Overbilling Attorneys Risk Jail & Attorney Discipline

The lead two stories in the on-line ABA Journal for Sept. 12 show what can sometimes happen to lawyers who overbill their clients.  The lead story was about a partner in a Chicago area law firm who was sentenced to 6 years in prison for billing work that the lawyer did not do.  The other story was about two public defenders (in unrelated cases) in West Virginia who face federal wire fraud charges for billing time for work that they did not do.

In my professional responsibility law practice, I regularly counsel attorneys that there are three things that can get a lawyer into serious trouble with the disciplinary authorities: doing drugs, having sex with a client, or messing with a client’s money.  Thus, it truly escapes me why attorneys take such chances with their careers and, in some cases, their freedom.

Perhaps the answer can be found in a simple five letter word spelled g-r-e-e-d.  This view is supported by a number of scholars who have studied the issue including Prof. Lisa Lerman. Prof. Lerman writes that “many wealthy Americans, including quite a few lawyers, are suffering from a plague of greed.”  See Lisa Lerman, Greed Among American Lawyers, 30 Okla. City U.L. Rev. 611 (Fall 2005).

But while greed is a reason, a more vexing question is why would lawyers purposefully do something that they know to be wrong?  The answer to that question might be that cheating the client is so pervasive that many lawyers no longer give the matter much thought anymore.

Overbilling may have gotten to be so pervasive the even some judges favor just accepting it.  A few years ago, Webster Hubbell, the former Clinton aide, was sentenced to 21 months in prison for overbilling.  However, as one Arkansas Supreme Court Justice protested, it was unfair to single Hubbell out for punishment when billing fraud is so common and is rarely prosecuted.

Overbilling is a particular problem for the insurance industry.  Prof. William Ross, regarded as the leading academic scholar on the subject of legal billing believes “that the insurance industry has been the victim of a disproportionate amount of excessive billing.”  See William Ross, Ironic and Unnecessary Controversy: Ethical Restrictions on Billing Guidelines and Submission of Insurance Defense Bills to Outside Counsel, 14 Notre Dame J.L. Ethics & Publ. Pol’y 527, 531 (2000).

Unfortunately, widespread cheating on legal bills is on the increase.  This is borne out by a recent survey conducted by Prof. William Ross, considered as the leading academic sholar on the subject of lawyers and legal billing.  In his latest survey, Prof. Ross found that lawyers in all practice areas surveyed were, on the whole, were less ethical in their billing practices.  The decline in lawyer billing ethics can be seen in the percentage of attorneys who believed that “double billing” was unethical which fell from 64.7 percent in the 1995-1996 survey to just 51.8 percent in Ross’ 2006-2007 survey.

Is there anything that insurers can do to prevent being a “victim” of overbilling lawyers?  Well, that is exactly what  my blog posts have been about.  In my January 23, 2011, post I stated that there are three and only three things that insurers can do to guard against being a vicitim of overbilling lawyers.  Those three things are establish an in-house legal bill review unit (LBRU),  train the adjusting staff to properly evaluate legal bills, or outsource the legal bill review function.

I have been blogging about all three of these options and am in the process of completing a series on outsourcing legal bill bill reviews. Outsourcing, I very firmly believe, is particiularly suited to small insurers who can leverage the same type of savings that that larger insurers get by using their in-house LBRU.   So you will want to follow my future postings on the subject of outsourcing.  In the meantime, if you have any questions on outsourcing or how to establish a LBRU or would like to schedule a training session for your staff on how to properly review legal bills, please feel free to contact me.

One Response to Overbilling Attorneys Risk Jail & Attorney Discipline

  1. Bill Clerk Boone says:

    As a legal billing clerk for 6+ years with a very large law firm, I was really glad to see that someone is addressing legal billing issues/practices between law firms and insurance companies. Regardless of the perspective (pro-insurance or pro-law firm), there are still so many “gray areas” in this profession. I look forward to your future comments. Thanks!

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