means of resolving disputes because of soaring litigation costs and other factors including:
More litigious society; less personal accountability
Savings
Control of the outcome
Civil litigation system broken in terms of producing equitable, efficient and economical results
A “win” for the company:
When litigation risk is reduced or eliminated and litigation costs are controlled

5. Toro’s ADR Program Unique 3 step program: 1. Prevention
2. Early intervention/accident investigation
3. Pre-Litigation Mediation

6. Step 1: Prevention
Product Liability group participates in all aspects of product safety; including:
Product safety reviews (new product and issues arising on field units)
Operator safety instructions
On-product warning creation
Safety Watch program
Safety Education programs
Safety Standards creation & compliance

7. Step 2: Early Intervention/Accident Investigation Process
Goal: Obtain the information we need in order to evaluate the claim without having to go through formal litigation procedures.
What we do: product specialists (non-lawyers) respond to product liability claims or lawsuits involving Toro product quickly:
conduct an on-site investigation accompanied by a Toro engineer
Inspect the equipment/preserve its condition and obtain historical information about the equipment
Interview the injured person and witnesses; document the facts of the accident
Photograph and document the site of the accident
Listen and treat the claimant as a dissatisfied customer who has had a problem with Toro equipment, not an enemy

8. Step 2: Early Intervention/Accident Investigation Process, Cont.
Evaluate the merits of the case based on the information we have gathered:
Severity of the injury
How does the accident affect their day to day life
The history of the product
Safety record, recalls
Similar accidents or complaints
Liability factors including alteration, misuse, negligence, the law in the state, the favorableness of the jurisdiction
General damages
The process does not ignore who’s at fault for the accident and injury

9. Moving from Evaluation to Resolution
Share our investigation and evaluation with the claimant and his/her attorney
Lower expectations
claims are resolved for $0
In June, 2006 we closed 17 cases, 13 with $0 payout
Willingness to settle
reasonableness vs. the moon
There are no blank checks
67% settled or disposed of at this point in the process
If our product specialists do not resolve the case (the claimant’s expectations may be too high), the case is referred to Mediation
Plaintiff may need a neutral mediator’s evaluation to become more reasonable

10. Step 3: Mediation Mechanics of a mediation
Enter into a formal mediation agreement with all parties
The parties meet over the course of two days and the plaintiff gives a sworn statement
Both sides present their position with regard to the facts, law, issues and arguments. Toro is represented by National Mediation Counsel, and a local attorney in the jurisdiction
Mediation is a less formal process but includes the exchange of information and preparation of mediation briefs. We come prepared to defend our product and lower the other side’s expectations.

11. Step 3: Mediation, Cont.
Over 95% of the cases submitted to mediation are resolved
If resolved, the terms of the agreement are confidential between the parties and cannot be published by the plaintiff
If the case is not resolved at mediation the local attorney representing Toro assumes a vigorous defense of the case

12. Resolving claims using ADR results:
Legal fees controlled
Over 1200 claims diverted to this program
Reduced average per claim handling expense from $115,000 to $43,000
Eliminated animosity with customers and unwanted publicity from adverse verdicts
Position of greatest strength - we controlled the outcome and we decided when to walk away; we controlled our time, our money, and our documents

13. Average Per-Claim Costs/Fees Comparison
Average Pre Costs/Fees = $47,252
Average Costs/Fees = $10,607
77% Reduction in Costs/Fees

14. Average Per-Claim Verdicts/Settlements Comparison
Average Pre-1991 Payouts = $68,368
Average Payouts = $32,232
53% reduction in amounts paid to resolve claims

15. Comparison of Average Total Cost to Close a File

16. Average Claim Lifespan Comparison
Avg. Pre-1991 Claim Lifespan = 24 Months
Avg Claim Lifespan = 9.8 Months
59% Reduction in lifespan of average claim

17. Thank You!