by James Chapman
For many U.S. property and casualty carriers, claims litigation is a major expense. Depending on the line of business, P&C insurance companies can spend upwards of 10% of gross written premium on panel counsel, staff counsel, experts, and other litigation costs. Total litigation spending is rising as lawsuits continue to increase, brought on by attorney advertising, litigation funding and social inflation.
Paying attorneys to defend these lawsuits is necessary. Yet over 95% of claim lawsuits are settled. Only a tiny percentage ever make it into the courtroom to be decided by a jury.
So how can carriers tell whether they are getting the best outcomes for the cost, especially in the cases that don’t go to trial? The heart of the matter is whether they have the right lawyers doing their work. Relatedly, how can they find the best new alternatives rather than overload and possibly burn out their existing firms and/or go to lawyers?
Over the years, several metrics have been applied to measure attorney performance. They include case cycle time, total billings, hours worked, and even billing guideline compliance. Carriers use these because they have the data. But are they really able to evaluate the ROI of their legal spend with them?
In our experience, the answer is no. Attorneys are on the panel because of subject matter expertise in the line of business. Billing rates are negotiated. Cases are assigned. Then it’s the moment of truth: each case is defended, often for years. Legal bills are submitted and paid. Then, in 95% of these cases, they settle, frequently just before trial. Any evaluation of case performance at that point is subjective and anecdotal. The litigation manager is happy to close another file and avoid the risk of a bad outcome at trial, resulting in a 5-star rating. There is rarely any tribal knowledge within the organization to make better selection decisions.
Simply, there is no good way to determine whether the amount or quality of work produced the right outcome at a reasonable cost using these metrics. Every carrier knows what it spends on the attorneys it hires but has no way to benchmark their performance to determine value.
It comes down to a lack of data. Or, more specifically, a lack of normalized data.
That is changing. There are companies offering normalized state and federal court data that could be used to augment services to evaluate the performance of attorneys doing insurance defense work. A consortium of law firms and legal departments established the non-profit SALI Alliance to create a legal matter standards specification to produce better outcomes.
Insights from these types of data include how specific venues, judges, plaintiff attorneys and mediators can impact legal cost and cycle time. It can also be used to identify defense patterns, motions success, and the best resolution practices of defense counsel. Data can even help identify rising stars to consider for assigning cases.
Just as the original ABA Litigation Code Set released in 1997 revolutionized electronic billing for litigation work, these new data players – and others, including ClaimEdge – are creating new data opportunities for insurance claim departments to make better, data-supported decisions in counsel selection and assessing attorney performance.
ClaimEdge is a highly secure platform designed to help defense attorneys and litigation managers collaborate, communicate more effectively, make better decisions, reduce costs, and improve claim outcomes. For more information about ClaimEdge, please contact us or request a demo.
I'm Jim Chapman. I've have 35 years of Insurance litigation experience with commercial line carriers. I think about how the industry can use technology and get more organized, more efficient and adopt better strategies to get the best results for our clients. Our blog posts will shed light on those topics and more. It's about saving you time for what matters! What does matter to you? Each of us can answer that differently, but we all desire to be more efficient with our time!
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