Contract Counsel Provide Fiscal Edge, Local Agility to Carriers, Law Firms

As an industry beset by steep competition and tightening margins, insurance providers are forced to find fiscal advantages wherever possible. The legal department, being one of the highest cost centers for any company, is an obvious choice to examine where savings can be extracted.

For many insurance companies, as well as corporations in a variety of industries and sectors, new approaches to the delivery of legal services are a top priority. The recent recession tipped the balance in favor of corporate legal departments who have been able to implement alternative fee agreements and alternative staffing models to gain efficiencies.

These alternatives provide less expensive, yet equally compelling solutions.

One such staffing alternative is the use of attorneys to provide “hearing coverage”. These attorneys, also referred to as “per diem attorneys” or “appearance attorneys”, attend hearings, depositions and other legal matters on behalf of other lawyers, law firms and corporate legal departments. While not appropriate for every matter, a company or law firm can identify specific categories of hearings and legal services that can be handled by local counsel and, in turn, save hundreds of thousands of dollars while still ensuring the company’s best interests.

Companies and law firms have long used contract attorneys for document review projects and utilized overseas legal processing outsourcing services. The growing use of attorneys to provide “hearing coverage” is a relatively new category of alternative legal services, but has long been used in certain practices. In particular, the use of appearance attorneys has been used in the credit card collections, small claims, traffic and social security fields for years. More recently it’s become prevalent in the mortgage default and bankruptcy fields.

The hearing coverage industry can be separated into two categories; (1) individual attorneys and small law firms, and (2) companies that provide the service and manage a network of appearance attorneys. There is a significant difference between the two.

Individual attorneys or small firms offer their services informally, whereas companies that specialize in providing the service are formal organizations, insured, have a secure IT platform, and have compliance programs.

The compliance programs, in large part, have emerged as a result of the economic meltdown that led to the foreclosure crisis. Regulatory agencies, from the Office of the Comptroller of the Currency, Federal Housing Administration and, more recently the Consumer Financial Protection Bureau, have taken particular interest in how banks and servicers manage third-party vendors. As a result, hearing coverage providers have developed very specific policies and procedures to comply with the regulators requirements. This includes extensive background checks and data security. Insurance companies and law firms that adopt the use of appearance attorneys get the benefit of these already established regulatory and compliance requirements.

The Use of Coverage

Everyday throughout the country, attorneys appear at thousands of routine, administrative-like hearings on behalf of their clients. This amounts to millions of dollars per day companies spend on high cost legal services for relatively routine matters.

The option historically has been to fly or drive an attorney to the court. The attorney makes the trip, incurring travel-related costs and billing clients for travel time to handle the matter. The client would certainly rather see this attorney’s skills, experience and fees applied to far more important, valuable and substantive work.

Other solutions like conference calls, video conferencing or using Skype are available. While these technologies are available in many courtrooms, they are not available in all.

Each judge has the discretion as to whether to allow this type of “appearance.” Even if encouraged by the court administrators, the judge still retains complete discretion as to whether to adopt this technology or not.

All of these technologies, however, lack the appeal and benefits of having an attorney in the courtroom. No matter how many technological tools we create, the practice of law itself cannot be automated or reduced to a single technology.

Now, contrast that to the use of local counsel. In its current model, the law firm or in-house legal department contacts a company that provides local counsel services and has attorneys nationwide who can appear at the local courthouse. The law firm or legal department instructs the attorney on the case, and schedules the attorney to attend the matter. The hearing is taken care of, results reported, uploaded automatically into a case management system all without any travel-related costs. Because the appearance attorney’s services are billable, a law firm also benefits by being able to allocate their personnel to their highest use while increasing the firm’s effective hourly rates.

To those who have used local counsel, the solution often is considered a cost-efficient success. Others are seeing the advantages and exploring how it fits into their business model.

Local Touch, National Scale

The insurance industry is an ideal application for the use of appearance counsel. Claims arise in every market an insurer serves. Services that provide appearance counsel often oversee a national network of attorneys who are screened, qualified and experienced.

While some may consider this “outsourcing,” it’s actually helping thousands of American attorneys make a living or supplement their income. It is a win-win situation. Companies get a cost effective solution and lawyers in large cities, suburbs and even rural communities benefit.

Serving as appearance counsel is not a training ground for recent law school graduates. Attorneys are highly qualified and experienced with strong local connections and familiarity with the local judiciary and court rules.

How to Choose Local Counsel

How can an insurance company benefit from the use of outsourced contract attorneys?

• Relegate the “routine” matters. Insurance companies typically have their network of panel-admitted law firms or lawyers. But as the client, the companies should be requesting that law firms focus on substantive matters, and relegate the more routine hearings and matters to local counsel to eliminate hourly billing and take advantage of flat rate pricing.

• Local counsel is not appropriate for every case. Some matters are simply not appropriate for anyone other than the attorney of record to handle. Insurance companies can easily identify which category of hearings for specific types of cases should be handled by appearance counsel. This also ensures better value for your legal spend.

• Engage CXOs in the decision-making. The decision to engage local counsel transcends the legal department. Working closely with the CFO, CTO, CLO and others, companies can realize substantial savings that go directly to the bottom line. The decision should include anyone involved in big picture, bottom line decisions.

• Integrate to realize efficiencies. Make sure the hearing coverage company you partner with can integrate with your case management system. This will also allow your legal support staff to focus on more substantive matters and less administrative, time consuming tasks.

• Think small, demand large. Many highly skilled, yet smaller, law firms and attorneys are looking for ways to grow their billable hours. Seek a local counsel provider partner with a national network of these local attorneys.

• Require experience. Require attorneys that serve as local counsel to have at least three years of relevant experience; some will have a decade or more.

• Compliance platform? Services that provide local counsel should conduct background checks, quarterly bar status verification checks, as well as other protective measures, including maintaining professional liability and malpractice insurance, to ensure the client is protected.

• Seek secure IT solutions. To comply with state and federal privacy laws partner with a service that has a robust IT platform, documented policies and procedures, and a disaster recovery plan. All correspondence and documents provided to local counsel should be relayed and stored over a secure IT network.

• Get to know your local counsel. To be sure, you’ll start as strangers. But as professionals and partners, relationships will grow. Moreover, it’s incumbent upon the hiring attorney to supervise, instruct and prepare appearance counsel just as they would an attorney from their own legal team. It stands to reason that the more you engage with and inform appearance counsel, the more you will view them as an extension of your legal team and your advocate.

Use of appearance counsel is becoming more accepted as law firms and in-house legal departments realize the efficiencies and value of partnering with an external provider to handle routine hearings. Companies continue to seek ways to get more value from their legal spend and law firms are able to allocate their personnel to their highest and best use. As the type and scope of alternative legal services expands, it’s important to find the right partner who specializes in the service you need.

Jonathan Broder is an attorney in Fort Lauderdale, Fla., and founder of MyMotionCalendar.com. The company provides appearance counsel who appear in person and represent clients at hearings, mediations and depositions for other lawyers, law firms and in-house legal departments throughout the country. The company was established in 2010, has 18 employees, works with over 900 law firms nationwide and their attorneys appeared at over 24,000 hearings on behalf of clients in 2014.