An interesting article appeared today in Artificial Lawyer (AL), Richard Tromans’ excellent blog on the impact of artificial intelligence, data analytics, and more generally, technology on the practice of law.

The gist of the article is that UK-based insurance law firm BLM has announced a partnership with  the London School of Economics (LSE), to develop litigation prediction models as part of a wider move into legal analytics. According to AL, “The move follows an increasing focus from insurance law firms on legal data analytics and the development of ‘own-brand’ litigation prediction tools. The overall goal of these programs is to forecast the outcome, cost and length of litigation, and to understand what drives these factors.’

Better litigation forecasting analytics could ultimately and perhaps finally drive the stake in the heart of the billable hour model, at least for the defense of certain types of litigation

Better litigation forecasting analytics could ultimately and perhaps finally drive the stake in the heart of the billable hour model, at least for the defense of certain types of litigation. Here’s why. The typical alternative to the billable hour model is where a piece of work, say a slip and fall case, is billed by by the lawyer on a flat fee instead of by the hour.

But the problem with this from the defense side (other than the typical excuse by defense lawyers you can’t predict what will happen with a given case) is the lack of an upside based on anything other than handling the case for less hours than predicted. As a result, the typical approach is a flat fee proposal based on an estimation of the number of hours it will take and offer a flat fee slightly above that amount. The exposure of the case really does not enter into the equation other than how it impacts the number of hours a lawyer thinks he or she can get away with charging. The problem of course is kind of estimation is this really is nothing other than a billable hour model dressed up as a flat fee. It still depends at its core on the billable hour model . So, when the case is over, evaluation of profitability ( and success) on the matter reverts to a billable hour analysis: the lower the billable hours, the happier the client; the higher the billable hours, the happier the lawyer. No wonder there is tension.

When the case is over, evaluation of profitability ( and success) on the matter reverts to a billable hour analysis: the lower the billable hours, the happier the client; the higher the billable hours, the happier the lawyer

Compare this to how most plaintiffs’ lawyers who work primarily on contingency fees evaluate cases. Most plaintiffs’ lawyers get a percentage of the recovery, if any. So, when a case walks in the door, the analysis is not just time but what’s the value of the case, as balanced against the time it will take to get to a resolution.  Time is a factor but overall profitability and success is measured largely by the value of the case and the ability of the plaintiffs’ lawyer to evaluate that value. Success and profitability depend to some extent on the lawyer’s ability to do better than that initial evaluation. And the time analysis they make is also different: it’s not so much how many hours it will take to do the case but also how long will it take to get to a resolution as compared to the projected payoff at the end. That’s a fundamentally different calculation than how many hours will it take me to do the case. And the higher the recovery, the happier the client and the lawyer are.

On the defense side, case and lawyer value should also be determined by whether the lawyer can achieve a better or lower result than some predicted value. But since that predicted value has traditionally been so hard to determine (and defense lawyers will often up the value to justify more billable hours spent on the matter), the industry is left really with no better model than something based on the actual billable hours whether that be the actual amount or some predicted amount in the case of a flat fee.

The ability to accurately forecast an outcome could change the game. If the prediction is accurate and the data sufficient to support it, defense lawyers could offer fees based on some percentage of savings off that predicted value

But the ability to accurately forecast an outcome could change the game. If the prediction is accurate and the data sufficient to support it, defense lawyers could offer fees based on some percentage of savings off that predicted value. The better they do, the more money they make, just like plaintiffs’ lawyers. So, when a case walks in the door, the defense lawyer makes the same analysis that plaintiffs lawyers make: what’s the value of the case, can I do better than that and how long will it take to get to a resolution. Just like with plaintiffs’ lawyers, time becomes only one factor. And just like with plaintiffs’ lawyers, over the course of time, the market determines the good defense lawyers-those who can get the best results for the least amount of time.

Just like with plaintiffs’ lawyers, over the course of time, the market determines the good defense lawyers-those who can get the best results for the least amount of time.

For clients, particularly insurance carriers, this new way of billing would allow them to share the risk with their lawyers in a different way creating more of a partnership model than the more adversarial one we now have. Legal spend becomes much more directly tied to result not time. Just as the lawyers are financially motivated to do the best job in the least amount of time, clients become focused on who really gets the best results perhaps finally driving, as I said at the outset, a proverbial stake in the heart of the billable hour model.

Photo Attribution: Damian Zaleski @zal3wa via Unsplash; Veri Ivanova @veri_ivanova