Total legal spend and the effects of insurance

What difference in terms of total legal spending might it make if one company is principally self insured and a comparable competitor has first-dollar insurance for litigation (See my post of Oct. 31, 2007: Fulbright & Jaworski data on insurance coverage against nine kinds of litigation; April 6, 2007: McDonald’s and self insurance for workers comp; and June 26, 2008: self-insurance has increased and boosted law department staff counts.)? Whatever the difference, if the second company does not include the amount of coverage payments it benefits from, its benchmark data on total legal spend will not reflect the full amount .

A handful of posts on Law Department Management Blog concern insurance carriers and their payments for insured litigation (See my post of Oct. 4, 2005: total legal spending and payments for insured litigation; March 15, 2006: insurance reimbursements and the law department as a profit center; Nov. 25, 2006: Oxycontin’s dispute over insurance payments of legal fees; Oct. 22, 2005: insurance proceeds in a loser-pays jurisdiction; and May 31, 2005: insurance where the loser pays the other side’s fees.).

Sometimes a company’s insurance carrier chooses the litigation firm that will represent the company (See my post of Oct. 30, 2006 on insurers choosing law firms.). The law department most commonly plays second-fiddle commonly in products liability and mass tort litigation such as asbestos. Alternatively, a carrier might not dictate which firm to use but might only reimburse for hourly rates it has negotiated with its preferred firms.

Insurance observations show up in three other posts on this blog (See my post of July 4, 2006: insurance to assuage nerves jangled by fixed-fee arrangements; Aug. 21, 2005: tension between lawyers and risk managers on notification of claims; and Oct. 14, 2005: structured settlements and annuities.).