In consulting work I do through my role as a CLM Advisor, I work with many small to mid-sized insurers on how to better control their outside legal costs. Invariably, this includes a discussion about the various approaches the insurer can take to legal bill review.
The primary approaches to legal bill review an insurer can take are training the claims staff to do bill reviews, establishing an internal bill review unit, or outsourcing the bill reviews. Each approach to bill review is separate and distinct and I try to work with an insurer to carefully identify the pros and cons of each approach in order to determine which approach is correct for their situation.
But in addition to the three main approaches to legal bill reviews, there is often a fourth or hybrid approach that can be taken. This hybrid approach is one in which most of the legal bill review is done in-house, but some of it is outsourced.
A hybrid approach to legal bill reviews allows an insurer to leverage the best features of both an in-house and outsourced legal bill review program. The hybrid approach may be especially attractive for insurers who are very concerned about maintaining good working relationships with their panel counsel and do not want to chance jeopardizing those relationships by outsourcing their entire bill review program.
But while most insurers are very concerned about maintaining good working relationships with their panel counsel, this sense of concern for panel counsel is decidedly not the same for their non-panel counsel – especially independent counsel. This is likely due to the “one and done” type of relationship most insurers have with non-panel or independent counsel. And, more importantly, overbilling by non-panel or independent counsel can easily exceed twice the rate or more of overbilling by panel counsel.
Another strong reason to consider outsourcing independent or non-panel counsel legal bill reviews is that supervening ethical (or pseudo ethical) issues that are so involved in their bill reviews. This invariably leads to additional time needed by in-house staff to do the legal bill reviews properly. And if an already overburdened staff does not have the extra time needed to deal with all the additional billing issues that non-panel or independent counsel legal bills often present, my experience has been that leakage of legal expense can easily run to 20% or more in those files.
While non-panel legal bills are prime candidates for outsourced review, there are other ways (e.g., LOBs or legal bills over a certain dollar amount) to effectively divide up legal bill reviews in a hybrid legal bill review program. The main point is that for many smaller to mid-sized insurers, a hybrid approach to legal bill review may be the best way to leverage the best aspects of both an in-house and an outsourced legal bill program.
Does your company have an effective house legal bill review program? How do you know for sure one way or the other? If you would like to know if your company’s legal bill review program is effective, please contact me at john.conlon@theCLM.org. If would like to learn more about my outsourced legal bill review services in a hybrid legal bill review program, please free to contact at firstname.lastname@example.org.