Hiding external fees with third-party insurance

Some law departments do not count in their outside counsel spending those fees paid on their behalf by insurance carriers who are defending claims. This off-the-books treatment continues, even though the company’s premiums may well currently or retroactively reflect such costs.

Other law departments, faced with large product liability claims and finite insurance coverage, want to be able to guide how their carriers spend defense dollars, because fees paid reduce the total available for indemnity. The first group misleads as to the company’s spending on legal matters; the second group takes more accountability. My view? Include all external legal expenses in the department’s comprehensive budget.

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