Three Simple Rules for Selecting the Right Firm to Defend Your Company

When faced with a troublesome claim, most insurance brokers and agents have a bad habit of contacting a “go to firm”—the firm that has handled the company’s litigation for years. The decision is comfortable and often based on an historical relationship that can span generations.

Certainly, using the “go to firm” has its merits, but for those claims which may cause irreparable damage to a firm, ruin a balance sheet or dig deeply into capital reserves, the old rules are just that—old rules for old times.

Insurance brokers and agents around the world are experiencing a fundamental shift in business attitudes. Changes in technology are overwhelming. Old business models are being shattered. The number of decisions that must be made are increasing exponentially while the time in which to make them remains constant, thus eroding the quality of decisions themselves.

But, as technology guru Peter Dekom observed in his book, Not On My Watch, the most important change in the last 100 years is not the development of the automobile, or the telephone, or the nuclear bomb, or the television, or the Internet—it is the speed of change itself. And, there is every reason to believe that the speed of change has impacted on the relationship between brokers and agents on the one side and their lawyers on the other.

In accord with change, new law firms with innovative structures are emerging. With this comes a growing need for brokers and agents to change the very process of selecting the right lawyers to litigate for them. Applying three simple rules can aid the transition and ensure the best possible result.

Rule 1: Avoid the comfort zone
Retaining counsel on a “feel good basis” is a mistake. Yet, lawyers routinely tell a prospective client what the client wants to hear—not what the client needs to hear. To avoid falling into the comfort zone, a client should develop a counsel selection check list. Early estimates can be flawed, but a seasoned litigator should have no problem with the following:

• Percentage of success;
• Time to trial;
• The approximate length of the trial itself; and,
• The cost (assume a minimum of $35,000 in litigation cost for each day of trial).

Normally, the firm’s “rainmaker” will not handle the case. Ask to meet the lawyers who will do the bulk of pre-trial and trial work and interview them as well.

Rule 2: Be aware of hidden conflicts
A law firm must decline representation when faced with a true conflict of interest, so this is not a large concern when selecting counsel. The exact opposite is true of hidden conflicts which, if not recognized early on, can lead to ineffective case management and skyrocket billing. In searching for hidden conflicts, the goal is to ensure that the client is looked upon as a valuable business asset whose interests are placed above the firm’s interests. Here, questions for the check list include:
• Does the firm have a reciprocal billing program—for instance, one that automatically cross bills for multiple lawyer meetings? If so, demand to opt out of it, and make each lawyer accountable for his or her own billing.
• Does the firm have a minimum monthly billing requirement for its lawyers? If it is unreasonably high (e.g. in excess of 185/month), overbilling can result. Request time estimates for every task over five hours.
• Will the firm’s high profile partners have ego problems following instructions from the client’s often less experienced house counsel? Obtain a written cooperation commitment.
• As a client, how will you compare with other clients of the firm in type and amount of business? Do not be a small fish in a big pond. Likewise, do not be a big fish in a small pond.
• What is the firm’s partner to associate ratio? Avoid firms which have more than two associates for each partner. Larger ratios, for instance, can cause more revisions in drafting documents, translating to increased cost.
• Is the firm “known” for representing insurance brokers, agents or companies? If so, the insurance history and expertise of the firm may lead to a “been there done that” attitude. These firms become overbearing and difficult to deal with because they “wrote the book.” Relying mainly on their reputations as “experts,” these firms expect to win on their reputations alone, overlook fundamental trial strategies and become the softest targets for a hard core litigator. Beware of them.

Rule 3: Appreciate the difference between firm cultures

There are four basic types of law firms, each with a unique culture. Matching a particular type and size of litigation with the correct firm culture requires subjective and objective analysis of the underlying claim, short and long term resolution strategies and a basic appreciation of the specific law firm culture.

• The power firm-multi-city and multinational firms stockpile talent and resources. There is little doubt that large power ½rms can stay in the game for years and are a particularly appropriate choice for extended, long-lived, paper trail litigation.

• The boutique ½rm-inhabited by former power ½rm lawyers, the boutique tailors its practice to two or three areas. Boutiques are exceptionally good at cases requiring technical expertise.

• The old boy firm—many industries benefit from the services of lawyers who enjoy well-earned respect because of their contacts, relationships, and years in practice. When resolution needs to come quickly or when settlement is not happening, the old boy firm with specific industry contacts can often find a middle ground better than industry outsiders.

• The gun slingers—more interested in results than the formalities of practicing law, gun slingers normally inhabit small firms and survive on speed and strategy as opposed to the strength of numbers. Although all types of attorneys win cases, because gun slingers are accustomed to being shot at, they are not afraid to take a hit. Gun slingers define a “win” as beating the plaintiff’s demand, which is not always the same as a defense verdict. Therefore, they are an excellent choice for damage control.

While choosing lawyers based upon “firm culture” may seem novel, the approach is clearly preferable to the hit and miss practice of packaging up a file and sending it to the “go to firm.” And, an evaluation and matching of case to culture can benefit the defense of multi-party cases where a careful culture match can build a team with all four cultures represented.

One out of every four companies in the United States will face an age/sex/race discrimination claim in the next five years. One out of every seven U.S. companies will face an E&O, EPLI or CGL claim every 10 years. Three out of every ten companies will become litigants in the next five years. There is, therefore, no way that a broker or an agent can avoid visiting the courthouse, but for those who are serious about minimizing litigation risk, the best way to ensure a positive litigation outcome is to start now:

•Interview and learn-evaluate hidden conflicts;
• Build a strong network of firms-power, boutique, old boy and gun slinger-and understand the difference;
• Find lawyers who will deliver bad news no matter what the cost and demand commitment to expense and time estimates-avoid the comfort zone.

Following these three simple rules can make all the difference.

Richard L. Charnley, Esq., is a trial lawyer with Nelsen, Thompson, Pegue & Thornton, based in Santa Monica, California. He is best known for his ability to step in at the 11th hour and successfully manage tough cases that have gotten way out of control. Charnley can be reached at (310) 315-1001 or e-mail rcharnley@ntptlaw.com.

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