%20(1).png)
Insurers are often called upon to work with attorneys outside an approved panel. This could be due to retentions on the policy, conditional acceptance of the loss/exposure (reservation of rights), or state law allowing insureds to assign their choice of counsel (Cumis counsel).
When should an outside auditor be engaged to review these bills?
A few situations come to mind...
Is the litigation complicated by covered and uncovered portions under the applicable coverage?
In one instance of complicated litigation, Alan Gray (AG) auditors were called upon to review a claim where the client was a defendant in the litigation and, in turn, asserted a counterclaim. Under the terms of the insurance policy, defense counsel was provided to defend the claim but not to affirmatively prosecute a counterclaim. AG reviewed the motions in the court database, separating the charges billed to each motion, allowing some and determining others were outside the scope of the defense obligation. To make matters more complicated, this insured was involved in a regulatory enforcement action outside the scope of the coverage. After a precise review, nearly $300,000 in legal fees and expenses were determined to be outside the scope of the coverage, resulting in a close to 34% reduction in the invoice total.
Is the firm not typically involved in insurance defense?
Often, firms that do not engage in insurance defense adopt billing practices that many insurers believe are excessive. In one instance, AG auditors were tasked with reviewing over $15 million in legal bills, which, after careful review, revealed the matter was being handled by four “lead” attorneys (two partners and two associates), whose work was being “reviewed” by an additional six attorneys who appear to have added little of substance to the litigation. Deducting the $2.5 million these six additional attorneys billed created substantial savings for the carrier. Such firms may also include charges for overhead costs, such as in-house firm catering for meetings or other uncovered expenses. In this instance, the overall suggested deductions brought the $15 million down to approximately $9 million (nearly a 35% reduction) in reasonable charges.
When adjusters are confronted with significant legal bills in complicated litigation, it pays to have a trusted auditor on your side.
Do invoices seem excessive considering the subject matter of the litigation?
In cases involving what appears to be overly excessive motion practice, an outside auditor can compare charges to actual court documents to determine patterns of abusive motion practice. In one AG assignment, our auditor determined that the non-client party continued to repeatedly move to compel expert reports long before the completion of discovery, claiming they could not “understand” the allegations asserted against them, even though they were properly pleaded in the complaint. In this instance, the client’s counsel was required to respond repeatedly to the same request, and extensive motion practice was, in fact, required. While this did not represent savings per se, the client was assured of the defense counsel’s diligence.
Let’s face it, adjusters are busy people, and when confronted with significant legal bills from unfamiliar firms in complicated litigation, it pays to have a partner with over 30 years of experience in auditing excellence on your side.
