February 9, 2016

How Corporations Utilize Contingencies to Manage Insurance Recovery Legal Costs

In-house legal departments are facing a great deal of pressure to reduce legal costs.  With insurance recovery matters, reducing up-front legal costs and maximizing insurance recoveries can go hand in hand, but only if clients fully understand their options.  No matter what kind of fee agreement is reached, the most important thing is that a strategy is developed and pursued that maximizes coverage.  In this video, we discuss the various kinds of deals that some of our clients have elected to pursue in order to accomplish their goals. 

In particular, we explore the benefits and rewards of full contingencies, partial contingencies, and full fee billing arrangements.   Although there are no hard fast rules as to what kind of agreement is best for any given situation, the following generalizations seem to apply.  Clients who are highly sensitive to up front legal costs tend to opt for full contingencies.  Clients who have adequate budgets, tend to favor traditional hourly billing arrangements.  Partial contingencies, in the middle, tend to be favored by clients who want to manage costs as the case is pursued, but are willing to exchange that for increased payout to their attorneys at the end.  

One of the most significant shifts we have seen in the past few years is how corporate legal departments think about contingencies.  Not so long ago, contingencies were rare.  Now, some of the most sophisticated and best known companies in the world are specifically asking us for contingency proposals.  

In the end, we have found that full contingencies tend to be the most expensive way for clients to pay for insurance recovery legal services.  But, because payments are made at the back end, when the insurers pay, this may be advantageous to some clients.   Conversely, the least expensive way to handle large insurance recovery claims tends to be the old fashioned way, straight hourly billings. 

As an insurance recovery law firm, we propose alternatives.  Although the end goal is the same for all of our clients, the approach to funding varies considerably.  We are happy to work on an hourly basis, on a partial contingency, or when warranted, on a full contingency basis.  We routinely share in client risks.  We understand that financial realities may dictate one approach over the other.  We are so confident in our services that we can offer flexibility that other law firms simply cannot. 

Feel free to give us a call us at 202-760-3160 to learn more about our comprehensive approach to resolving insurance claims. 

Below is a transcript of the video:

Contingencies and Insurance Recovery Law

Some clients will come in and say, we just don’t have the money in our budget to do a big insurance recovery action. And we will say, that’s fine. Do you want to do it on a contingency? And sometimes they’ll say yes and sometimes they’ll say no. I guess our point is that sometimes we can go anywhere from a full contingency to a partial contingency to no contingency at all. And it’s all going to depend on how the client views the potential rewards and the potential benefits but were always willing to share with the client the risk. And we believe that’s a good thing because if we don’t deliver the client pays a lot less or nothing. If we do deliver, the client of course, is going to pay some amount additional for the discount. But it’s still a good thing because it aligns the interest in the parties. It keeps everyone working for the same exact goal and it helps the clients achieve their goals, if their goals are to decrease spending or decrease legal expenditures.

As far as saving costs we deal with a lot of different kinds of clients. We have small clients and we have large international Fortune 100 companies, that are traded on international stock exchanges as well  US stock exchanges. So we go everywhere from medium size companies to the largest named brands that consumers are familiar with. Now it’s interesting because everybody comes at this from a different direction. And it’s all going to depend on what the client’s direction is. So some of the larger companies have told us, we’re not going to give up this claim. We want it. It’s a lot of money coming in the door, but would like to basically pay very little. And we’ve taken those cases on contingency but before we do so, we always tell the client, it may not be the best thing for you to do and here’s why, it’s going to cost us x to get here. We think we’re going to get recover this amount and we think if you do it on a contingency the way we’re happy to do, but it’s going to cost you more money in the end. And a lot of times sophisticated clients will say that’s fine. We’re happy to do that. Why are we happy to do it? Because our management says it’s more important to manage legal costs. Then again we’re happy to do that. At the end of the day though we’ve recovered on these cases and they’re happy to pay but looking at it in hindsight, I wonder if some of them would rather have done it the other way. Either way, we offer the flexibility and that’s what the client wants.

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