As most business owners are aware, a successful business needs to have an effective law firm representing them. While we have discussed the benefits of hiring inside counsel in the past, many companies are more inclined to hire outside counsel. If this is the case, the payment methods and their repercussions should be considered. As the main decision-makers for their firms, Directors and Officers Insurance is a necessary asset that protects their respective business.
Your clients may choose to pay their outside counsel hourly. This is the most common, and often is a transparent method of tracking hours and progress on any case. The lawyers must provide your clients with a detailed invoice that documents how that time was spent, justifying the price.
The second option is paying lawyers a “blended rate” which means that all associates, partners, and paralegals will combine their efforts and provide your clients with one rate.
If the issue the lawyer was hired for is pretty cut and dry, they may agree to a flat rate. This will give your clients an upfront fee and will also encourage the lawyer to work faster to guarantee the number he/she agreed upon is accurate; or they might agree upon flat rates for different parts of the case. For example, you could agree to one amount through mediation, one amount through discovery and summary judgment, and a final amount for trial, says Inside Counsel.
Another strategy is the contingency-based fee. This means the lawyer will not require your clients to pay a lot or anything up front, and will only gather money if they can win the case for them. This often works if your clients are suing someone else.
Lastly, paying in stock is an option. Bear in mind that this form requires a significant amount of trust in the lawyer and often exposes them to professional liability exposures. This means that equity in the company has to be forfeited to the lawyer.
Whichever payment form your client chooses to use, ensure they are protected with the right insurance policies to defend their decisions. While not all claims can be foreseen, many can be prevented and mitigated with the right insurance.
In addition to bringing you the latest news from the insurance industry, PL Risk provides Resources for Agents and Brokers nationwide. We’ve recently implemented Hiscox Now, which allows agents their own access to Hiscox and instant quoting. To learn more about our operations, contact us today at (855) 403-5982.
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