Rate and Overall Discounts from Firms

January 25, 2024

There are corporations, such as insurance companies, that receive a discount from firms on hourly rates, a prompt pay discount, or an overall percentage of the total invoice. This leads to the fact that the companies are paying less. However, the law firms are still subject to a legal bill review to ensure compliance with the companies’ billing guidelines.

Still, these corporations choose not to review legal invoices where firms offer discounts on fees and expenses, potentially missing out on additional cost savings within acceptable billing parameters. The companies that are receiving some form of discount from the law firms typically receive hundreds, if not thousands, of legal and vendor invoices every month from those law firms. In some of these instances, the companies do not carefully review each line-item entry for compliance with their own billing guidelines. Companies that do not conduct line-item reviews of their legal and vendor invoices run the risk of paying for services that they have not contracted to reimburse or pay, even though the firm provides some form of discount. Too often, corporations have ultimate trust in the law firms they select as panel or outside counsel. That trust fails to ensure the firms comply with the billing guidelines it contracted to abide by.

Corporate legal departments and insurance claim adjusters often do not want to challenge a firm’s billing when the firm is applying a discount. They believe that if they question the accuracy of legal invoices received from the firms, scrutiny will ruin the relationship or lead to a poor representation of their interests.

Receiving a discount from a law firm is not a reason to pass through its legal invoices without a review. Most discounts provided by firms are in the form of rate reductions due to the volume of cases the corporation or insurance company assigns to a particular firm. Firm rate implied reductions, prompt pay discounts, or overall percentage discounts should not release the firm from being subjected to a legal bill review. The panel or outside counsel has contracted with the corporation to provide legal services for specific agreed-upon rates. Still, the firm also agrees to be subjected to a legal bill review and to comply with the corporation’s or insured’s billing guidelines. A law firm agreeing to an overall invoice percentage discount, a prompt payment discount, or a rate discount is still bound by the client’s billing guidelines and is subject to regular legal bill reviews.

Retaining a third-party legal invoice reviewer allows companies to ensure the legal invoice is accurate, and compliant with firm-provided discounts and drives savings in legal spend.

Legal bill reviews are a necessity, with or without firm discounts. Historically, non-insurance companies and corporations’ legal invoice review has been the responsibility of the in-house counsel. Similarly, insurance companies rely on non-attorney legal bill reviewers to interpret the firm’s compliance with billing guidelines. Over the last several years, the trend has been to reduce the burden of invoice review on corporate in-house counsel and claim adjusters while still stressing the necessity of reducing legal spending by reviewing all outside counsel and vendor work for billing guideline compliance. In an effort to minimize overall legal spending, corporations, and insurance companies are increasingly utilizing third-party legal invoice review services. These services review invoices from panel counsel, outside counsel, and vendors for accuracy, compliance, and potential cost savings.

There are many benefits of third-party legal invoice reviewers. They, who are licensed and experienced attorneys, understand which legal services are being provided, the length of time particular legal tasks will typically take, and the appropriate law firm staff that should be conducting each task. These professional reviewers examine every legal invoice line item for compliance with the company’s billing guidelines.

All companies that pay legal or vendor invoices are contractually allowed to ensure the legal invoice is accurate and all line items comply with the billing guidelines. Regardless of whether the company uses e-billing software, all should employ a third-party legal invoice review service of its panel or outside law firms. A third-party legal invoice review service can provide the firm with an opportunity to appeal and recommend deductions or rate reductions without the active participation of the corporation. A third-party legal invoice review will also ensure compliance with all firm-provided discounts (either rate reductions, prompt pay discounts, or an overall percentage of the invoice total deduction). Most importantly, retaining a third-party legal invoice reviewer will provide the company with overall savings in legal spending along with any discounts the firm provides.

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