From Rees Morrison in his Law Department Management blawg, a reference to and old favorite of mine, the USF&G study showing money saved by using more expensive lawyers. The description:
In 1992, the insurance company USF&G evaluated its 250 law firms and dropped 100 of them. It replaced those firms, not with more $80 average an hour firms but with national firms whose average billing rates were over $200 an hour (mercy me!).
At the time, the insurer was paying 10 percent of its litigation budget for claims to law firms and 90 percent to claimants. A little over a year later, the company estimated it had saved $15 million on law firms and $35 million on claims payments!
Query: if higher-billing rate, and thus presumably better-quality lawyers produce such eye-popping savings in total claims litigation costs, why has there been only one float in this parade?
In my view, the right curve for this experiment is probably a bell curve. After rates get to a certain point, the quality of outcome doesn’t improve, at least not by much. That is typically the point where a client enters into a “comfort” analysis—ie, you never get second guessed if you retain Skadden (unless of course cost is a factor).
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