Product Liability Claim Forecasting and Valuation
Mass tort and product liability projects frequently involve estimating the number and value of claims likely to be brought in the future against a defendant, as well as valuing claims that are already pending.
Combining scientific analysis with behavioral economics, NERA experts have developed rigorous models to forecast product liabilities. To forecast claims filings, we estimate the size of the population potentially exposed to a company’s product; predict levels of valid diseases or the most likely pattern of product defects; and project the number of claims filed by those affected by the exposure. Because not every injury or product defect will result in a claim, we examine historical claiming rates and assess how those rates may change in the future, e.g., with publicity, increased entrepreneurial tactics by plaintiffs attorneys, or tort reforms. To value the future claims, we uses statistical analysis to understand the drivers of the historical settlements, as well as how they might be expected to change going forward (with, for example, the aging of the claimant population).
Among other applications, NERA experts use such forecasts to establish the size of bankruptcy trusts, assess the value of insurance coverage, or help companies establish financial reserves. We frequently discuss and support the results with the companies’ auditors. We have provided analysis as part of the due diligence process for potential mergers and acquisitions -- assessing existing liability estimates as well as providing projections that may include upper and lower bounds in addition to a “best estimate”. We have also helped clients evaluate potential changes to their litigation strategy by modeling the costs and benefits of alternative strategies and the anticipated impact on claim filings and settlement values.
