September 22, 2021

Become a Sought-After Client: Assess Your Own “Payment Culture” With Outside Counsel

Recently I shared thoughts about specific questions that adjusters should pose to outside defense counsel to gauge the “billing culture” within the law firm.

This got me thinking about the “payment culture” within the insurance company or TPA overseeing claims and working with defense counsel. If it’s legitimate for claims people to poke and prod with regard to the law firm’s billing culture, it is legitimate as well for attorneys to inquire about the payment patterns of the insurer or claim department.

Admittedly, this is a delicate topic. Candidate law firms trying to win or keep business referrals from insurance companies do not wish to come across as being obsessed about billing. However, law firms — like insurance companies or businesses — and survive (or die) due to cash flow.

It’s no secret that some insurance companies (which will remain unnamed here), whether intentionally or through benign neglect, drag their feet and paying defense attorney bills. As a claim adjuster and supervisor, I knew of one multibillion-dollar insurance company that had an unwritten rule that no law firm Bill was considered for payment until it was 90 days old. Other insurance companies appear to operate on the basis that “the squeaky wheel gets the grease” (and the bill payment).

Tip: be a good client by paying bills on time.

Set expectations with outside counsel as to when bills get paid, within “x” number of days for example.

If there is a problem or question about a bill, communicate that quickly to the law firm so it can address it.

Consider issuing payment for the undisputed portion of the bill.

Help defense counsel maintain reasonable cash flow by not foot dragging bill payment.

Don’t put them in a bad spot vis-à-vis their firm management, which notes that there is a receivable problem with your files.

Avoid developing the appearance or reputation of a “deadbeat” client or a source of business. It’s going to be harder for the attorney to argue on coverage disputes that your company keeps its promises, knowing that the company drags its feet with regard to paying bills on time.

Claims people may be unaware that in many law firms, Insurance Defense Practice is looked down on by other departments of the firm. It can quickly be perceived as the orphaned stepchild of the different practice groups in a larger firm. Hourly billing rates for insurance work are much lower than those for other types of high prestige or cachet practices such as transactional work, tax, M&A, commercial litigation, intellectual property, etc. I’ve spoken to many attorneys in larger firms who do insurance work who privately tell me the pressure that they get from firm management to increase the rates.

Do you want to attract the best legal talent to your cases?

Do you want to be able to summon high-quality legal assistance on short notice in time-sensitive situations?

Do you want to be viewed as an attractive client, the kind that lawyers want to work for?

Set clear expectations with outside counsel as to payment cycles.

Honor those payment cycles.

Pay defense attorney bills promptly.

If there are issues or problems with the bill, communicate that quickly to outside counsel so that they can either explain the bill or consider writing it off or writing it down.
Assess your own corporate and departmental culture with regard to bill-paying. Strive to be a sought-after client by not creating undue financial hardship on the cash flow of your outside counsel and firms.

In the short run, you’re helping them.

In the long run, you’re helping yourself by demonstrating that you keep your promises and that you are a good business partner and somebody that high-quality law firms and attorneys want to work with.

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