Expert Commentary

Legal Billing—Is There a Change in the Wind? A Look at the UTBMS Task Codes and the Future of Legal E-billing

When I started in the P&C claims arena in the late 1970s, law firms were still billing cases at the close of the file. That's right, whether a case had been open 3 months or 3 years, you did not see a legal invoice until the matter was closed. The other oddity is how the invoice looked. It was generally a cover letter from the handling attorney with a one-page invoice that said: "Service Rendered" and indicated the amount. Believe it or not, the invoice was processed almost immediately.

Litigation Management
December 2005

Around the mid-1980s, there was a "meeting of the minds" and we began to see invoices on an annual basis. The law firms loved it because they didn’t have to wait 3 years. Insurers loved it because they could better track what became known as allocated loss adjustment expenses (or ALAE). Without going through the gory details, by the end of the 1980s there were allegations of fraudulent billing and a move toward quarterly invoicing. Around that same time, legal bill auditing companies were becoming popular, as were the accusations against law firms. Tensions were escalating between insurance claims personnel and their outside legal panels. In fact, concomitantly there also came the growth of in-house staff counsel, with the understanding that you could trust an employee more than an outside legal services provider.

Amid all of this, there was a growing awareness that something needed to be done, as everyone was pointing fingers at everyone else. The long and short of it was, "We have met the enemy and he is us." What had once been a friendly environment was turning into a hostile one. The solutions varied.

Enter Billing Systems

Fast forward to the mid-1990s when, after significant research, a group met to discuss the establishment of legal task codes. This tripartite effort of the American Bar Association (ABA) Section of Litigation, the American Corporate Counsel Association (ACCA), and a group of major corporate clients and law firms coordinated and supported by Price Waterhouse LLP developed a budget and billing system designed to provide clients and law firms with meaningful cost information on legal services. The system was given the name "Uniform Task Based Management System" or "UTBMS" for short. The first major area of legal work addressed by the System was litigation.

The System enables lawyers to budget and bill by litigation task, aiding client and counsel in understanding, managing, and conducting litigation. It is intended to cover all contested matters, including judicial litigation, binding arbitration, and regulatory/administrative proceedings. More information can be found on the ABA website. (Also see the Uniform Task Based Management System website.)

Several software billing companies then began to come out of the woodwork in an attempt to streamline these codes and introduce an electronic form of billing via the use of these codes and the UTBMS. TyMetrix, founded in 1994, pioneered the electronic invoice processing industry and developed the first and fullest-featured Web-based collaborative matter management system that is also integrated with financial information. TyMetrix has been facilitating the electronic preparation and submission of law firm invoices since 1995 and appears to have been the first company to use the ABA/ACCA UTBMS task codes to deliver easy-to-review invoices and quality, reportable data.

Looking for Standardization

As the concept of the UTBMS grew, so also did the desire to establish some standardization. As such, the Legal Electronic Data Exchange Standard (LEDES) was adopted by a consortium of law firms, corporate clients, and vendors in 1998. Essentially, LEDES permits law firms to generate a uniform set of billing data no matter what their time and billing system. As such, since other software companies like TyMetrix were getting established, law firms were not locked into using one particular internal billing program. LEDES was able to take what ever billing and accounting program the law firm had and marry it to whatever legal processing program the insurance company or corporation wanted. It codified a uniform data output from law firm time-and-billing systems for export to e-billing systems. Spurred by this new industry standard and the general advances of e-business, e-billing became more rapidly adopted.

These codes are currently used extensively in the United States by law firms to code attorney time for submission via e-billing to their clients. By some estimates, over 95 percent of the $10 billion in legal fees moved electronically last year were coded using the UTBMS codes. This includes billings from more than 98 percent of the 200 largest law firms in the United States, four of the U.K.'s "magic circle" firms, and a rapidly increasing base of law firms and legal vendors worldwide.

Since the late 1990s, there have been many more companies like TyMetrix which have established programs utilizing the UTBMS via a LEDES transfer of data. While this article is not designed to promote any one product nor to market any, the following is a listing of those products that I am personally familiar with to some extent (no doubt this is not an all-inclusive list, so forgive me for leaving some out):

UTBMS Initiative Update and Internationalization Survey

In the spring of 2005, a group led by Jeff Hodge (vice president of Product Marketing in the United Kingdom with DataCert; prior manager/principal consultant with PricewaterhouseCoopers; creator of LEDES; and founder of the LEDES Oversight Committee or LOC) and Brad Blickstein (founder of the Blickstein Group), began an initiative charged with updating and enhancing the current UTBMS code sets to take advantage of lessons learned since their introduction in 1995. At this meeting there was a three-prong focus on: (1) code updates, (2) international implementation, and (3) intellectual property. The initiative has received a great deal of attention from the legal community and is well on its way toward meeting its goals.

As of this writing, the Initiative has more than 100 members from the United States and Europe. Members are from many of the world's largest companies, law firms, consulting organizations, legal vendors, the legal press, and others. The group established the following six main goals:

  1. Maximize opportunities for broad industry input.
  2. Update the UTBMS code sets to address existing weaknesses and make them more useful.
  3. Make the codes useful in an international context.
  4. Add at least an IP code set, but also address industry-specific needs (like financial services) where possible.
  5. Get endorsement of the new work from the ABA, ACC, and IBA.
  6. Institute mechanisms to maintain the codes long-term.

There has also been a survey created to allow folks the opportunity to share opinions and offer suggestions. Click on the following link to begin. It only takes about 10 minutes! UTBMS Initiative Update and Internationalization Survey.

The UTBMS Task Force held its second general meeting on October 19, 2005, in Washington, DC. It is reported that the meeting was quite a success, and the various working groups and subcommittees are making great progress.

These committees and groups are hard at work trying to rectify many of the issues that have escalated tensions. The bottom line is we all recognize the value of technology. We also have seen how coding can make tasks much easier. After all, think of how it was 25 years ago when you went through a grocery checkout line and the cashier had to physically look at every item and enter the price that was on the label. Not only were you at the mercy of who ever placed the label on the item to make sure it was accurate, but you were also at the mercy of the cashier that he or she entered the amount correctly. Today, it is simply a swipe of a bar code. In fact, most grocery stores and even the retail giant Wal-Mart have introduced self-checkout lines because technology, and yes coding, has made it easier.

So, your task today is simple, complete the survey above and offer what opinions and suggestions you have. If you don’t, take it like a political election. If you don’t vote and your candidate loses, don’t run around complaining since you had a chance to make a difference and chose to ignore it. I for one have already completed the survey and have initiated contact with the groups. I am a general member of LEDES, which I would encourage you to join as well. Then if you have legal partners or claims personnel, direct them to do the same. Let’s work together to improve this process for all.

The views, content, and opinions expressed herein are solely those of Michael Boutot and are not those, nor intended to be those of the Board of Directors and/or the membership of the International Litigation Management Association (ILMA). For more information about ILMA, visit their website.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do 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.

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