A Paradigm Shift in Litigation Management

By Michael Boutot posted 08-04-2009 09:09 AM


Through recent years, many insurers, self-insured corporations, and third-party administrators have maintained a consistency with regard to litigation management and its impact on clients. Little emphasis was placed on this issue 25 years ago. However, due to increased litigation, litigation management has become a business unto itself. Consider some of these facts, quotes, and statistics:

  • In 2007 there were nearly 400,000 new civil tort cases with less than 10,000 going to trial (less than 3 percent).
  • In 2007 there were over 2.2 million pending civil tort cases.
  • Since 1950 there has been more than 11 percent growth in new civil tort cases.
  • The cost of the U.S. tort system for 2006 was over $230 billion.
  • Over the past 10 years, civil tort litigation costs have increased 125 percent.
  • The RAND Institute for Civil Justice studied transaction costs and determined that about 43 cents on the dollar goes to the plaintiff. The other 57 cents goes to transaction costs, which include attorney fees paid by the plaintiff and the defendant and court filing costs.

Lawsuits are on the rise. Litigation costs are skyrocketing. Some demands are just ridiculous. Legal cost-containment "experts" are everywhere. I submit to you that the key to resolving these issues is to treat the problem, not the symptom.

I have shared this scenario at many conferences and trade shows: Assume we hire the best attorneys to defend our litigated cases and provide the most elaborate details on how to handle these cases and eliminate human error. How much will we save when we go to audit invoices? The answer is nothing!

What we must do is hire the best attorneys, provide the best guidelines, provide the best tools and resources, and expect the best results. After we do that we will see the effects of true litigation management. Anything less is attempting to treat the symptom and not the problem. The answer is a paradigm shift to true litigation management.

Hire the Best Attorneys

A recent poll conducted of more than 100 insurance defense firms indicated that these firms felt they were consistently getting the short end of the stick when they entered into relationships for litigation management. More than 90 percent of these firms recognized a serious decline in relationships due to what was labeled as litigation management.

So who is winning? Do we honestly think hiring third-party auditors to go in and reduce legal bills is winning? Auditing a legal invoice after the fact treats the symptom, not the problem.

We've all heard the cliché "failure to inspect is failure to expect." If to inspect only means auditing a legal invoice after the fact, we have a major problem. I am not talking about eliminating accountability; I am talking about improving it.

What if we applied the concept of strength in numbers to litigation and litigation management? We need a network of the best attorneys that provide coverage throughout the United States. The network would go beyond the assignment of the best attorney, providing a preferred list of court reporters, expert witnesses, data research, records copy services, and more. The network would be so large it would get national discounts on long-distance phone rates, overnight delivery service, and office supplies.

Provide the Best Guidelines

Insurers, self-insured corporations, and TPAs have established litigation management guidelines as part of their core products. However, with the evolution of litigation management initiatives and an increased emphasis on litigation management as an integral part of business plans, many are further defining their guidelines.

Our goals should include benchmarking results to determine the best and most feasible guidelines for the industry. This includes participation with various national organizations and involvement with established task forces.

Another goal is to work with other companies and organizations within this industry to establish standardized guidelines for simplicity and ease of use by all parties involved in litigation. By conducting research, benchmarking results, and aligning ourselves with key organizations, we can provide our clients and attorneys with the best litigation management guidelines.

Provide the Best Tools and Resources

Now is the time to focus on relationship building between adjusters and the attorneys handling litigated cases. The key is a network that enhances relationships and tools that provide for ease of doing business.

We need to change the way we do business. Despite all the automation and systems integration out there, you can look at 100 different legal invoices and get 100 different formats and 100 different sets of standards and guidelines. We still see legal invoices submitted on paper that track 1 month or even 3 months of billing. It's no wonder we need auditors to review invoices. We have yet to see any real standardization of legal-billing practices and formatting, let alone the timing in which legal invoices are submitted.

We need a litigation management product that internalizes all the legal handling, reporting, and billing guidelines, and basically guarantees compliance and accuracy. This system would take benchmarking results and allow every task-based legal billing entry to have an accepted billing time range. The system would run checks and balances on every single task-based billing and validate the results.

Now, let's take that system one step further and create a win for the law firms. What if at the end of the day, after every billable hour was validated, the system issued a direct deposit to the law firm for that day's activities?

A change like this would be a major paradigm shift to real-time legal invoice processing and payment. What law firm would not agree to more discounts, stricter guidelines, and standardization in exchange for avoiding third-party legal bill auditors and guaranteed next day payment on the prior day's activities?

The best resources include arming our defense attorneys and litigation adjusters with a network that includes every aspect of handling litigated files. When handling a litigated case, this network will not only allow adjusters to select the best attorney, but will also provide attorneys with the best experts, the best court reporters, the best record copy service, the best of everything.

With these tools, we will be able to enhance tracking and the payment process of all issues related to litigation management. It would track how much was spent in litigation in a particular year and how much was spent on court reporting on all workers' compensation cases by state. It would identify what percentage of time a junior partner attorney spent on all cases as compared to a senior member of the law firm. In short, the resources and capability to tell you everything about how, why, and where your legal dollars are being spent.

Now is the time to solidify the relationship between adjusters and attorneys. Put them back on the same team and provide them with the opportunity to do what they were hired to do - handle and defend litigated exposures.

Expect the Best Results

A shift to true litigation management would make doing business easier for all parties, create near guaranteed compliance with procedures, increase focus on cases, create cost reductions, and provide prompt benchmarking results, real-time validation of invoices, and the ability to measure compliance. When we have accomplished these enhancements - providing the best attorneys, the best guidelines, and the best tool and resources - we will then be able to expect the best results.