Insurers’ frugality may be undermining the insurance defence bar, CICMA/CIAA told

Insurers, in trying to scrimp on litigation claims costs, may inadvertently be allowing the insurance defence bar to wither away on the vine, a senior member of the bar told members of the insurance industry attending the 41st annual CICMA/CIAA joint Conference held in Toronto.
Guest speaker Brian Elkin of Lavery deBilly LLP said he hoped his message would be taken as coming from “a member of the family.” Family members tend to be harsher with each other than those around them, he noted.
Harsh or not, Elkin said the insurance defence bar stands to lose its best and brightest lawyers, because insurers are increasingly preoccupied with their litigation costs and are trying to find ways to pay less money to lawyers responsible for defending their claims.
Elkin listed several concrete examples of how nickling-and-diming defence lawyers by not paying disbursement costs, for example runs the risk of the lawyers losing the case, which ultimately drives up insurers’ claims costs in the forms of huge settlements.
Also, Elkin observed, young lawyers doing the lucrative business of commercial litigation are putting in fewer billable hours, and yet are making more money, than hard-working lawyers in the insurance defence field.
Elkin said if young lawyers start to notice this dynamic, it will be difficult for law firms to attract bright, young new lawyers into the field. “[As insurers] try to attract people to do insurance defence work, who will represent the industry as you go down the road?” Elkin asked rhetorically. “It’s not going to be the best lawyer.”
Elkin noted the situation has reached the point where specialized (also known as “boutique”) law firms are looking towards specializing in other areas of law than insurance. In addition, entire insurance practices have left law firms the theory being that, without having to pay the overhead associated with being members of a firm, they might be able to stretch their income further.
Elkin noted some insurance defence lawyers are charging about $100 per hour less to keep their insurance business. For one lawyer, that kind of concession amounts to almost $185,000 annually, Elkin observed. And so if nine insurance defence lawyers in a firm take that kind of hit, that translates into a $1-million-plus loss of income for a law firm in a year. Elkin said the fear is that partners will notice this kind of drop in income and question whether insurance law is worth it.