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 Posted on
February 25, 2009 |
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Does Your Law Firm Provide Measurable ROI?
by Daniel P. Costello, Esq.
I have been very fortunate over the last several months to meet with some of the leaders from best of breed companies in the insurance industry to talk about my firm and litigation management. After every meeting that I have, I leave re-energized by the future of the industry and what we are already doing for our clients to help make them leaders in litigation management.
I have worn many hats over the years, with the most challenging working directly for a large insurance company. For a number of years I worked as an attorney working across multiple jurisdictions, as a manager leading legal offices across the country, and then as an officer for Fortune 500 company directing all claims litigation nationwide. The reality is that insurance defense and claims litigation is essentially 98% the same across all companies. However, not all companies approach litigation management in the same manner. The leading companies are asking the right questions and employing the proper resources to address these common problems.
The common problem for most carriers fall into three categories;
1. How do we measure the value of counsel?
2. How do we pair the right files with the right firms?
3. What can we do internally to improve our litigation best practices to produce results that align the goals of claims and counsel?
Whenever something new comes into vogue in the industry there is always some push back. First there were litigation guidelines, then billing guidelines, then bill review programs, and all were initially met with resistance from counsel. In fact, many thought that litigation management would die a quick death to the ethical problems that this created, but alas it did not. Indeed, not only have counsel and claims accepted these "innovations" but each has become industry standard. But do any of these programs completely answer the aforementioned questions?
Most carriers inherently know what the issues are: generic litigation plans, bloated budgets (or no real budget at all), long cycle times, and comparing counsel's performance across multiple variables. Claims managers have long dealt with issues like cost control and performance measurement internally, but few have treaded on these issues with outside counsel, and even fewer have been successful in implementing the proper measures.
However, is there a more important time than the present to answer the pressing questions? Gone are the days of double digit investment returns for carriers, and combined ratios which hover in the low nineties.
Leading edge insurers must develop best practices performance management systems that go beyond bill review. They will use web based audits of counsel, alternative fee agreements, and comprehensive metrics to measure firm performance that they'll share with the firms. Carriers will provide solutions where every firm will have an equal opportunity to gauge how they're doing relative to their competitors and to compare their price and overall performance. Insurers will select firms that embrace the new business practices and work to craft them into a finely honed model. Carriers who adopt the model will try to create a litigation meritocracy with attorneys who best address their business needs, while providing stellar service.
The question is despite all the talk of change in 2009, are carriers really looking for innovators among law firms?
Albert Einstein defined Insanity as: "doing the same thing over and over again and expecting different results."
If you want to change your end results you must select counsel not only based upon their litigation skills but their business acumen. You must employ the new litigation management solutions, and launch the same with the help of experts.
Companies know that they will need to change, but often put it off. Why? Fear of change, the perceived security that a big firm offers, no immediate pressure? In the business world, a company that does not embrace better, faster, cheaper, will suffer a quick death to its competitors who do.
The only constant in the business world is change. The question for carriers is are you going to be the ones who define that change, or the ones that that get defined by it?
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Posted on
October 09, 2008 |
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How Do You Reduce Expenses and Improve Quality
by Daniel P. Costello, Esq.
I have been doing quite a bit of talking lately to insurance company clients, insiders, and key decision makers across the county. The topics range from negotiations, ethical considerations of the tripartite relationship, and to litigation intelligence. But I keep coming back to a key synergy in all of these divergent topics. That is the essential function of proper communication between the insurer and attorney. Without this communication many of the best laid plans fall to the wayside. However, in my experience the most effective way to close the loop on communication is to align the economic incentives of counsel and insurer by alternative fee agreements. This eliminates concerns about billing, cycle time, and ulterior motives. It also improves the quality of service and reduces expenses. Simply put it aligns the business goals of the firm, the insurer, and while simultaneously taking care of the insured. This article briefly explores some non-traditional fee agreements we utilize to obtain the best value for our clients.
The Current State of the Billing Model-
My own experience as an officer in a Fortune 500 company taught me that businesses in all sectors need to show productivity improvements every year and demonstrate that as the company grows that the costs of legal services as a percentage of revenue decline. In the business world, a company that does not embrace better, faster, cheaper, will suffer a quick death to its competitors who do. This is contrasted with the model for most law firms which is growth by creating more billable hours at a higher rate. These goals are seemingly incompatible, especially in those firms who act as panel firms, with the goals of corporate clients. Although this seems very intuitive I still see companies that even have their staff counsel organization running programs with mandated billable hour requirements. Which begs the question is this what best for the organization? Is this what's best for the insured? Is this the best measure of value?
Looking at the Model Rules, specifically Rule 1.7 provides in part that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest,” which the rule defines as occurring when “there is a significant risk that the representation of one or more clients will be materially limited by a personal interest of the lawyer.”
I ask you to ponder for just a few minutes whether that rule can really be fulfilled by hourly based fees. When was the last time that a lawyer has sat down with you and set forth the problems of this system as a client the way they do with other conflicts? Who ever says to a client that my billing system on its face rewards me at your expense for slow problem-solving, duplication of effort, compulsiveness, and a scorched earth approach to litigation. The system, if discussed frankly, would require the attorney to say, “I’m going to bill you on a basis in which the clear economic incentives favor prolonging rather than shortening the litigation for which you have hired me.”
The current law firm model which derives its profitability from growing scale and raising hourly rates-will soon be over. The firms that survive and thrive will be those that recognize this change and focus on how to maintain margins by focusing on productivity, efficiency, and fairness. The tipping point will come when companies “get it” as far as efficiency and value are concerned. Firms that move in the same strategic direction as businesses recognize that the work has to be done better, faster, and cheaper, just like what is expected in the business world.
I found that my firm works best in conjunction with our clients to create a more efficient model that eliminates uncertainty from litigation, reduces costs, and shortens the cycle time. We offer several innovative models as alternative fee agreements with clients, and tailored agreements that fit into many business model models.
Flat Fee Agreements-
Although this approach may draw a yawn from experienced professionals, this model is making a dramatic come back. I have meet with at least one CLO in recent days who is moving one of the largest insurance companies in the world to flat fee agreements. Simply put it eliminates the need for complex bill review departments and the adversarial relationship between the company and the firm. Flat Fee agreements allow both parties the opportunity to truly define their costs and to make business decisions on litigation. It also creates an incentive to drive what’s best for the client without the added fear of mounting litigation costs. If the quick resolution of the case is in the best interests of the client, you can rest assured that the attorney has the same interests. If a trial is what is best, both parties will determine that early on and can proceed with the understanding that the decision has been made and without intervening evidence which materially changes the case, we are united in our goals. Most important flat fee agreements create certainty to your allocated legal expenses.
Phase Agreements-
The notion here is that the firm will agree upfront to a defined cost based upon a three tier chronology to the litigation or based upon a severity classification. I know that there are many insurance carriers out there that are now classifying cases based on severity and tier the firms, fees, and expenses based on the same. This is a creative approach that we have used for years and find it very effective. In the classic straight tier litigation approach, Phase I would be based on pleadings and written discovery, Phase II is based on oral discovery and dispositive motions, and Phase III will be based on trial. The client can agree to a flat fee for the entire litigation at the beginning of this matter or can opt for a phased approach where only one phase is agreed upon at the time of assignment.
The benefits of the phase approach are enormous. In this approach counsel is encouraged and given monetary incentive to end the case for the best value in the least amount of time. If the client and the firm agree to a Phased approached and employ upfront litigation management, cases where a motion for summary judgment will end the case benefit the company, the insured, and the firm. If the firm can end the case on a dispositive motion early in the second phase, rather than waiting for trial the fee will be larger. If they lose the motion for summary judgment there is no incentive as trial is not assumed. Even better, if there is an opportunity to file a motion for summary judgment in Phase I, counsel can end the case early in Phase I and reduce the cycle time, get the best result, and the client will reward the skill and efficiency of the firm for the same. How many times does the business world reward firms that take the most time, and do not file dispositive motions because it will cost the firm more money in the end?
Value Creation Agreements
Finally one of the most innovative approaches are value creation agreements. In the most common version of this type of agreement a firm will agree to handle all of the construction business for an insurer either nationwide or regionally. They will make a flat bid on the value of all of those cases and will handle them either internally or with the assistance of local counsel. If they can close out the cases quickly, the value for the firm increases. For the insurer there is usually both a cost savings on legal fees, and the added value of certainty in their budget. This type of agreement definitely involves more risk for the firm, but if handled correctly can create more value that just a small sampling of cases.
The legal world is resistant to change. Thus, we know that many companies, legal departments, and outside counsel are resistant to take innovative approaches to cost reduction strategies. However, only by aligning goals and economic incentives can we break the current logjam and create more value for clients.
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Posted on
June 30, 2008 |
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Ethical Considerations of the Tripartite Relationship
By Daniel P. Costello, Esq.
After many days, hours, and minutes of focusing on case law, statutes of limitations, and deadlines it's easy for the best practitioner and professional to miss the "Big Picture". I recently had the privilege to speak to some of the most seasoned claims professionals and attorneys in the country at the PLRB eastern Regional Conference in Tampa, Florida. The topic is one that inspired me to write a followup in this blog. The refrain from the attorneys and claims professionals who attended the seminar was uniform, "Why don't we talk about this stuff more?". My answer is one that a lawyer often gives to such open ended questions, "because its a difficult topic which is ill suited to a straight answer". The truth is that the Model Rules, the claims handling acts for most states, and common law provide little guidance to attorneys and claims professionals. So with such an elusive answer, what insight can I give? Here are some of the golden rules.
1. The tripartite relationship involves three parties
When I asked the question to the audience "who is my client?" they uniformly answered that the insured is my client. However, how many times do the attorney and the other professionals forget this concept when figuring out how to resolve a thorny issue? Are attorneys fully explaining the effects of the coverage positions to their "clients"? Are the claims professionals asking counsel to act contrary to their "clients" interest? Or more commonly, to reveal information which could create a conflict? The big picture is that the insured needs to be consulted, briefed, and considered in the representation of all matters. Although the answer maybe obvious the practice is far from perfect.
2. Defense Counsel's Obligations Include Informing Your Client
I have personally handled cases where before my handling of case, the client told me that no one had ever advised them of the status of the case. The importance of rule number one is that counsel needs to include the client in the handling of the case. The client needs to become a part of the process and have some ability to participate in the defense of the matter. The client's participation is also key as counsel needs to inform the insured of any potential conflict of interest including a full waiver of the potential conflict in writing. Remember explaining the process is much easier up front than when there is a problem.
3. Communication is the Key
I recently read an article that 80% of the grievances filed against attorneys in the state of New York were due to inattention to a client's matter and for failure to communicate, generally. Moreover, most of these grievances result in malpractice claims where there was actually no malpractice committed. The implication is obvious. The more that you communicate with the client and inform them of potential issues on their case, the less likely confusion sets in and leads to bigger problems down the road.
On the claim's side communication is key even within your own department. Making sure that if there is a potential or actual conflict that the file is split in the office and the handling of the file is segregated. Remember that although the policy and regulatory framework allow the carrier to control the defense of the case, most states also recognize the fiduciary obligation of the carrier to its insured. Although there maybe a focus at most carriers on the length of time to call an insured back, a continued focus on what is said on the calls is also important.
Although I was the "expert" to lecture on these topics, I find that every time I give these presentations, it gives me time to re-examine my own behavior and to exceed the "client's expectations." The point of this newsletter is that this area of our jobs needs as much reflection as those all important case summaries.
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Posted on
November 19, 2007 |
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Writing for Claims Professionals
By Daniel P. Costello
Today's claims professional has a very difficult job. Balancing pending claims, reducing cycle time, knowing the law in several jurisdictions, and increasingly the job of legal writing. Although diagraming a sentence in high school was not your favorite thing to do, you recognize the importance of solid writing. There are just a few rules, which I call "Costello's Golden Rules" which are easy to remember.
Claims adjusters, its your job to persuade the other party. Thus, this article reviews the components of persuasive writing, and identifies the techniques that separate the amateurs from the pros?
Step 1. Write Grammatically
Proper grammar is essential to conveying your message to the reader. If you write with haste, your reader will note the same. Additionally, if you confuse your audience they will miss your message. Thus, keep in mind these 10 rules for grammar:
1. Write short sentences.
2. Place only two or three paragraphs on a typed page.
3. Use the active voice.
4. Always use an action verb rather than the "to be" verb and an adjective.
5. Start each paragraph with a topic sentence.
6. Use headings and sub-headings to break upthe brief or memo.
7. Given a choice, use the word "that" instead of the word "which."
8. Do not start a sentence with the word "However."
9. Do not use the phrase "In order to." Instead, use "To."
10. Read the final work with an eye toward finding and correcting each of the nine errors listed above.
Write short sentences.Place only two or three paragraphs on aUse the active voice.Always use an action verb rather than theStart each paragraph with a topic sentence.Use headings and sub-headings to break upGiven a choice, use the word "that" insteadDo not start a sentence with the wordDo not use the phrase "In order to."Read the final work with an eye toward
Step #2 Get Organized
That enduring requirement of high school composition—that is, to begin your writing projects with an outline-is still a good idea. An outline gives direction to your project from the start and makes the laborious process of writing the first draft that much easier.
The typical legal memorandum or arbitration letter has four parts: an introduction, factual background, argument, and conclusion. You should consider a longer introduction that provides a sort of "executive summary" that states at the outset why your client should win. The conclusion is normally a perfunctory close of only a sentence or two.
If you are responding to something your opponent has already written, it is often easiest to adopt your opponent's organization—that is, respond to your opponent's arguments in the same order that he or she presented them.
For longer legal briefs and court memos, consider adding a table of contents at the front. It aids comprehension and shows you have confidence in your ability to organize.
Step #3 Maintain Your Credibility
The court will respond more favorably to your arguments if they think you are fair-minded and wise. The basic rules are easy. Present a cogent legal argument. Don't misstate the facts or the law. Be thorough in your research. Always cite-check your case citations.
Your credibility is also influenced by how seriously you take the arguments advanced by your opponent. Any legal brief or memo that fails to address every point made by the other side is inherently flawed. It's a rule that's often violated, especially when we're rushed.
What about concessions? It's often strategically wise—and an automatic credibility-booster—to state your opponent is right on points that don't matter to the end result. Why do so many lawyers feel compelled to defend indefensible positions that aren't material? Point out other reasons why you should win anyway.
Credibility also has a stylistic component. A common problem is overstatement, which will make the reader question every other forceful statement you make. Example: Defendant contends Smith v. Jones is distinguishable, but nothing could be further from the truth.
Never come on too strong.
Step #4 Adopt the Right Tone
It's at this point that many veer wildly off course. Tone can be defined as the underlying attitude we take towards our opponent and our opponent's arguments. This attitude isn't explicitly spelled out, but shows through the fabric of our legal arguments.
Tone comes in all varieties—objective, respectful, or professional on the one hand; condescending, self-righteous, or bitter on the other. Too often we pull out all our guns and attack, either rudely mocking the arguments of opposing counsel, or even worse, rudely mocking opposing counsel.
This approach seems to add an extra oomph to the force of our legal argument. Yet all too often, what actually happens is that we alienate the reader—that is, the judge or arbitrator.
An angry, defiant tone just doesn't add a lot. Ever met someone whose response to every difficult situation is a sarcastic retort? Amusing for a few minutes, but then listeners get bored or disgusted, and want to leave the room.
Remember: The judge already knows you disagree with your opponent's position.
Begin by rationally stating why you disagree. An objective, reasonable tone is usually the most persuasive.
Step #5 Make It Easy to Read
Is this obvious? To many, the gut reaction is: Easy to read? No one will take it seriously!
These people believe that a difficult style reflects a brilliant mind. Six-syllable words, a pompous delivery, ideas that are hidden in thickets of tangled syntax—it's how philosophers and professors write, isn't it?
Yet these aren't models for lawyers to emulate. If your readers have to work to decipher your meaning, they may ultimately give up. And they won't be persuaded. So revise. Again and again. If the meaning isn't clear, it's not a sign of brilliance—it's a sign you were rushed, or apathetic, or lazy.
As you revise, look for ways to make things easy on the reader. Since a page that presents a lot of white space is more inviting than one featuring long, dull-looking blocks of text, aim for shorter paragraphs.
Another way to add white space to the page is a liberal use of headings and sub-heading. In the text itself, use bulleted lists to quickly group related points.
Finally, eliminate unnecessary modifiers. When you complete the next-to-last draft of your brief, make another pass through the text and ruthlessly cut all unnecessary adjectives and adverbs.
Example: Because there are clearly no question of fact for trial, Defendant is obviously entitled to summary judgment.
The point is just as strong without the adverbs.
Step #6 Take Pride in Your Work
Those who take pride in their work put out a finished product that's pleasing to the eye. It's a lesson from marketing: packaging counts. Books are judged by their covers.
So proofread carefully. Fix the typographical errors. Don't allow your name to be placed on work that looks sloppy or unprofessional.
In the final analysis, of course, good writing only counts for so much. Sometimes we lose because we have to defend a position that's clearly wrong.
But how much worse when we lose an argument that's clearly right. Now that's a result that's unforgivable.
What are your questions on legal writing issues?
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