Product Liability -- Pro-Active Protection

Oct. 18, 2005
Toro attacks product liability, personal injury and property damage claims head-on -- and estimates savings at $13 million per year.

While it seems every one else in the manufacturing community is wringing their hands over tort reform, the team over at The Toro Co., Minneapolis, is busy perfecting a 14-year-old program that's reduced the time and cost of resolving product liability, personal injury and property damage claims -- and has created some very happy customers in the process.

The strategy? The company quickly and privately closes two-thirds of the complaints and sends the rest to mediation. Ninety-five percent of the mediated cases are settled, leaving a small fraction of claims that go to trial -- and even those usually get settled on the courthouse steps, often for the amount proffered in mediation. Before the program was initiated, about half of the approximate 150 claims per year were actively litigated. This year, only three have proceeded beyond mediation to the more expensive litigation stage, but will likely "never see the courtroom," says Drew Byers, head of the program loosely dubbed the Mediation Program. The program has reduced the amount Toro spends on such claims, including fees and settlements, to $4.3 million a year, a 75% reduction from $17.3 million.

Another advantage: "We have not been in a courtroom since 1994," Byers says. "We have not had an officer or director of this company deposed or giving testimony of any kind in over 12 years." The time it takes to settle a claim, he adds, has fallen to nine months to a year, down from two to three years.

The program's philosophy is to treat the injured party as an unhappy customer, rather than as a potential litigant, and to act quickly. As soon as the team hears about an incident, a paralegal hustles out to talk to the customers involved, face-to face, taking an engineer along to inspect the Toro product. The goal is to investigate the incident and resolve the claim amicably. The paralegal is empowered to deny the claim outright, settle with a piece of equipment or cash, or turn the case over to mediation if an agreement is not reached. Byers stresses that the paralegals can settle even when there is no clear defect, but also when it could be perceived by the customer that there is a defect. Emphasis is on the personal, by letting the claimant state his case, Byers says. Many times the paralegal decides on the settlement by asking the claimants, "What would you like to see Toro do for you?"

The team of five -- Byers, two paralegals and an assistant in the U.S., and a representative in Europe -- gets a jump on claims by enlisting everyone in the company -- from production employees to sales territory representatives -- to be on the lookout for potential cases while they watch the local media. Everyone in the company gets a "Safety Watch" card, a triple-fold business-size card that lists the types of accident information to report. "It's got our work phones and our home phones, which gets them thinking in the right direction," Byers says. In addition, an engineer searches the Internet each Monday morning, trolling for incident reports that require investigation.

Fears that Toro will become an easy mark for frivolous lawsuits are unfounded, Byers says, because of the company's aggressive preparation for all mediated cases. "Once it goes into mediation mode, we basically prepare as if we're preparing for trial, and that word has gotten around," he says. Since the program started, only one potential litigant has tried to take advantage of Toro's penchant for quick resolution. A lawyer who had slipped and broken his ankle while mowing on wet grass, on a hill, claimed the mower pulled him off his feet. During the investigation, the lawyer admitted that he'd read an article about Toro's settlement approach and figured Toro would quickly pay his claim. Instead, Toro's representative denied the claim outright, implying that it was a perfect case to litigate, and "that was the end of that," says Byers. "We're not afraid to go to trial; we just choose not to. We're just trying to settle cases as quickly and as efficiently and as cheaply as possible. It's such a no-brainer for us. We've saved millions of dollars doing it, and we end up with a lot of very happy customers who tell their friends how well they've been treated."

Toro Slashes Litigation Costs
Product liability, personal injury and property damage claims

Pre-1991 1991-2004 % Reduction
Ave. settlement per claim: $68,368 $28,508 58.3%
Ave. cost (fees) per claim: +$47,252 +$10,994 76.7%
Ave. total cost per claim: $115,620 $39,502 65.8%
Ave. number of claims: x150 x110
Ave. total cost/year: $17,343,000 $4,345,220 75%
About the Author

Patricia Panchak | Patricia Panchak, Former Editor-in-Chief

Focus: Competitiveness & Public Policy

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In her commentary and reporting for IndustryWeek, Editor-in-Chief Patricia Panchak covers world-class manufacturing industry strategies, best practices and public policy issues that affect manufacturers’ competitiveness. She delivers news and analysis—and reports the trends--in tax, trade and labor policy; federal, state and local government agencies and programs; and judicial, executive and legislative actions. As well, she shares case studies about how manufacturing executives can capitalize on the latest best practices to cut costs, boost productivity and increase profits.

As editor, she directs the strategic development of all IW editorial products, including the magazine,, research and information products, and executive conferences.

An award-winning editor, Panchak received the 2004 Jesse H. Neal Business Journalism Award for Signed Commentary and helped her staff earn the 2004 Neal Award for Subject-Related Series. She also has earned the American Business Media’s Midwest Award for Editorial Courage and Integrity.

Patricia holds bachelor’s degrees in Journalism and English from Bowling Green State University and a master’s degree in Journalism from Ohio University’s E.W. Scripps School of Journalism. She lives in Cleveland Hts., Ohio, with her family.  

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