An example of a massive coordinated defense in litigation (OxyContin)

According to the Wall St. J., June 13, 2006 at A3, one of the insurance companies covering Purdue Pharma’s defense of nearly 1,400 lawsuits over OxyContin, Purdue hired 40 law firms in 32 states to fight the claims. Perdue’s legal team included 322 partners, 849 associates and 1,023 paralegals. All told, that army of legal talent billed more than 1.2 million hours, and more than $400 million in defense costs (a blended rate in the mid-$300 dollar range).

The amount and scope of this defense team’s effort is daunting. A question, though, arises: when an insurance policy covers litigation costs, how does that coverage reflect itself in the law department’s budget for outside counsel (See my post of Jan. 30, 2006 about Purdue Pharma’s use of contract lawyers.)? Of deeper significance even is the issue raised by the dispute between Purdue and its carrier over the costs of defense: how much control do insurers have over how their clients’ litigation is handled?

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