Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Accounting
Reexamination Certificate
1999-06-25
2003-09-16
Rice, Kenneth R. (Department: 2167)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Accounting
Reexamination Certificate
active
06622128
ABSTRACT:
BACKGROUND OF THE INVENTION
1. Field of the Invention
This invention relates to accounting methods and more particularly to an Internet-based billkeeping and litigation management system, allowing third parties to monitor the progress and expense of litigation and/or possibly other legal matters.
2. Description of the Related Art
The imposition of insurance company billing and litigation guidelines has been a problem for defense counsel over the past ten years. While such guidelines may be unpleasant, ethical questions automatically surface whenever an attorney is instructed by someone other than a true client what should or should not be included in the preparation of a client's defense or what can or cannot be billed. The question arises as to whether or not defense attorneys are principally acting in an unethical manner or committing malpractice if, through guidelines, they allow an insurance carrier to control litigation. Variables flowing from that question to any given case situation make the answer somewhat elusive. Any time they conform to guidelines instead of professional judgment, attorneys arguably are acting contrary to canons, committing malpractice or behaving unethically. In a more practical business sense, it is not so easy for attorneys or judges to know where lines should be drawn. There are many cases that set out to interpret the bottom line rights and obligations of the parties in a tripartite relationship. As in many heated ethical or legal issues, the true answer continues to be obscure in the face of absent absolutes.
A pure and simple axiom is unlikely to be found any time soon. It is clear that neither the lawyers nor their insurance counterparts intend to soften their positions on guideline issues. Battle lines have been drawn over the past twenty years by the insurance industry and their outside defense counsel regarding such guidelines. Over time, disputes between the two sides have become less subtle and more recently have accelerated with an intensity not likely to soon diminish. What once flourished as a healthy and tightly bonded business relationship has become an unfortunate and relentless scrimmage which allows and fosters mistrust, uncertainty and lack of confidence to influence, maybe even dominate, interactive behavior.
Now the insurance industry, as a whole, has resorted to harsher tactics. They have made billing for legal services a focal point rather than the residual it had been in the past. Insurance defense firms are routinely being audited by insurance companies and are putting up with (some would say victimized) by fee adjustments by what bas become a dreaded bill review process. As a result, a whole new ethical consideration now looms. Notwithstanding the isolated ethical question of having a third party audit a law firm's, bills, billing guidelines (which themselves are often argued to have unethical aspects in a pure sense) have recently and more regularly served as the very measurement upon which the audits and bill reviews are predicated, instead of the quality and/or shell with which the legal services are rendered. The more restrictive and complete the guidelines, the more susceptible a bill is to adjustment. Cost becomes the overriding consideration for the insurance carrier payor, rather than service to the insured.
Disagreements continue to mount. Although they are closely intertwined, guidelines and audits with all their separate but related ethical problems, really stem from the erosion of relationships—something that could be easily repaired if each side would sincerely want to make things better. While these problems hit directly on ethical matters, their solutions may be found through a less formal, indirect link. To understand the quandary collectively facing the insurance and insurance defense industries today, and maybe even reach some solutions, it is helpful to separately analyze the roots and breakdown the makeup of current problems. Main components of such an analysis include:
1. history of relationships, attitudes and guidelines;
2. the advent, impact and influence of hourly billing;
3. a more practical interpretation of the tripartite relationship;
4. the ethical aspects and presuppositions of outside counsel guidelines; and
5. The development of audits and their impact.
The current situation and its difficult nature arose over time from many sources. It would take many fingers to point blame for the mess in which outside defense firms and one of their primary sources of business—insurance companies—are finding themselves. This situation has resulted from an abstract history of development that includes exaggerated litigiousness, increasing case complexity, changing laws, liberalism, consumerism, mismanagement, and countless other factors. To lay responsibility, or blame, either on outside counsel or on the insurance companies would be unfair and would only serve to sabotage restorative measures which are sorely needed if improvement in working relationships can be achieved. Still, both have clearly made mistakes which contributed to the friction—the most serious being a general failure to truly communicate by understanding one another's composite problems.
The evolution of trouble has intensified annually as overall litigation defense costs and their ratio to indemnity dollars has increased. Even though some transfer occurs through increased premiums, the heaviest and most direct impact of these rising costs falls squarely upon the insurance industry. That legal expenses are a problem is irrefutable. While to a great extent holding outside counsel responsible for causing the problem, insurance companies have largely accepted it as their own for solving. This is at least the perception created when looking at the seemingly infinite number of is guidelines and audit processes now being forced upon defense attorneys. The emergence of guidelines, which are steadily becoming more cumbersome, shows off the most noticeable common characteristic of the insurance industry—solving problems by regulation. It is the nature of any insurance company to believe that management of processes creates all successes. This is precisely why defense guidelines most often are characteristically procedural. The propriety of these “procedures” may be challenged every time their implementation potentially clashes, or conflicts, with inherent responsibilities of either the attorney or the claims professional.
Insurance carriers have vigorously asserted themselves in trying to solve their legal expense problems by micro-supervising defense attorneys to spend less and accomplish more toward reasonable claims resolutions. Is this obsession with controlling the process deserved by defense attorneys? Maybe so. In fact, initially, to a large degree, they were the cause of current ill feelings. While law firms flourished in the nineteen-eighties, they failed to understand the composite makeup, needs and development of their primary business source through some very tough times. During the early eighties, too many insurance defense firms ignored what had been happening to their customer base in the preceding four or five years. Through the economic stresses of insurance companies, when the seeds of current attitudes were planted, law firms commonly realized record profits; ignored their responsibilities for developing future business relationships and neglected to offer their own creative thoughts for legal cost solutions.
As an aftermath of severe market cycles and having failed miserably at cash flow underwriting attempts, the insurance industry found itself in big financial trouble by 1980. The portrait by mid-decade was ugly at best with Allocated Loss Adjustment Expense (ALAE), which includes legal expense, and high pure loss ratios combining to break some insurance companies and severely cripple most of the rest. By then, there were more attorneys than ever and lawsuits continued to rise. So did company insolvencies. Seeing no affirmative relief from the legal industry in the face of burdensome expenses, the insu
Bedell Jerry L.
McKevitt Dennis W.
Cislo & Thomas LLP
Rice Kenneth R.
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