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The Importance of Adequate Descriptions in Legal Billing

If you went to a restaurant, and got a bill at the end of dinner that said "Food - $100," you would probably question it - you would want to see the detail. You are the customer, and as such you have the right to know what you are paying for. Similarly, isn't it just as unreasonable for a lawyer to submit a legal bill that simply said "For legal services - $1000?" Yes, of course it is. Itemization is necessary, because when reviewing legal bills, the activities are subject to evaluation. You, as the client, have the right to scrutinize the bill to see what you are being charged for.

Generally speaking, insurance defense lawyers get paid for their time, specifically, the time they spend using their legal acumen and expertise to provide a defense. In order to get paid for it, the lawyer billing his time must actually set forth in his bill the work that he has done. While this sounds simple enough, it is surprising how many times lawyers submit vague bills and expect them to get paid without question.

Why is this important? Well, the primary reason for requiring a detailed breakdown of your legal fees is to ensure you are getting your money's worth. If a legal bill contains the entry "Prepare for deposition - 4 hours $ 100/hr = $400," how do you know what you are getting for your $400? At first blush, you may think that 4 hours, or $400 is reasonable for deposition preparation, and in all fairness it probably is. But is that description really adequate to justify payment? Let us examine the possibilities…

• Is it necessary?
  • Whose deposition is it, anyway? Does it really require our attendance? If the deponent is a party, then sure, but if it is someone else, it may not be necessary to attend - ordering the transcript may be enough. That determination cannot be made from this entry.
• How is he preparing?

  • This does not mean that you are refusing to pay for the lawyer to prepare for the deposition. That is not the case - what we need to know is exactly what was being done. Too many of us have seen the scene in "The Firm" where Gene Hackman's character (Avery Tolar) tells Tom Cruise's character (Mitch McDeere) that he should bill time if he thinks about a case in the shower. It is for that reason that words like

    • strategize,
      
    • analyze,
      
    • consider, or
      
    • work on case
      
      

    should go off like a time bomb in the head of a seasoned bill reviewer. Staring out the window and contemplating the case is not a billable event. To be a billable event, there should be some concrete activity - researching an issue, reviewing a document, conferring with a witness. The point is, you do not want to reward the firm for being vague. There are very concrete reasons for requiring the firms to provide adequate description:

  1. Is the work necessary?
     
  2. Is the work redundant or duplicative of other work being done?
  3. Is the work billable?
  4. Is the time billed reasonable for the work?

It's Not About the Money…

Well, it's not JUST about the money. Obviously the vague descriptions can set the stage for billing abuses, but that is not the only reason for requiring detail. It is also because having the detail allows a more fair comparison of performance among firms.

Firms that do use adequate descriptions would be penalized if there were other firms who got away with vague billing entries. For example, if a firm honestly (but excessively) bills "$.25 a page/4 pages = $1.00" for photocopying will have its charge reduced to the reasonable $.10 or $.15 per page, whereas the firm that simply bills "photocopies - $1.00" may be billing a dollar a page, or $.50 or $.25 or $.10 per page. Therefore, the fair thing to do is not pay it, pending further explanation or detail.

The same situation exists for inadequately-described fax charges. Maintenance of a fax machine is a part of a firm's overhead. Certainly, whenever the firm incurs an expense in using the fax machine, such as when it dials out to a long distance number, the firm is entitled to be reimbursed for its out-of-pocket expenditure. However, if a firm is billing $1 per page, or is billing for incoming faxes, the firm is actually MAKING money off its fax machine, and it is not in the business of faxing, it is in the business of practicing law, so the client would be justified in refusing to pay. Seeing a charge for "$4 for faxes" or "$16 - incoming faxes" should be a red flag to the reviewer that these might not be actual out-of-pocket expenses. Thus demanding to know the nature of the charge before you pay it is within your right as a client. The goal here is for the auditor to overcome the mindset that "yes, we pay for faxes, or photocopies" or "that's not a lot of money" when looking at these kinds of entries, because that is not the point. The point is the firm must be required to adequately indicate the nature of the charge so that the auditor can better evaluate the firms' performance against other firms.

Other examples of entries that might be "void for vagueness" include:

• Trial Prep
  
• Review correspondence
  
• Phone call
  
• Miscellaneous expense
  
• Travel Expense

What Can They Do?

Or

"Second Chances"

If the law firms you work with are accustomed to billing vaguely, and getting paid for it, they will naturally be shocked, and possibly offended, when their bills get returned with some of the charges disallowed. Before you are intimidated into giving all the deductions back without question, a better practice would be to give the firms the opportunity to supply additional information that would make the entry adequate. If the firm gives you the data to make a determination as to whether the deficient entry, as amended, is compliant, billable and/or reasonable, then you can re-review that entry, this time on the merits, and possibility credit the firm with the amount that was deducted. For example:

The firm has now provided an adequate description of how he prepared for the status conference, and you will be able to issue the credit.

Or, you might receive this explanation:

Now that you have this description of how that 2 hours was spent, you probably would NOT pay for it, as it appears clerical in nature (not requiring any legal acumen), so you would not issue any further credit.

Having a process in place to allow firms to supplement their original entries to overcome the deficiency helps to take the sting out of the bill reduction. The charge can be recovered, if warranted - the firm is given a second chance to get it right.

Check, please…

Just as a patron in a restaurant, or a car owner in a repair shop, insurance companies are entitled to an itemization of what they are being charged for. This is not only to legitimize the billing, but also to ensure that you have enough information in front of you to compare "apples to apples" if you are shopping around to find the best value for your money. If your firms are not providing you with enough information, rather than reward them for their vagueness, request that they provide the missing information before you pay.

Here is a checklist for things to help you determine whether the description is adequate:

1. Can I tell what this timekeeper is doing?
   
2. If he is doing research, is he telling me what the issue is?
   
3. Can I tell if what he is doing is billable, duplicative, redundant or necessary?
   
4. Can I tell if the time billed is reasonable?

HINT: If you cannot answer these questions easily, the entry is probably NOT adequately described.