Do Defense Costs Matter to Insurance Companies?
Defense costs are rarely a big factor to the major insurance companies in 2011
I think there is a conventional wisdom out there that insurance companies will settle cases because they fear litigation costs. I really think, on the micro level in which Maryland accident lawyers deal, all they fear is verdicts. As a result, defense costs seem to be a factor of decreasing significance in settlement negotiations. Most large insurers have “captive” staff counsel offices in major metropolitan areas. Sure, this still costs real money. But the insurance companies don't quite see it that way. Because these lawyers are direct employees of the insurer, and who do nothing but defend against lawsuits brought against that carrier’s insureds, the cost - the significant cost - get obscured.
Insurance companies - and the Baltimore Sun for that matter - seem sold on the cost savings on in-house lawyers. I get the logic. These lawyers (and their offices and staff) are a fixed cost, so adding one more case to defend does not appreciably change the carrier’s costs, or its settlement analysis on any particular case.
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