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Legal Commentary

: In Search of Perfect Client Service

IsThe Insurance Industry Waking Up?

By Patrick J. Lamb

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Someone emailed me the link to an article, in Claims (Covering the Business of Loss). The article, Fleecing The Golden Goose: Why Insurers Need A Defense To Overbilling Lawyers, addresses the phenomenon of overbilling in the world of insurance defense. Here's the tally:

While the good news out of all the reports on lawyer overbilling is that the majority of lawyers do not engage in overbilling practices, the bad news is the compelling evidence that a sizable minority of lawyers throughout the profession do engage in abusive billing practices and that the insurance industry has been a particular target of billing abuse. It is clear, then, that prudent insurers need to take definitive, defensive steps to further guard against becoming the victims of lawyer overbilling.

The article refers to several studies and suggests that overbilling may add 15-30% to most bills. That, my friends, is real money.

The solution, according to the article is to play better defense:

Insurers need to adopt a comprehensive, three-step defensive program that includes: clear billing guidelines based upon the ethics of the legal profession, a good e-billing program, and an effective legal bill review program. Employing all three defensive measures is critical. For just as a three-legged stool cannot stand on just one or two ends, a successful program to defend against overbilling lawyers cannot succeed without all three necessary parts of the program.

To be honest, I think that any solution that tries to catch overbilling at the back end is destined to fail. When it comes to their billing practices, lawyers are really smart. The suggested solution is like an arms race where one side acquires the new weapon of choice. I believe a better solution is the use of fee structures other than the hourly rate, even in the insurance defense world. But, in the insurance world, that, to quote Jim Croce, is "tugging on Superman's cape, or spitting into the wind."

Full post as published by In Search of Perfect Client Service on July 15, 2009 (boomark / email).