If there is something that everyone on CLM’s Litigation Management Task Force can agree on, it is that the conversations about the pain points between carriers and defense counsel have been honest, energetic, and worthwhile.
As Task Force Steering Committee member Cayce Lynch, national managing partner at Tyson & Mendes, says, “It has only been one or two meetings, but this has been a shining example of how much people care. Whether you're a lawyer or whether you're a claims professional, these are lifelong professionals who are coming forward with the very best of intentions to collaborate.” She adds, “I really appreciate CLM providing the platform for us to have these conversations.”
The Task Force has been broken up into subcommittees that are covering a range of issues of importance to carriers and law firms. Recruitment, retention, and artificial intelligence have generated considerable discussion. But when checking in with members of the Task Force’s Steering Committee for an update on subcommittee discussions, one topic stands out, and it is, unsurprisingly, billing. How the industry ended up with a system that neither side appears particularly happy with and that has, over the years, been used to both cut bills and inflate them is beyond the scope of this article. What to do about that system—which has become an obstacle carriers and defense firms must clear so they can focus on larger threats to the industry—and how to move forward is at the heart of what the Task Force hopes to accomplish.
To that end, any conversation about how to resolve this issue needs to start with an honest discussion about how each party views the current landscape. That is what has happened at the early Task Force meetings. Those honest discussions can perhaps be uncomfortable, but they are necessary. Lynch notes, “We don't want to talk about money in our personal lives, and we don’t want to talk about money with our clients. It’s super uncomfortable. But I'm really proud of the subcommittees for having the guts to bring it up and discuss it honestly because, at the end of the day, it’s about having the resources to do the job to the very best of our ability on everybody’s front.”
Steering Committee member Bob Kopka, founding partner, Kopka Pinkus Dolin, adds that the discussions are exposing some animosity, “because there is a clash. I'm on insurance defense lawyer’s side—we’re begging for recognition and for respect. And on the other side, [carriers] have pressures that are financial, and they have had situations where lawyers have let them down. And so, it's a difficult gap to bridge.”
When it comes to the nuts and bolts of the topic at hand, Kopka has much to say about the perceived inconsistencies with how billing guidelines are applied, and the concept of billable hours in general. Some of his points:
- It creates the wrong incentives for attorneys—“I was an associate at a law firm where the guy that billed 600 hours a quarter—he was the hero, and they gave him a bonus check in front of everybody to make sure everyone knew that billable hours were the thing that they were looking for.”
- There are metrics available today that better measure the effectiveness of firms and attorneys—“The quality of the law firm then becomes the focus; not the ability to avoid bill cuts.”
- It disincentivizes the use of new and innovative technology that would increase efficiency, such as AI, and discourages firms from making the hefty initial investments—"I wouldn't be able to monetize it. It would reduce the number of hours.”
In many ways, Kopka’s observations track with defense counsel survey data that Taylor Smith, president of Suite 200 Solutions, has compiled on behalf of CLM over recent years (those surveys, and the conversations they generated, helped lead to the formation of the Litigation Management Task Force). Speaking to CLM for a previous CCO Connect article, Smith said, “The majority of attorneys continue to believe that [billing] adjustments are either subjective or inconsistent. There's a lack of core understanding—and I'm not passing judgment on whether the guidelines are good or bad. I am just reporting on the perception of the attorneys. That’s been pretty consistent over our survey.”
Smith added in that article: “Now, to be fair, if I’m talking with claims executives, they say, ‘We’ve had no lack of education around the guidelines. There shouldn’t be a lack of clarity around the guidelines.’ But the reality remains that the perception of what’s happening is different on both sides.”
Lynch sums up the current state of affairs by pointing out the mounting challenges facing the industry and the inability of carriers and defense firms to adapt. “Social inflation is continuing to rise,” she says. “Nuclear Verdicts are continuing to rise. The plaintiffs’ bar is more connected and more creative than ever, and defense firms and insurance carriers are absolutely now starting to talk about what we can do creatively to address these problems.
“But we’re in a pickle because the economic model that defense firms operate within, mandated by the insurance carriers, doesn’t always allow us the freedom and flexibility to respond in a creative and a unique way, and now carriers, all these years later, are facing such challenges with social inflation [and] the rising cost of premiums…that they feel they do not have the flexibility to make the changes to the financial arrangement between both of us that perhaps need to be done to give us more flexibility.”
The defense firm task force representatives are not the only ones who see a need to change the compensation structure. Steering Committee member Krista Glenn, EVP and chief claims officer, Westfield Specialty, also says the current model is due for a shake-up: “I think that we all agree that the current billing procedures aren’t ideal for anyone—counsel or carriers,” she says. She also views the task force as an opportunity to accomplish that: “I do agree that we do have momentum on this issue, and it seems that most agree that we are past due for a real sea change in the way that we are compensating counsel for the work that we need them to do.”
With recognition from carriers and defense firms that it may be time for a change, progress on this issue might seem inevitable. But changing any established structure always has its challenges. Kopka says, “Every time I talk to a vice president or a higher-level person at a carrier about switching from the billable hour to a flat fee, they love it. They’re interested. And they all warn me there’s an infrastructure out there. [They say], ‘I can't snap my fingers and make it happen.’”
As of now there is no breakthrough revelation when it comes to changing the billing structure currently in place. But the conversations within the Task Force are just getting started, and there is considerable optimism that ongoing discussions will yield results. Glenn says, “I’ve been concerned about litigation management issues for a while, so I haven’t been surprised by what I have heard. And my husband is a defense attorney, so I get what they are facing. I have been pleased to see that there are a lot of people who have a shared concern and are committed to finding a better way to approach the problems we are facing. Because there are so many smart people who have a lot of passion for this topic, I’m sure that we will make progress."
Glenn adds, “We shouldn’t limit ourselves to only trying to fix the billing issues, but rather should see this as an opportunity to address all of the issues such as difficulties that counsel and carriers have in bringing new talent to their firms, ensuring that less-experienced attorneys have the opportunity to get trial experience in a ‘Nuclear Verdict’ environment, and building stronger partnerships between counsel and carriers. If we can work together on some of these issues, changing the mechanics of the billing process shouldn’t be so daunting.”