That firm must be a good one if they’re on a billboard, right? That depends. Billboard attorneys and firms are usually volume-based and are what some legal commentators refer to as “settlement mills.” This article will give an overview of these volume-based firms.
A volume-based firm needs hundreds or thousands of cases to come through their door every month. They will rarely turn down a case and they settle cases as soon as possible. Unfortunately, this sometimes means asking their clients to settle for less to speed up the process. The reason for this is the economics of running a volume-based law firm.
The volume-based firm has high overhead costs because they spend millions on advertising every year. And how many cases can an attorney actually pay attention to? Not thousands. So the firm turns into an assembly line with an army of paralegals and “pre-litigation” associates who are hired to be case processors. These firms resemble insurance companies more than traditional law firms. A paralegal or other assistant is assigned your case, works up the file, deals with the insurance, and then (hopefully) an attorney gives your case a review.
All this staff costs money. Money the firm has to pay whether your case settles or not. And if the staff is working on your case, they can’t be working on someone else’s. Let’s look at some numbers to get a feel for why all this means you might be pressured to settle for less.
Let’s say the billboard lawyer could hold out for an extra $5,000 from the insurance company to settle your case, but it would probably take an extra month of negotiations. After paying your attorney their fee, that would be an extra $3,500 in your pocket, not bad. The firm’s cut would only be an extra $1,500 (with a typical fee split) if they wait out that extra month. But to keep that case for an extra month the firm must pay its staff to handle the case and make the calls, draft the letters, etc. It would probably cost the firm a few thousand dollars more just to keep working up the file for that extra month which would cancel out most of the extra revenue the firm could expect to see. They also don’t want the insurance company to demand going to trial – in which case they would likely lose money on the file.
So the benefit to the volume-based accident firm of holding out for more money is pretty close to $0 and could be negative if they go to trial. Odds are the volume-based firm isn’t going to do that and will instead tell you to take the first decent offer that comes so the firm can get paid faster. It’s the economical thing for them to do.
If you have a small injury and just need cash quick, going with the billboard lawyer is not a bad idea. But what if you have a larger injury?
Nora Engstrom, a law professor at Stanford Law, has researched and written extensively about what she calls “settlement mills.” Professor Engstrom says these mills don’t litigate, they “process” claims. And according to her, the top eight settlement mills collectively process three times more cases than all jury trials tried in every district court in the country combined—that’s a lot of cases to process for just a few firms—going to trial on even a small percentage of those cases would be catastrophic to their business models.
In one article, Professor Engstrom addresses an intriguing question – if settlement mills don’t like going to trial, why don’t insurance companies just refuse to settle with them and call their bluff? While that might work in the short run, Professor Engstrom concludes that insurance companies are choosing to play ball with the settlement mills. Why? Because, according to Engstrom, “settlement mills appear willing to settle the largest claims—which present the highest chance of a catastrophic verdict—at an attractive discount” so in the end “cooperation is profitable.” You can read more about her research here: https://law.stanford.edu/wp-content/uploads/sites/default/files/publication/259631/doc/slspublic/Engstrom.pdf
So if you have a large injury, you might get paid quicker by going with the settlement mill, but it would come at a cost. The insurance company expects, and receives, an attractive discount to play ball with the settlement mill, which means you have to accept less money for your injury.
So before choosing the volume-based settlement mill, you might consider consulting a local firm with a good reputation for litigating cases.
Udall Shumway has provided quality litigation in the Valley for over 50 years and has recovered millions of dollars for its clients.
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