Risk Managers and Defense Lawyers

Article excerpt

Risk Managers And Defense Lawyers

A risk manager for a large Midwestern food retailer was tickled to read the defense attorney's final report: "We succeeded in settling this injury claim for 2,500. Enclosed is our final bill." He was shocked, though, when he saw the lawyer's bill for $17,412. This seemed like the risk manager's equivalent of, "The operation was a success, but the patient died."

Litigation is a $70 billion industry, much of it subsidized--especially on the defense side--by corporate coffers. Risk managers try to cut costs, but often overlook the potential of managing budgets for defense fees. In a way, high legal costs can be compared to the weather: You can talk about it, but no one can change it. By following some simple advice, however, risk professionals can become better litigation managers.

Team Defense

One way of controlling litigation expenses has nothing to do with lawyers. Claims adjusters should be fully utilized to conduct swift but thorough investigations. Adjusters can accomplish much at a fraction of the cost of the cheapest attorney. They can obtain statements, photograph accident scenes, identify, locate and obtain statements from witnesses, obtain medical and wage authorizations, gather medical records and more. Much information can be obtained more quickly through adjusters than by sitting back and letting the expensive discovery process run its slow course.

Unlike attorneys, adjusters are trained to set early reserves. Using adjusters also liberates lawyers to do what they do best--draft motions, take depositions and apply the law.

If a company is self-insured, a good independent claims adjustment facility should be selected. Other businesses must demand top-flight claim service from their carriers and periodically audit files to ensure that adjusting work is not being palmed off on defense attorneys by harried adjusters.

Only Experienced Need Apply

When defense attorneys are needed, risk managers should seek defense attorneys experienced in their lines of operation. You should ask firms for names, addresses and telephone numbers of references which have losses arising out of similar risk areas. Those references should be checked out. You should request examples of cases they have defended and information on their outcomes. The lawyer may have handled dozens of workers' compensation files, but does that help you when you receive a summons regarding a discrimination suit? Does the firm have a facsimile machine or computers? These resources impact their ability to handle the case and to deliver tailored service. The defense attorney should be open to working with claim adjusters without feeling defensive or indulging in turf wars over who does what.

Once you have made your selection, require lawyers to send you copies of all reports, correspondence, etc. This dodges the twin nightmares of settling groundless claims or defending "born losers." If you are a large buyer of legal services, use this leverage to enforce timely reporting. You should hear periodically about the case status. What is the lawyer's discovery plan? Is there an early warning system signalling that the case is going to be settled? What is the lawyer's strategy from this point on?

Avoid the other extreme of being inundated with needless paper, for which you are directly or indirectly paying. Encourage lawyers to be concise; use captions to break up a report and get to the point fast; and give summary recommendations and flag the purpose of the report on a cover sheet (i.e., is it for information only, does it need a reply and is it urgent?).

Watch over-use of courier services. You are paying for this and much material going out via courier is not urgently needed.

Dollars and Sense

Other simple steps can help you curb runaway legal fees. Hourly prices are misleading barometers of litigation costs. …