Commodification of the Insurance Defense Practice: 4 Cautionary Tales from the Insurance Defense World

According to an article published in the Vanderbilt Law Review, insurance defense practice is commonly if not always considered as a commodity by the insurance companies who benefit from these services. This perception can lead to bargain-shopping on the part of insurers and demands for value-added services from their legal counsel without proper compensation. While this may seem like a solid approach to retaining defense representation for insurance cases, it comes with some serious pitfalls that could have significant financial consequences for companies who choose this method of selecting and managing legal counsel requirements. Here are four cautionary tales that illustrate the problems with this approach.

Cautionary Tale No. 1: Considering Legal Services as a Commodity

Companies that customarily view the services rendered by their insurance defense counsel as a commodity may find their cases being treated in a similar fashion. By selecting a law firm solely based on the cost of the services provided, insurance companies may receive the bare minimum in terms of research and time spent on their behalf. This can end up being a costly decision for insurers in the civil litigation arena.

• Not all legal services are the same in quality or dedication to defending your cases effectively.
• Demanding wholesale prices for legal services will generally result in reduced attention to specific cases.
• A 2007 article published in the journal Above the Law highlights the issue of bulk processing of defense cases and the lack of attention to detail that can result from the commodification of insurance defense services.

You would never choose a surgeon based solely on the cost of their services. By regarding legal services as an interchangeable commodity rather than the product of skilled attorneys working on behalf of your company, you could end up with less-than-stellar results and increased payouts when poorly constructed defense strategies fail. For example, you could reduce damages by digging up preexisting conditions when battling against unjustified personal injury claims.

Cautionary Tale No. 2: Failing to Build Partnerships with Defense Attorneys

In the modern legal field, building strong working relationships with a legal team that understands the challenges of your insurance company may seem like a thing of the past. Creating a long-term partnership, however, can pay off in a number of ways:

• Increasing the legal know-how of your legal team when defending cases specific to your policies
• Incentivizing legal teams to go above and beyond to achieve the best results
• Establishing comfortable relationships that can promote easy communication between insurance company representatives and the defense team

By approaching the relationship between insurers and defense attorneys as a partnership rather than an exchange of goods and services, it may be possible to achieve improved outcomes and a greater degree of trust both in the defense team and in the services they provide. Partnerships generate greater motivation for attorneys than temporary arrangements that can be severed when a less-expensive option comes along.

Cautionary Tale No. 3: Choosing Law Firms That Value Quantity Over Quality

One of the key dangers of viewing legal defense services as a commodity is the probability that the firm you choose will also regard their services as a commodity. In simple terms, this could translate into the following issues:

• Reduced attention to individual cases in favor of closing as many as possible
• A slipshod approach to defending cases that are perceived as risky
• Increased willingness to settle cases that might otherwise be won in court

In some cases, insurance defense attorneys who are treated as commodities rather than partners may prioritize easy-to-win cases rather than high-dollar-value cases. This practice could end up costing insurance companies more in payouts than they saved in going with the lowest-cost legal option. Eschewing the assembly line approach will usually produce better results and increased protection for the financial assets of your company.

Cautionary Tale No. 4: The Number of Attorneys Does Not Translate Into Quality Results

Experience matters in the legal field. A firm with 20 brand-new attorneys may cost less than one with two or three insurance defense specialists with more than 20 years in the industry. This does not, however, indicate that the larger firm is the better choice:

• New attorneys may not have the skills or knowledge needed to present the best defense for complex cases.
• Missteps by inexperienced attorneys could end up losing your insurance company cases. We believe that successful attorneys embody these 7 defining traits of great lawyers.
• Looking into the credentials and experience of the attorneys handling your insurance defense is the best way to assess their ability to defend cases effectively.

Larger law firms could delegate cases to less-experienced colleagues to reduce their expenses when defending your insurance company. This could add up to reduced effectiveness in representing your interests both in and out of court.

Choose the Best Insurance Defense Team for Your Needs

Selecting an insurance defense firm that views insurance defense services as more than a commodity to sell is critical to the success of your legal cases. Building a strong partnership with a firm that has a proven reputation for results and offers cost-effective solutions for your insurance defense requirements is essential to protect your financial resources. At the Di Lauri & Hewitt Law Group, we have extensive experience in the insurance field. We understand what goes into creating sustainable partnerships that are beneficial both for insurers and for their attorneys. Give us a call today at 973-354-5783 to learn more about our track record for success and to touch base with our team. We are here to serve you.