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How State Farm saves millions on electronic data discovery

State Farm wanted control over and consistency within its e-discovery process. By keeping 25 years' worth of documents in production systems fronted by a master management system, the company greatly reduced the cost of responding to lawsuits.

State Farm Mutual Automobile Insurance Co. takes what many would argue is a counterintuitive approach to electronic...

data discovery (e-discovery). The U.S.'s largest insurer of homes and automobiles keeps anything that might matter: emails, 100% of the email attachments of its claims officers, paper and electronic documents dating back 25 years, even the latest iterations of its human resources Web pages. The voluminous cache, meticulously imaged and coded, is stored centrally in an active system that is searched regularly as litigation arises.

"For us it is not about cost but more about lowering risk. We have a lot of litigation all over the country," said Tim Crouthamel, section head of litigation support for State Farm's corporate law offices.

But saving basically everything in a centralized platform has also saved millions of dollars for the Bloomington, Ill.-based insurer, as evidenced in the wake of Hurricane Katrina. Crouthamel said the company was midway through the implementation of its centralized live repository when the hurricane hit. To recover data related to the Katrina litigation from just 1% of the hard drives cost State Farm $30 million. The long-term cost of archiving email for all 30,000 or so claims officers? Something around $1 million.

"Who knows what it would have been if we had searched everything we preserved, which, knock on wood, we haven't had to do," said Crouthamel, who spoke at last week's LegalTech event in New York.

Making documents available all the time

State Farm is not in the legal business. But litigation sure is a big part of its business. The insurer has approximately 150,000 pending lawsuits. It employs hundreds of law firms, all of which in the past answered litigation requests in their own way from their own collections of documents. After the explosion of bad faith cases in the 1980s and 1990s, State Farm wanted a workflow process that would allow it to respond to cases in a consistent and efficient manner, Crouthamel said. It did not want to have to school each one of its law firms in its data retention policies. With the advent of electronic data discovery laws, the need for a centralized platform became more urgent.

"We knew we have certain kinds of litigation across different departments. We asked what are the documents that we use over and over again," Crouthamel said. Why not "put them up in a platform where we can reuse the documents and the work products in an efficient manner?"

The company installed a dedicated staff at its corporate headquarters that does nothing but e-discovery. It brought the supervision of class action lawsuits in-house, ensuring State Farm speaks in a single voice on legal actions that affect the enterprise. It hauled in the many discrete document collections built up by its field law firms. And then it paired with e-discovery platform vendor CaseCentral Inc. in San Francisco to build a central repository, or master library, of carefully coded documents to populate its hundreds of thousands of lawsuits, minus the duplication and inconsistency common to the paper world.

It's kind of hard for the government to make a conspiracy argument against you when you have all the email and attachments of the people they are talking about as targets sitting there.

Tim Crouthamel, litigation support section head, State Farm Mutual Automobile Insurance Co.

This aggressively proactive process is not just about managing the past or materials requested in litigation. Any new document that could conceivably be requested in a legal hold is put into the repository by State Farm's cadre of "gatekeeper" paralegals, ready if necessary to populate the company's many lawsuits.

"We're trying to take the duty-to-preserve issue off the table," said Crouthamel, who refers to the company's re-engineering of its document management as "optimizing our e-discovery supply chain."

"It's kind of hard for the government to make a conspiracy argument against you when you have all the email and attachments of the people they are talking about as targets sitting there and ready to look at," Crouthamel said.

The insurer's disciplined process elicits something approaching awe from other lawyers.

"I think State Farm, more than any other corporation I have seen, gets long-term enterprise evidence management better than any other firm I have talked to," said John Woods, a Washington-based partner at Hunton & Williams LLP, who advises companies on internal investigations, business crimes and complex civil litigation.

But Woods, who participated on the panel and does not do legal work for State Farm, said companies with more typical litigation exposure might well find this approach a tough sell in hard times.

"You have made a philosophical choice that you are basically going to save everything, but your volume of litigation is atypical and probably your risk is atypical," Woods said to Crouthamel.

The main message for companies, Woods said, is that whatever electronic data discovery process they implement should be easily explainable to outside counsel required to sign off on the process.

"I know a lot of companies very focused on saving only what needs to be saved. The tension point is that you can do whatever you want, but I [in the role of outside counsel] am going to ask some questions about how you got there."

Let us know what you think about the story; email: Linda Tucci, Senior News Writer

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