#5 Challenging Insurance Billing Guidelines

In this video, Brian Friel finishes his discussion on the importance of challenging insurance billing guidelines and how insurance carriers attempt to discount corporate policyholder defense costs payments.  This video picks up where the prior video addressing how insurance carriers impose unreasonable billing rate caps on lawyers left off.  There are many tricks of the insurance trade used by insurance carriers to lower their payment obligations, such as making certain line item deletions on billing entries for the failure to comply with unilaterally imposed insurance billing guidelines.  In practice, after applying these lower attorney rates and rejecting billing entries for the failure to comply with insurance billing guidelines, it is not uncommon for corporate policyholders find themselves getting reimbursed only 15%-25% of their legitimate defense costs incurred.  

Maximizing Insurance By Challenging Insurance Billing Guidelines 

Policyholders are not obligated to accept severe discounts on defense cost, but many accept such deductions. Billing guidelines are generally not enforceable and should be challenged.  They are not part of the insurance policy and, in many situations, billing guidelines place defense counsel in an ethical dilemma by making it impossible for them to zealously defend a matter.

Watch our video to learn why billing guidelines are improper, and how corporate policyholders should address billing guideline challenges. 

For a transcript of the video, please see below.

The second part are what they call the insurance company billing guidelines. They’ve agreed to accept probably in their reservation or rights your attorneys’ fees. They’ve agreed to your lawyers, they’ve agreed to some sort of rate, and they’re going to start paying you some money.

Now they hit you with the second part of their one-two tango. Which is their billing guidelines. They say, okay, here’s our 15-page billing guidelines. You get this document from your insurance company and it says we only pay for one lawyer at a deposition. We only pay for one lawyer at a court hearing. We don’t pay for lawyers to have meetings at the same firm inside the firm, or even intrafirm phone calls. Right? Conferences. We don’t pay for that unless you seek preapproval from us and we agree to it. Which never happens, or very rarely happens.

If anyone at a company has been involved with any sort of litigation of any significance, you realize lawyers have to talk to one another. That’s why you use lawyers. You go to larger firms even. You’re trying to take advantage of the various skill sets, right, at these firms. The idea that a law firm can defend a complex patent infringement case, an antitrust case, a complex corporate commercial transaction and not have conversations and meetings at their own firm to talk about strategy and scheduling and pre-trial motions or pre-hearing motions, and getting ready for oral arguments is absolutely detached from reality. It’s unreasonable. But yet they do it.

Then they say, in these billing guidelines, we don’t pay for electronic legal research, Westlaw or Lexis or some other agency, some other company. That’s our trade. Legal research, and sometimes it adds up to thousands of dollars. Accessing what is going to be very, very important support for your arguments to win your case. But yet insurance companies say they don’t pay for that. What’s the net effect of all of this? First they hit you with the billing rate, instead of paying you $850 an hour for your attorney, they’re only going to pay you $350 an hour, or $275 an hour. That’s hit number one.

Hit number two is even at those rates, you submit your invoices that you’ve paid in full, and now you ask for the insurance company to pay you back or reimburse you. They take their red pen and they start knocking down those legal invoices. Two lawyers are involved in this meeting, two lawyers went to this court hearing. Electronic research. The next thing you know, your bill has just been knocked down by 70% on top of the rates. Instead of getting reimbursed $100,000 for your legal bill, between the billing rates hit, and now this litigation guidelines hit, you’re getting paid $15,000 or $20,000. That is very, very common. 15%, 20%, 25% reimbursement rates on these bills.

What can you do? Number one we consider many of those restrictions or conditions in these litigation guidelines by insurance companies to be per se unreasonable for the reasons I laid out a minute ago. It’s just not the reality of the legal practice or the practice of law particularly involving significant cases or complex cases with significant financial exposure. There are arguments to be made about why the carriers are taking an unreasonable position. That’s number one.

Number two is an argument that we’ve used very effectively is that these litigation guidelines that are relied upon by insurance companies to discount your bill and discount their payments are not part of the insurance policy. Look at your insurance policy. Look at it carefully. You’ll not see a reference to insurance company billing guidelines. It’s not in your policy. We think that these obligations that they are trying to put or foist on their policyholders are improper because it’s not part of the contract that you signed with your insurance company.

Third, we think that these insurance billing guidelines are problematic because we think they’re unethical or possibly unethical. As a defense counsel hired by a company to defend that company in litigation, a lawyer has certain ethical obligations to his or her client. Zealous advocacy, truthful at all times, thorough preparation. If a lawyer doesn’t feel that he or she can do that, and comply with those ethical obligations within the confines of the insurance company billing guidelines, they’re put into a quandary.

It’s our view that the insurance company is even acting in bad faith by insisting on these guidelines because it’s forcing the lawyers for the corporate policyholders, maybe not to represent their clients as zealously as they should or can, or be as prepared as they should or can, and that’s a real problem.

We do a major push-back with insurance companies on these billing guidelines. Again, where does that leave us at the end of the day? We try to negotiate the best deal we can, making the best arguments possible. At some point we may not be able to get everything we want and we reach a compromise with the insurance company where maybe they’ll allow two lawyers at a deposition or at a court hearing, or allow certain meetings to occur and be paid for and reimbursed within the firm.

We reserve our rights, accept the payment, keep that positive cash flow coming in, and then at the end of the case, you can reassess what the delta is between your reimbursement from insurance companies and your out of pocket expense, and again, if it’s significant enough, there could be a rapprochement with the insurance companies, and perhaps even litigation if the delta is so significant that the company just can’t accept what the insurance company has paid.

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