“Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.”
“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
“Through the Looking-Glass” (1871), Lewis Carroll
Morgan & Morgan recently announced that it will spend at least $1 billion (yes, that’s billion with a B) on legal tech and AI over the next 10 years. That ought to get the personal injury (PI) defense bar’s attention. If nothing else, that announcement reveals a fundamental shift in the personal injury and tort litigation marketplace. And the relationship between the plaintiffs’ and defense bars.
It’s a shift driven by more than just the deep pockets of firms like Morgan & Morgan. The shift is fueled by three factors, all of which may currently work more in favor of plaintiffs’ lawyers. Collectively they mean the defense bar is starting to feel like it needs all the running it can do just to stay in the same place.
The AI Revolution
First of all, there are efficiencies brought about by AI, particularly generative AI. These efficiencies clearly benefit those lawyers who work under a contingency fee business model. Quite simply, under that model, the more you can do in less time, the more profit you can make. Doing more in less time is something AI has proven quite good at. And indirectly, by handing AI more of the scut work in cases, plaintiffs’ lawyers are freed up to be more creative on substantive matters. That could mean better results.
Both of these things explain, in part, why we are reportedly seeing an uptick in motor vehicle tort filings and award amounts. They explain in part why we are seeing more tech vendors hawking products built for plaintiffs’ contingency fee lawyers. Vendors like EvenUp, Supio, and Eve.
On the other side of the equation, PI defense firms still typically bill by the hour, and the use of AI reduces billable time. And reduces profit. So the incentives are just the opposite when it comes to AI. These firms are already constrained by low profit margins brought about by low hourly rates imposed by insurance carriers, who insure defendants in many PI matters. Defense firms thus face mounting financial pressures.
Talent And Tech Advantages
Secondly, the fact that plaintiffs’ law firms can now get better results for less cost through aggressive use of AI means they will make more money overall. More profit. And more profit impacts everything. From talent acquisition and retention to investments in more and more technology.
Defense firms face the opposite paradigm. Being constrained by the billable hour model and the rates carriers are willing to pay could make them less and less profitable. It impairs their ability to make investments and retain talent. It’s a constant refrain I hear from them. How can we possibly compete?
It’s Always Been About Rates And Fees
Many PI defense firms are hamstrung by an inability to raise rates to offset this difference. Insurance carriers typically control rates like they were guarding the life of their firstborn. For years, they have pushed and pushed to keep rates low. And through third-party fee auditors, they have aggressively sought to cut the fees that are billed. Not to mention the fact that many carriers demand fee discounts as a condition to getting any work.
For the carriers, the decision to emphasize rates and costs was easy. You need to understand that carriers essentially pay for two things. The costs of defending a matter and the exposure or cost of the ultimate outcome or resolution. And they consider these things separately.
Carriers elected not to pay the higher rates that grade A lawyering commands. And while that may have increased the overall cost of outcomes, presumably that increased exposure was more than offset by paying lower defense costs across thousands of cases. In many respects, carriers still have this mentality.
To put it simply: the mismatch between the talent and resources of plaintiffs’ firms and those of defense firms is widening.
Economies Of Scale
But there is a third thing afoot that is perhaps even more challenging for the defense bar. Not so long ago, the plaintiffs’ contingency fee bar, particularly in the PI field, was made up of small, independent law firms.
The defense bar, on the other hand, was made up of larger law firms with greater resources. And because they were paid by the hour, they could wage a war of attrition against the smaller plaintiffs’ firms. Firms that had fewer resources and were often behind the eight-ball. That playing field has not only leveled, but it may now be tilting the other way.
Years ago, John Morgan, the founder of Morgan & Morgan, had an idea. Why not create a national behemoth plaintiffs’ law firm that could take advantage of economies of scale? That would have the resources to dominate the defense bar.
Morgan not only had the idea, he built it. He created a law firm that could, as it recently announced, spend at least $1 billion on legal technology and AI over the next 10 years. Morgan & Morgan is, in every respect, Biglaw, and because of its resources, it is uniquely positioned to take advantage of the AI revolution.
So now the shoe is on the other foot. It is often the defense firms that no longer have the resources to compete with firms like Morgan & Morgan. Most defense firms continue to operate independently from one another. Many are unable to match the resources of the Morgans & Morgans of the world. That could create a fundamental shift in litigation dynamics that can affect outcomes and strategy.
Solutions For The Defense
There are various solutions, but they aren’t easy ones either for defense firms or for carriers. Neither of which is known for embracing change.
First, the carriers have to recognize the impact of AI. AI has the potential to reduce the costs of litigation considerably. That enables plaintiffs’ firms to become more profitable, take more cases, and get better outcomes. But it could also do the same on the other side of the ledger. Carriers are going to have to value and be willing to pay more for outcomes, not just look to cut defense costs.
That means a de-emphasis on the billable hour and on rates, as opposed to outcomes and value. Having undertaken significant work under a flat fee arrangement with an insurance carrier, I can tell you that this approach changed perspective. It changed the thinking about how to handle cases. On both sides. This not only can improve outcomes, but it can have an impact on the cost as well. Both sides need to be open to these kinds of billing arrangements.
Next, carriers need to realize that in the age of AI, improved efficiencies, economies of scale, and the ability to go toe-to-toe with the plaintiffs’ lawyers have started to shift toward plaintiffs. That means the way carriers manage costs needs to philosophically change. To match large and sophisticated plaintiffs’ law firms, defense lawyers must have access to the same capabilities and talent to get the best outcomes. Carriers have to see the defense of cases as a team sport. Instead of focusing on constraining rates and costs. And treating defense firms as an adversary.
And on the defense side, defense firms may need to consider the Morgan & Morgan model. They need to think about better combining resources and talent to achieve greater economies of scale and capability. That means a greater emphasis on AI.
None of this will be easy for a litigation model that has been in place for so long for the defense bar and carriers. But that model may no longer be as effective against an opponent as sophisticated and well-heeled as the Morgans & Morgans of the world.
For years, the defense bar has lived in Alice’s country. It now lives in the Red Queen’s. And running with the old model, no matter how fast, won’t even keep it in the same place.
Running twice as fast won’t get it somewhere else either. If you want to get somewhere else, change the model.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
The post The Defense Bar In The Age Of AI: Running A Red Queen’s Race? appeared first on Above the Law.
“Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.”
“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
“Through the Looking-Glass” (1871), Lewis Carroll
Morgan & Morgan recently announced that it will spend at least $1 billion (yes, that’s billion with a B) on legal tech and AI over the next 10 years. That ought to get the personal injury (PI) defense bar’s attention. If nothing else, that announcement reveals a fundamental shift in the personal injury and tort litigation marketplace. And the relationship between the plaintiffs’ and defense bars.
It’s a shift driven by more than just the deep pockets of firms like Morgan & Morgan. The shift is fueled by three factors, all of which may currently work more in favor of plaintiffs’ lawyers. Collectively they mean the defense bar is starting to feel like it needs all the running it can do just to stay in the same place.
The AI Revolution
First of all, there are efficiencies brought about by AI, particularly generative AI. These efficiencies clearly benefit those lawyers who work under a contingency fee business model. Quite simply, under that model, the more you can do in less time, the more profit you can make. Doing more in less time is something AI has proven quite good at. And indirectly, by handing AI more of the scut work in cases, plaintiffs’ lawyers are freed up to be more creative on substantive matters. That could mean better results.
Both of these things explain, in part, why we are reportedly seeing an uptick in motor vehicle tort filings and award amounts. They explain in part why we are seeing more tech vendors hawking products built for plaintiffs’ contingency fee lawyers. Vendors like EvenUp, Supio, and Eve.
On the other side of the equation, PI defense firms still typically bill by the hour, and the use of AI reduces billable time. And reduces profit. So the incentives are just the opposite when it comes to AI. These firms are already constrained by low profit margins brought about by low hourly rates imposed by insurance carriers, who insure defendants in many PI matters. Defense firms thus face mounting financial pressures.
Talent And Tech Advantages
Secondly, the fact that plaintiffs’ law firms can now get better results for less cost through aggressive use of AI means they will make more money overall. More profit. And more profit impacts everything. From talent acquisition and retention to investments in more and more technology.
Defense firms face the opposite paradigm. Being constrained by the billable hour model and the rates carriers are willing to pay could make them less and less profitable. It impairs their ability to make investments and retain talent. It’s a constant refrain I hear from them. How can we possibly compete?
It’s Always Been About Rates And Fees
Many PI defense firms are hamstrung by an inability to raise rates to offset this difference. Insurance carriers typically control rates like they were guarding the life of their firstborn. For years, they have pushed and pushed to keep rates low. And through third-party fee auditors, they have aggressively sought to cut the fees that are billed. Not to mention the fact that many carriers demand fee discounts as a condition to getting any work.
For the carriers, the decision to emphasize rates and costs was easy. You need to understand that carriers essentially pay for two things. The costs of defending a matter and the exposure or cost of the ultimate outcome or resolution. And they consider these things separately.
Carriers elected not to pay the higher rates that grade A lawyering commands. And while that may have increased the overall cost of outcomes, presumably that increased exposure was more than offset by paying lower defense costs across thousands of cases. In many respects, carriers still have this mentality.
To put it simply: the mismatch between the talent and resources of plaintiffs’ firms and those of defense firms is widening.
Economies Of Scale
But there is a third thing afoot that is perhaps even more challenging for the defense bar. Not so long ago, the plaintiffs’ contingency fee bar, particularly in the PI field, was made up of small, independent law firms.
The defense bar, on the other hand, was made up of larger law firms with greater resources. And because they were paid by the hour, they could wage a war of attrition against the smaller plaintiffs’ firms. Firms that had fewer resources and were often behind the eight-ball. That playing field has not only leveled, but it may now be tilting the other way.
Years ago, John Morgan, the founder of Morgan & Morgan, had an idea. Why not create a national behemoth plaintiffs’ law firm that could take advantage of economies of scale? That would have the resources to dominate the defense bar.
Morgan not only had the idea, he built it. He created a law firm that could, as it recently announced, spend at least $1 billion on legal technology and AI over the next 10 years. Morgan & Morgan is, in every respect, Biglaw, and because of its resources, it is uniquely positioned to take advantage of the AI revolution.
So now the shoe is on the other foot. It is often the defense firms that no longer have the resources to compete with firms like Morgan & Morgan. Most defense firms continue to operate independently from one another. Many are unable to match the resources of the Morgans & Morgans of the world. That could create a fundamental shift in litigation dynamics that can affect outcomes and strategy.
Solutions For The Defense
There are various solutions, but they aren’t easy ones either for defense firms or for carriers. Neither of which is known for embracing change.
First, the carriers have to recognize the impact of AI. AI has the potential to reduce the costs of litigation considerably. That enables plaintiffs’ firms to become more profitable, take more cases, and get better outcomes. But it could also do the same on the other side of the ledger. Carriers are going to have to value and be willing to pay more for outcomes, not just look to cut defense costs.
That means a de-emphasis on the billable hour and on rates, as opposed to outcomes and value. Having undertaken significant work under a flat fee arrangement with an insurance carrier, I can tell you that this approach changed perspective. It changed the thinking about how to handle cases. On both sides. This not only can improve outcomes, but it can have an impact on the cost as well. Both sides need to be open to these kinds of billing arrangements.
Next, carriers need to realize that in the age of AI, improved efficiencies, economies of scale, and the ability to go toe-to-toe with the plaintiffs’ lawyers have started to shift toward plaintiffs. That means the way carriers manage costs needs to philosophically change. To match large and sophisticated plaintiffs’ law firms, defense lawyers must have access to the same capabilities and talent to get the best outcomes. Carriers have to see the defense of cases as a team sport. Instead of focusing on constraining rates and costs. And treating defense firms as an adversary.
And on the defense side, defense firms may need to consider the Morgan & Morgan model. They need to think about better combining resources and talent to achieve greater economies of scale and capability. That means a greater emphasis on AI.
None of this will be easy for a litigation model that has been in place for so long for the defense bar and carriers. But that model may no longer be as effective against an opponent as sophisticated and well-heeled as the Morgans & Morgans of the world.
For years, the defense bar has lived in Alice’s country. It now lives in the Red Queen’s. And running with the old model, no matter how fast, won’t even keep it in the same place.
Running twice as fast won’t get it somewhere else either. If you want to get somewhere else, change the model.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
