Self-insured employers frequently are faced with the challenge of knowing whether or not they are getting good value for their dollars when paying their legal bills. Self-insured employers have a smaller claim volume than the standard workers’ compensation insurance company, and hence have a smaller need for defense attorneys. However, as legal fees can be a significant portion of the cost of litigated claims, it is important for self-insured employers to properly manage their legal cost.
Set of Billing Guidelines Needs To Be Established
Prior to the assignment of a workers’ compensation claim to a defense firm, the self-insured employer needs to establish with the defense firm a set of billing guidelines for the legal service bills. Criteria that should be included in the billing guideline include:
• The stated hourly rates for senior partners, partners, associates and paralegals
• Secretarial support time should not be billed
• Any changes in hourly rates will apply only to new cases, with no hourly rate changes on pending case
• All activity and time spent on the file is to be itemized and billed individually, with no bulk time or block billing for multiple activities
• All billing will be increments of one-tenth (0.1) hours
• There will be no re-assignment of the principal attorney on the case without the self-insured employer’s prior agreement
• All discovery issues/items are to be pre-approved by the self-insured employer
• The frequency of service bills, whether monthly, quarterly or semi-annually should be agreed to
• Internal consultations, training of associates and paralegals, and inter-office conferencing should not be charged
• Billing for legal research will not be considered unless it is outside of the normal parameters of the expertise of the defense attorney
Control Additional Expenses
Often overlooked are additional legal expenses. Criteria for expenses should be established prior to the assignment of the workers’ compensation claim to the defense attorney. Common criteria for legal expenses include:
• All travel outside of the local area should be pre-approved by the self-insured employer
• Air fare will be at the coach rate after pre-approval
• Motel stays should be in the mid-price range
• Travel time should be capped (8 hours per day)
• Automobile mileage will be reimbursed at the Internal Revenue Service current business mileage rate
• Telephone expenses should be not be charged
• Photocopy charges per page should be agreed to ($.10 per page is common) and should be itemized
• FedEx, UPS and USPS delivery charges will be paid, if not due to inefficiencies in the defense attorney’s office
• Postage to be paid only if higher than the single stamp rate and should be itemized
• Subpoena service should be billed at cost
• Any unusual expense should be pre-approved by the self-insured employer
Non-Reimbursable Defense Costs
Sometimes defense attorneys get creative in their billing of time and expenses. The following cost should not be reimbursed to defense counsel:
• Any overhead cost of doing business (overhead cost are already included in the attorney’s hourly rate)
o Office rent, utilities, storage of files
o Secretarial support
File/case creation
Bill preparation
Phone messages
o Computer usage / fax machine usage
• Mark-ups on bills submitted by vendors
• Equipment rentals
By establishing with defense counsel prior to case assignment what is acceptable billing behavior, the self-insured employer avoids unhappy surprises and hassles with the legal bills. The legal billing guidelines should be incorporated into your overall litigation management program.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.
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