A few years ago, I attended a seminar presentation sponsored by the Corporate Counsel Section of my state bar association. The presentation was on “controlling outside legal expense.” The three presenters were all in-house corporate attorneys with impressive credentials. I could tell that their credentials were impressive by way they preened themselves as their pedigrees were shared with the audience by session moderator.
After their prepared remarks on what their companies were doing (in a macro sense) to control outside legal expenses, they opened it up to the audience to take questions. The first question out of the box was from an audience member who asked a practical question about what corporate lawyers see on an every day basis, “My law firms are constantly running people in and out of my files. How do you tell when enough people are already working in a file or when new people are needed?”
As I looked away from the questioner, I thought to myself, “what a softball question! The panel will probably hit this one out of the ball park.” But when I looked up at the panel, I saw three blank stares. Actually it was more of a “deer in the headlights” look.
The panel’s responses to the question confirmed they didn’t have a clue. Just as law school graduates sitting for a bar exam are counseled in bar review courses “to just start writing” (in hope that something will come to mind), the panel just started talking. And they talked. They taked all around the subject without ever directly answering the question and then they called for the next question.
My above recollection was triggered this past week when I read Rees Morrison’s blog post “Fourteen reasons, ranked by legitimacy, why a law department doesn’t bring the hammer down on its law firms” http://www.lawdepartmentmanagementblog.com/law_department_management/2011/07/fourteen-reasons-ranked-by-legitimacy-why-a-law-departments-doesnt-bring-the-hammer-down-on-its-law-.html
Rees’ post just confirms what I have learned over the years as a member of a corporate law department and a claims department. If corporate law departments take steps at all to control outside legal costs, it is usually done in a broad “macro” sense such as trying to hit a home run with a clever AFA. But focusing on the things in a “micro” sense the way claims managers do every day to control outside legal costs such as close review of legal bills is just not something that lawyers in most corporate legal departments are generally inclined to do.
Why are corporate law departments and insurance claims departments on different planets when if comes to the approaches to controlling outside legal costs? I think that the explanations are in Rees’ blog post. Consider that none of his “fourteen reasons” apply at all to claims departments.
I think the major reason for this difference in approach is that claims departments tend to take a much more detatched view of their outside counsel than do corporate law departments. As I noted in my comment to Rees’ post, I have observed that many in-house attorneys come from the same firms they are supposed to oversee or come from large law firms that have similar billing models. The result is that corporate attorneys from the GC on down sometimes really do not know any different. They really do think it is okay to bill 20 hours in one day.
Fortuately for most insurance companies, the claims managers I deal with do not have the same symbiotic relationship with their outside counsel that their corporate law “partners” often do. For most claims managers, it is more of a pure business partnership defined on a macro basis by such things as guidelines and billing rules, but also more importantly, on a micro basis by such things as close review of questionable legal bills. As most claims manager know, this is where the real work of controlling legal costs is done.
So, how do you know if there are too many attorneys and paralegals billing in your files or when you need to add additional law firm personnel? Click on this link to find out the answer http://conlonassociates.com/Whentoaddstaff.aspx