Of lawyering and bean counting: yes, the twain can meet.

• Author: Pope, Michael A.

Repairing the Relationship

WHILE the situation is grave, it is not hopeless. Things can be done to re-establish the traditional, mutually beneficial working relationship.

For one, both sides must understand there is a problem. As professionals, outside counsel want to defend their clients from a position of strength, and that means a well-prepared, well-researched case that offers the best chance for success. They are willing to prepare legal budgets, which will allow insurers to make early decisions about whether they want to invest substantial funds in defense of certain cases. If not, an early settlement is obviously the best solution, if it can be attained.

Personnel in claims departments, particularly those that have seen major staff reductions, may need better training in the entire litigation process. The more that can be accomplished internally in preparing a defense to a claim before suit is filed, the lower the outside counsel bills will be. Defense attorneys are both willing and able to assist in this training.

Claims departments also need to re-evaluate their approach to settlements. If a claims adjuster is not experienced in negotiation or is unfamiliar with the current value of cases, the opportunity to resolve the claim early may be lost. While it may be easier to reject a settlement offer and send the case to outside counsel, the ultimate cost will be substantially higher.

Here outside attorneys can be of tremendous help if brought into the discussion early enough for advice and counsel. They are experts in trial strategy and can offer a learned reading of the risks and benefits of settlements versus trials.

Finally, a better sense of the financial benefit realized by carriers from effective and aggressive legal work would help remove the "billing blight" currently wreaking havoc on the perceptions of outside counsel. If a $250,000 settlement can be achieved by aggressive and effective legal work, the insurer may well have been saved from a $5 million judgment. That savings must be considered in evaluating the legal bill from the outside law firm. Yet traditionally, many insurers made little or no attempt to evaluate the overall amount "saved" by their lawyers' efforts.

An article in the January 7, 1994, Wall Street Journal suggests that at least one carrier, U.S. Fidelity and Guaranty Co., has recognized this important principle. Since dismissing about 100 of its traditional outside firms and relying more heavily on...