USF&G moved to higher price firms in 1993 and saving $50 million

Yes, 12 year old data, but it made me wonder why more law departments have not followed this path. 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? This data came from an article by Stephen Voltz of QuantilLex (See also my post of May 30, 2005 on a law department that uses only partners.)

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