Vanity Law Fair

Why Insurers Need a Defense to Overbilling Lawyers 

Just like overindulging is a polite term for getting drunk, overbilling is just a polite term for billing fraud. And just as many drunks do not really think that they have a drinking problem, many lawyers apparently do not think they have an ethical problem if they overbill their clients. This sad fact is borne out by a number of important reports and studies over the past two decades. Even the American Bar Association (ABA) has taken official notice of the problems caused by lawyer billing abuses. In 1993, the ABA’s committee on ethics and professional responsibility called lawyer billing problems a “major contributory factor to the discouraging public opinion of the legal profession.”

Abusive lawyer billing practices have also been studied and reported on by a number of legal scholars. Considered by many to be the leading academic scholar on the subject of lawyer overbilling, Professor William Ross conducted three important surveys of lawyers beginning in 1991. His most recent survey in 2006-2007 of lawyers in all types of practice settings found a discouraging upward trend in the percentage of attorneys who not only admitted to billing abuses, but saw no ethical problem with it. For example, the percentage of attorneys who believed that “double billing” was unethical fell from 64.7 percent in the 1995-1996 survey to 51.8 percent in the 2006-2007 survey. (To view past survey results on lawyer billing abuses.

Some legal experts believe that excessive lawyer billing can easily add 15-30 percent or more to legal bills. According to Prof. Ross, insurance companies “may have been the victim of a disproportionate amount of excessive billing.”

Taking definitive steps includes implementing tried-and-true measures, such as hiring only reputable attorneys, securing discounted hourly rates, and having in place and closely monitoring good litigation plans. However, these strategies alone have not shown that they will prevent lawyer billing abuses or will result in lower legal costs. In fact, one step — bargaining for lower rates — may actually lead to lawyer overbilling. As Douglas Richmond, a former insurance defense lawyer put it in Professional Responsibilities of Law Firm Associates: “Clients who negotiate discounted hourly rates are vulnerable to overbilling because, lawyers reason, they are not truly cheating those clients when they pad their time — that extra time is only restoring the firm to the financial position it would have been in but for the clients’ unreasonable insistence on discounts.”

Insurers that are truly intent on preventing attorney billing abuse and controlling legal costs need to do much more than they have done in the past. 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.

There is virtually nothing of any substance found in most insurer billing or litigation guidelines that cannot be reworded to tie directly into an ethical obligation of an attorney. For example, many insurer guidelines provide that “the company will not pay for lawyers doing non-legal work customarily handled by clerical staff.” Many insurers and attorneys believe that such a guideline merely reflects something that is a customary practice in the legal profession. Actually, it reflects much more. The guideline mirrors a mandatory attorney ethical obligation. Thus, a better way of stating the guideline would be “the company will not pay for lawyers doing non-legal work customarily handled by clerical staff, as attorneys may not ethically bill for such work.”

Squarely tying guidelines to a lawyer’s ethical obligations will keep guidelines from appearing to be arbitrary requirements of the company. It shows that the guidelines are not just reflecting customary or accepted practices, which must sometimes give way if the attorney believes they interfere with the attorney’s professional judgment. Linking billing and litigation guidelines directly to an attorney’s ethical obligation will likely change the dynamics of most billing disputes. It will serve to refocus and elevate most billing disputes to a more appropriate discussion of what the ethics of the legal profession provide with regard to billing for particular tasks or costs.

E-billing programs electronically scan submitted attorney invoices and apply rules that mainly come from requirements in a company’s billing guidelines. Rule violations are flagged for the reviewer’s attention. One key benefit to this feature is that the e-billing program, in addition to catching large items, catches many smaller charges that the bill reviewer has overlooked or has difficulty catching manually. These smaller charges often include improper rates and miscalculated costs, which can sometimes add up to one-to-three percent of the total charges in the legal bill. Catching billing errors that are often overlooked or hard to spot manually not only saves on legal expenses, but also it leaves the reviewer with more time to subjectively analyze the more substantive portions of legal bills.

A word of caution about e-billing programs: Not all e-billing programs are alike. Reporting capabilities can vary greatly among them. Also, some e-billing products are better suited to a corporate rather than an insurance company environment. So it is important to choose an e-billing company that has a focus on providing a system that is suited to the insurance industry, provides a wide array of standard reports, and provides the user with the ability to create custom reports.

Establishing an effective legal bill review program generally requires having a dedicated legal bill review unit (LBRU). Legal bill review units can be staffed with insurance defense attorneys or experienced litigation adjusters — or a combination of both. In addition to providing the maximum amount of protection against billing abuses, a dedicated in-house legal bill review unit will provide consistency in legal bill reviews (which law firms will actually appreciate) and send a signal to all that the company is serious about preventing lawyer overbilling.

It may be discouraging for insurers to realize that some outside counsel they have established relationships with might be engaging in abusive billing practices. It is tempting to just think that this only happens with lawyers who work for other insurance companies. But remember it is more likely than not that those overbilling lawyers who work for other insurers also work for your company, as well. As a result, all insurers need to take definitive, defensive measures to guard against being fleeced by their own lawyers.

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Time is not something that can be perceived as such, in its supposed capacity of an in itself identity holder, as some sort of immutable receptacle that is to be filled with various things; quite the opposite, it gains its identity depending on the things that fill it, it flows differently with respect to the relevance and the sense of the things that roam through it. Thus, accounting time first implies its decantation that will indicate it to us, that will enable us to guess it as a relation between a maximum and a minimum.

Its maximum consists in the main hypostasis in which we assume it, in which it enters our lives, namely as death… Thus, death becomes the pre-eminent form in which time shows itself to us and, as such, any evocation of time is an evocation of death, any time is for us, in the end, a time of death.

The minimum, on the other hand, appears as a time breakdown that is to show us, only to indicate to us without making it explicit, the fact that it does have an identity in itself, hypostasis which is defined by the recurrence. In this respect, I believe, it is said that when one makes the same things everyday many days in a row, it is not that a number of days have passed, but, in fact, only a single one- the standstill-present as a death of time. More explicitly, just as we get to understand that an instrument-object could have an identity in itself, that it could be something else than we intended to make out of it only when it is broken, becoming an inert thing of which we cannot make any use but into which we keep running, time allows itself to be guessed in its capacity of simple and inert presence only when it becomes broken, when it isn’t really flowing, namely in the shape of the standstill-present, of the perpetual recurrence.

What does then boredom mean? Perhaps it would be fairer to say of the moments that bore us not that they take to long but quite the opposite, that they do not take at all, that in their respect time doesn’t flow at all. The anxious waiting form them to pass is actually not a hunger for deeds but a hunger for moments, it is not an attempt at getting to events but one at getting to time.

Therefore between the time of death and the death of time it allows itself to be decanted, guessed and thus accounted.