One of the most poorly guarded secrets among practicing attorneys is that the billable rates paid to insurance defense counsel tend to lag markedly behind rates charged by commercial and corporate litigators, family law practitioners and even criminal defense counsel. The inequity is more surprising given that, as a sector of practicing attorneys, insurance defense trial counsel generally have much more significant trial experience than other so-called “litigators” and are often some of the most talented trial attorneys practicing.
Insurance defense attorneys have come to accept this fee-discrepancy reality, as most truly enjoy the nature of their practice, the types of cases they handle, and the ability to deal with knowledgeable and experienced claims personnel with whom they have developed long-standing relationships, both professionally and personally. Most of the current “older” insurance defense attorneys started their careers as young associates hired out of law school, or through an early job change, without a true understanding of what they were getting into. However, over time, they developed a taste for that type of work and the interesting caseload, and simply continued doing so as their skills, confidence and experience grew, and they became the litigators we know today.
Unfortunately, the future of the insurance defense bar, and by extension the liability insurance industry, faces challenges that were unforeseen just a decade ago.
As the CLM Litigation Management Survey consistently reflects, one of the friction points in the partnership between carriers and insurance defense counsel tends to be the practice of “auditing” counsel’s bills, or more to the point, the carriers’ practice of unilaterally striking time entries logged by defense counsel for reasons that often, to the attorneys who did the work and billed for it, seem petty and unreasonable.
Yet, insurance defense counsel continue to reluctantly accept that as the nature of the beast, and essentially the “cost of doing business.”
But we are rapidly progressing to a point where the insurance industry will have to re-visit the issues like billable rates and invoice auditing practices, as fewer experienced and skilled trial attorneys remain active and otherwise available.
Where Is the Talent?
For many years, insurance defense firms had no problem attracting incoming young talent, the best of whom would develop over time and eventually assume leadership roles and trial responsibilities for their firm’s insurance clients. When law school graduates and young associates were plentiful, the opportunities to join a legal practice where they would get actual hands-on experience, including the ability to interact directly with clients, take depositions, second-chair trials, and eventually have their own chance to take a case to verdict, were by themselves desirable, even when the salaries offered by insurance defense firms could not match those of “big law” practices. Part of that, of course, was driven by the amount of competition for those high-paying positions.
In the past few years, however, as any managing partner of an insurance defense firm will tell you, attracting and retaining young talent has not just become difficult, but has rapidly reached crisis levels. The main reason for this comes down to pure numbers: Law school enrollment in 2026 was down significantly from the 2010 peak of 52,404 new incoming students. In the 80s and 90s, law school enrollment averaged between 40,000 to 43,000 new students each year, rising slowly over the next decade to that 2010 high water mark.
However, in the following decade, enrollment fell dramatically, down to approximately only 38,000 new incoming students by 2014, and it has essentially leveled off since then. That represents a drop of about 14,000 from that 2010 peak, or more than a 25% drop in enrollment, in just a few short years.
The corollary is that there have been significantly fewer law school graduates looking for jobs over the past decade. Associate positions in law firms have become a seller’s market for law graduates, and as the available talent pool dwindles, “big law” and commercial or corporate practices that can afford to pay higher starting salaries attract newly minted attorneys, while insurance defense firms—already unable to compete financially with bigger firms—face a shockingly limited pool of applicants for available positions.
Moreover, even when insurance defense firms are lucky enough to hire a competent new associate, they often lose them within a year or two to other firms, as young associates find markedly higher salaries available elsewhere.
While insurance carriers acknowledge the talent crunch that faces the defense bar, they tend to feel it is a problem for the law firms to address themselves, noting that carriers likewise face a talent crunch, as discussed during the 2026 CLM Annual Conference Premier Panel in March in Orlando. However, to the extent that carriers see defense counsel as a trusted “partner” and not just a necessary evil (i.e., a line-item expense to be reduced as much as possible), they must recognize why they should take an active interest in this crisis of defense talent and step up to help. Within the next decade, current experienced trial attorneys in their 50s and 60s will inevitably retire or scale back. Without a succession plan, i.e., younger trial attorneys developing their own skills, who will be around to take cases to trial?
The plaintiff’s bar will be licking its chops over the ability to go to trial against woefully inexperienced defense counsel, and that gap in trial skills will inevitably lead to substantially larger verdicts, larger settlements, and will drive carriers to settle cases they might have otherwise defended to verdict in the past. In a climate that is already seeing nuclear verdicts for a variety of reasons that keep claims professionals up at night, adding a dearth of experienced defense counsel to the mix portends a future of costly indemnity payments.
Falling Behind on AI
The plaintiff’s bar is already a step or two ahead of the defense bar in the implementation of artificial intelligence (AI) platforms and their use in claims and litigation matters. As the 2026 Litigation Management Study notes, the insurance industry not only hopes, but also expects defense counsel to get on board and compete appropriately. However, it remains unclear how the cost of defense implementation of AI products and services will be borne.
Half of the responding carriers in the 2026 Litigation Management Study and many who responded informally in CLM Annual Conference sessions have made it clear that they expect defense counsel to absorb those expenses as another “cost of doing business.” However, the impact on small and mid-sized defense firms can be substantial. They lose the billable time that associates or paralegals once generated doing summaries, medical chronologies, discovery evaluations, etc., and instead must actually pay a licensing fee to have an AI platform that does the same work without generating any direct revenue for its use.
Stepping Up
The solutions to these issues, as distasteful as it may be to a carrier watching its bottom line, is to invest in its defense counsel—pay higher rates so that defense counsel can attract and keep talented young associates who will become skilled trial attorneys, and allow defense counsel to pass along some of the expense of AI products so that they are both encouraged and motivated to use them vigorously to compete aggressively with the plaintiff’s bar.
Carriers that can’t swallow the idea of increasing their hourly rates to defense counsel should at least explore alternative fee arrangement (AFA) plans. AFAs have been championed over the past several years by attorneys such as CLM Member Robert Kopka, Kopka Law, and members of the CLM Counsel Value subcommittee of the CLM Litigation Management Task Force. The idea is that AFAs might offer carriers an ability to budget their defense spend more accurately while avoiding the potential for runaway defense costs. Likewise, defense counsel might be more fairly compensated without having to argue about invoice cuts, billable rates, etc.
The hurdle, however, is coming up with an arrangement that makes sense for both parties, and AFAs might only be practical for a law firm and/or carrier with a large volume of cases for which valid data on cycle times, hours spent, and the involvement of differing levels of professionals can be evaluated. Nevertheless, carriers unwilling to consider straightforward billable rate increases to their defense panel should be at least considering creative alternatives that will help keep their loyal defense firms thriving and growing.
To avoid the potential explosion of claim value in the next decade or two, insurance carriers need top-tier trial defense firms. Likewise, those defense firms must continue to try to attract new talent who can develop and grow into dynamic defense trial counsel to meet those challenges. To do so, defense firms need to be able to offer young attorneys opportunities they may not get in other practices, while still being compensated competitively.
The harsh reality is that defense firms must generate sufficient revenue to allow them to compete technologically with the plaintiff’s bar and attract and retain that talent. That revenue inevitably – only -- comes from the fees they charge for their legal services. The consequence of the insurance industry failing to step up now will be the erosion of solo and small insurance defense firms entirely, as they will not be able to afford AI platforms or products nor hire competent associates, and the likely inability of mid-sized firms to take on all assignments and be forced to turn down work. The end result will see the insurance industry inevitably compelled to send cases to larger law firms that can handle the volume of work, but at rates that, by then, will make carriers pine for days gone by.
There is no AI product that will ever try a case to a jury, but the attorneys who can and currently are doing so are fading away. The solution to this crisis will admittedly come at a cost to carriers, but in the long run, the investment now may save a fortune in the future.