“Adapt or die….”
Billy Beane, Moneyball
As insurance company legal departments continue to feel organizational pressure to improve efficiencies in the engagement of outside law firms, many outside firms lag behind in adapting products and services to meet this need. Those firms who have, however, risen to meet the demands of the market continue to innovate. Subscription fee arrangements are one such innovation. Under these arrangements, in which clients pay outside firms an monthly flat fee subscription for legal services, provide much – wanted control over expense, and help insurers’ legal departments convert variable costs into fixed ones.
We have discussed a broad range of alternative fee innovations in these pages many times in the past. Subscription fee arrangements represent a narrow but powerful segment of this range.
Rather than pay outside firms by the hour, a referred matter, litigated or not, is quoted by the outside firm at a flat monthly price. Assignments with a shorter life span of 60 days are simply quoted on a flat rate fee basis. Most litigated matters are quoted with a cap on the number of months the subscription fee is to be paid. Both the lawyer and client agree, however, to be open to reasonable adjustments of the length of subscription, especially in cases of unforeseen circumstances, delays, as well as events which may shorten the life of the assignment. Trial preparation and trial are billed separately, either on an hourly basis, or an after-negotiated flat rate per day quote.
For comparison purposes, our firm provides clients with a statement of what a subscription fee matter would have cost if it were billed hourly. This data is used not only to demonstrate extra value provided to the client, but to make adjustments in the monthly subscription fee, if necessary, in similar future assignments to make sure the client is satisfied with the arrangement.
The subscription fee arrangement is also scalable. Assignments can be negotiated in blocks for a single subscription fee, for example, and volume subscription discounts can also be offered and agreed upon.
Subscription flat fee arrangements are win-win for both legal department and outside law firms. Firms are encouraged to handle matters quickly and efficiently, and insurance company legal departments can migrate a large portion of outside legal expense to a fixed cost as opposed to a highly variable one.
Reach me at chaddick@dmclaw.com or 717-731-4800 for more information on how the use of flat fee subscription agreements in insurance litigation and non litigation matters can create efficiencies for your legal department.
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