Litigation Management: Are Defense Litigation Budgets Billable??

A huge part (maybe too much, but that’s the subject of another post) of litigation management is cost control. One key tool in controlling costs is requiring that outside counsel submit periodic budgets. Some of these budgets may be quite detailed and involved.

Further, budgeting is not a one-time discipline. Ideally, budgeting is a recurring discipline on defense counsel’s part. The adjuster or client should have an initial budget within, say, 90 days of the assignment to counsel, at least. Further, budgets have a limited shelf-life, too. Like potato chips, just one won’t do.

Circumstances change which can render a budget out-dated. Responsive and astute counsel should be attuned to this, reporting not only on the changed circumstances, but the implications that those changes have on (a) case value and (b) cost of defense. Sometimes Budget A is predicated on the Judge ruling one way and Budget B is predicated on the Judge ruling another way. Having both scenarios budgeted for helps the insurer or client make both tactical and strategic decisions regarding defense versus resolution. Further, budgets help insurer and clients fine-tune Expense reserves.

In short, defense counsel may have considerable time wrapped up in preparing budgets. A good budget, done right, requires thought … and time! Attorneys may fully intend to bill for such time.

A potential friction point, though, comes when counsel includes in the bill time charged for budget preparation. Some insurers and clients balk at this line item in a bill, thinking that this is something counsel just ought to do anyway and not bill for. Some may refuse the pay any charges related to bill preparation.

Defense counsel bristles, feeling that this is a justified billable task. The insurer or client feels that the lawyer is over-reaching. It can become a distracting frictional issue, even if the amounts in contention are not huge.

Tip for insurers and clients: If you do not intend to pay for budget prep-time, so note this in advance with your client guidelines.

Suggestion: A fair approach and reasonable middle ground, in my view, is to include in litigation guidelines verbiage to the effect that, “We will pay for reasonable time spent preparing a budget. Generally, though, we do not expect counsel to spend more than one (1.0) hour on this task. If you feel more time will be needed, please discuss with us beforehand.”

Tip for counsel: If the client has given you guidelines, read through them carefully! Don’t assume that all guidelines are created equal. If there is anything that is problematic from your standpoint – such as no billing for budget prep – discuss that up front before accepting the assignment or agreeing to be placed on an approved panel. Either negotiate, in a friendly way of course, some leeway here, agree to absorb this time or respectfully decline the assignment.

Litigation is enough of a battle without distracting side-skirmishes with counsel over billing for budgets. Budgets are meant to curb costs, not hike them! Deal with the issue up-front so it is out of the way at the outset of the assignment and avoid it festering during the life of the case.