Litigation management is a term that is thrown
around a lot these days. Insurers and third-party administrators assure their
customers that litigation management is a standard claims service that they
provide. Many of the latest and greatest risk management information systems
include a litigation management module as part of their suite of offerings.
by Glenn Brown
While it is very catchy and sounds like an important thing to do, the question
is … what exactly constitutes litigation management?
Many years ago, the term "litigation management" referred to a loose collection
of initiatives intended to control legal costs. There was an effort to keep
adjusters in control of their claims even when litigation was initiated so that
adjusters—not attorneys—were the deciders about whether to settle or litigate.
Alternative dispute resolution (ADR) was introduced to bring litigation to
a conclusion through mediation or arbitration, thus avoiding lengthy and costly
litigation. Another element was the requirement that only preapproved outside
counsel with negotiated hourly rates could be used for defense work. The review
and approval of legal bills by adjusters has also been a litigation management
practice from the beginning.
Of all of these initiatives, the greatest emphasis was placed on adjusters
keeping ownership of their claims from cradle to grave. Adjusters were repeatedly
warned not to abandon claims to defense counsel. They were taught that attorneys
are trained to complete discovery and litigate, but have far less experience
than adjusters with pricing and settling claims. They were cautioned that defense
counsel might be inclined to fully complete the discovery process prior to being
ready to consider settlement, even when the facts were clear and the information
necessary to price the claim was available. Admittedly, this paints defense
attorneys with a wide negative brush, but that's the way the training was and
to some degree still is.
One reason there may be confusion about the definition of litigation management
is that it can mean different things to different people. It may mean one thing
to a risk manager or a claims adjuster, but it can mean something very different
to the legal community.
When attorneys think of litigation management or matter management, they
likely think of a means of organizing huge mounts of information associated
with their litigated case. They need a way to assemble all of the information
that is gathered during the discovery process and fit it together so it can
be logically presented at trial. Various software products have been developed
to help manage the large or complex cases that might involve multiple defendants,
mass torts, or multiple jurisdictions. These systems can intake huge amounts
of data and allow it to be sorted, stored, and accessed by multiple authorized
parties. The software can also weed out redundant material to make the review
of the case material more efficient.
If you've ever seen the huge numbers of boxed documents associated with a
big legal case, you can understand the need for a solution to keep everything
straight. It's just unfortunate that the solution takes the same name as the
claims initiative intended to manage litigation costs!
Returning now to the world of claims management and coming forward toward
the present, we find that what constitutes litigation management has been changing
over time. One area that has changed is the scrutiny of legal bills. Where historically
adjusters were responsible for reviewing the bills to make sure the charges
were related to the correct case and that the time expended by the attorneys
appeared to be reasonable, an industry has now developed around the auditing
of legal bills. There are firms who derive a substantial income by cutting legal
bills through the detection of patterns of excessive charges and by eliminating
charges when they find the inappropriate utilization of legal staff or multiple
attorneys billing for the same service. These firms also screen bills for duplicate
The problem with this approach is that it is very adversarial and could lead
to the severing of relations with a very capable law firm. A more enlightened
approach to litigation management is to proactively communicate the expectations
and requirements for the defense firm up front to avoid problems when the services
So what are the elements of a comprehensive litigation management program
for the well-run claims operation of today? In the claims area, litigation management
has come to mean a comprehensive policy to control litigation costs. It still
means making the right decisions about when to settle and when to litigate.
It still means making use of ADR to bring certain claims to a head prior to
spending enormous amounts of time and money getting to a trial date. However,
when litigation is the right choice (or perhaps the forced choice), there should
be an explicit set of performance and billing guidelines for defense counsel
The first step is to select a panel of capable law firms that are willing
to accept and abide by a set of guidelines. The next step is to negotiate and
memorialize an agreement that sets the ground rules. The performance and billing
policy should contemplate the following areas:
Hourly Rates. Negotiate rates for the
partners, associates, and paralegals that will be involved with the defense
Alternative Fees. It may be possible
to get away from hourly billing for certain bundled legal activities that
can be paid on a flat-fee basis. For instance, a flat fee could be established
for answering a straightforward lawsuit and issuing the initial discovery.
Litigation Plan and Budget. A full
litigation plan and budget (detailed activity list with time estimates and
cost) should be provided within perhaps 30 days of the filing of an answer
to a summons and complaint. The plan and budget should be revised whenever
there are developments in the case that impact the proposed strategy and/or
Litigation is a very expensive business to begin with, but if not properly
managed, legal costs can become enormous. In my claim auditing work, I have
seen many egregious examples of unmanaged litigated claims. In one case, a single
attorney billed a total of 24.3 hours in small increments for 1 day's work on
a single case. The bill was paid without any sort of question by the TPA. No
one took the time to add all of the entries together to see that the amount
billed was an impossibility for a 1-day period.
In another case, I found $30,000 paid in legal expenses on an auto liability
claim where the policy limit was $25,000 and the case was settled just prior
to trial for the longstanding demand of $5,000. Somehow, the adjuster couldn't
justify settling for $5,000 (until the bitter end), but was perfectly content
to let the legal bills exceed the full policy limit available for the claim.
Beyond isolated examples of inflated legal fees, there can be a larger issue
when or if litigation expenses creep up over time and become a larger and larger
percentage of the total dollars spent on insurance claims. Reasonable protocols
that are part of a comprehensive litigation management program can help guard
against outrageous individual legal bills and can also keep legal costs under
control in general.
Litigation management does not mean that only the firms with the lowest hourly
rates should be on the approved list. More expensive firms that work efficiently
may well have a final billed amount than a firm with low hourly rates who inflates
their hours. The key is to find quality firms and get them to accept standardized
billing protocols that will keep legal costs under control while also keeping
claim costs down through superior litigation results.
Management Consultants claims management team (Glenn Brown, Lisa Hartman,
William Quinn, Jr., David Ackerman, and David A. Tweedy) contributes articles
on claims topics. You can reach Glenn Brown at
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