A Paradigm Shift to True Litigation Management
August 2002
In this new IRMI.com column, Michael Boutot
discusses litigation management and provides new ideas for making business easier
for all parties to the litigation process.
by Michael
R. Boutot
International
Litigation Management Association (ILMA)
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 1998 there were more than 256,000 new civil tort cases with only
6,000 going to trial (less than 3 percent).
- In 1998 there were nearly 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 1999 was over $200 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.
The views, content, and opinions expressed herein are solely
those of Michael Boutot and are not those, nor intended to be those, of Crawford
& Company and/or the membership of the National Association of Insurance Litigation
Management (NAILM).
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.