When Should Government Regulate Lawyer-Client Relationships? The Campaign to Prevent Insurers from Managing Defense Costs

Abstract

Since 1996, courts and state bar committes have issued an enormous number of opinions regulating insurance carriers' use of staff attorneys, fee audits, litigation management guidelines, and flat fees. On the whole, these opinions have sought to prevent insurers from innovating to reduce defense costs. The purported justification for extensive regulation has been the desire to protect vulnerable policyholders from exploitation. Unfortunately, regulators have no evidence that policyholders are in danger. An exhaustive search of the opinions and other sources provides no factual basis for believing that modern defense cost management techniques have harmed policyholders. The real motive behind the campaign is the desire to empower defense lawyers and to prevent further reductions in fees.