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As litigation costs and plaintiff-side technology reshape the claims landscape, insurers are beginning to think of defense counsel not simply as a cost to be minimized, but as a resource to be aligned with the needs of each claim—sometimes warranting greater investment, and other times achieving an excellent result through an experienced and efficient firm at lower cost.
The objective is to handle each claim in accordance with the policy, applicable law, and the particular facts and circumstances of the claim, including paying what is owed under the policy and providing an appropriate defense to insureds consistent with policy terms.
A carrier saves $25,000 through diligent bill review and leveraged negotiated rates. The same file settles six months later for an additional $750,000 because critical discovery was delayed, negotiation opportunities were missed, or experienced counsel was unavailable. Those invoice reductions and rate savings were real, but standing alone do they show whether the litigation was managed effectively?
On the invoice, the savings were genuine. But standing alone they revealed little about whether the defense resources were aligned with what the claim actually required.
The lowest defense cost is not always the strategy that produces the best total claim outcome; the goal is to align the right defense resources with the needs of each claim, particularly in an environment of social inflation, plaintiff-bar technology investment, and defense talent shortages.
Krista Glenn, EVP & Chief Claims Officer, Westfield Specialty
It is understandable that organizations pay close attention to defense expenses because they are visible, easily measurable, and immediate. However, carriers must handle each claim consistent with policy terms, applicable law, and the particular facts and circumstances of the claim. The larger financial risk is not defense spend, but escalating indemnity payments.
For years, carriers and risk managers focused on controlling defense costs while assuming that litigation dynamics remained relatively stable. As litigation dynamics change, that assumption warrants renewed attention, and cost considerations should always be weighed alongside the critical need for sound judgment, understanding policy obligations, and the quality and effectiveness of the defense.
Today, plaintiff firms are receiving substantial outside investment to build technology specifically designed to drive increases in settlement values, generate policy-limit demands, and improve their negotiation outcomes.
Hundreds of millions of dollars have been invested in plaintiff-focused legal technology platforms, led by companies such as EvenUp, which claims “settlement increases of up to 30%”, and Eve which advertises the ability to “increase settlement values” while helping firms handle more cases. These investors include major venture capital firms such as Andreessen Horowitz, Bain Capital Ventures, Bessemer Venture Partners, Spark Capital, Sapphire Ventures and Left Lane Capital.
According to the 2026 CLM Litigation Management Study conducted by Suite 200 Solutions, 81% of organizations report increasing indemnity costs, 85% report increasing policy-limit demands, and 60% report managing more litigated claims than three years ago. At the same time, 76% report increasing defense costs. The problem is not that defense costs are rising. The problem is that indemnity costs are rising even faster.
In this environment, the question that CFOs and risk managers should be asking is not, “How do we spend less on lawyers?” but rather, “How do we achieve the best total financial outcome consistent with what the law and the policy provides?” Managing legal spend responsibly remains important, but hourly rates and invoice reductions alone do not measure whether litigation is being managed effectively.
Plaintiff’s technology platforms automate demand packages and strengthen negotiation positions. Defense teams are operating in a much more sophisticated and aggressive environment than they were even five years ago.
This reality creates an important implication for carriers, risk managers, and CFOs. If plaintiffs are investing heavily in technology, analytics, and negotiation capabilities, the defense side is best served by aligning the right resources with the demands of each claim, supporting counsel’s development, and valuing outside counsel as an important strategic collaborator rather than an interchangeable commodity.
This is not merely a story about automation. It is a story about leverage. A.I. allows plaintiff firms to apply the work product previously reserved for their largest cases across thousands of claims simultaneously. The result is more sophisticated demands, more persuasive narratives, more policy-limit pressure, and potentially greater settlement consistency. The plaintiff bar is not using A.I. primarily to reduce expenses. It is using A.I. to increase claim demands and potential settlements.
Thus, the strategic question is no longer whether defense costs can be reduced. The strategic question is whether the defense team is adequately equipped to counter a plaintiff ecosystem that is investing hundreds of millions of dollars to make every claim worth more.
In that environment, the objective is to align the right defense resources with the needs of the particular claim. Some claims may warrant additional investment — such as a well-staffed defense team, advanced litigation technology, or enhanced negotiation training — where that investment is proportionate to the exposure and improves the overall outcome. That is the conversation CFOs and risk managers increasingly need to have: not solely the cost of defense, but the value counsel delivers and the overall claim outcome given the coverage that the policy provides.
Meanwhile, the defense bar is facing capacity and talent challenges. The insurance defense ecosystem is under strain because of higher attorney caseloads; difficulty recruiting and retaining lawyers; and longer cycle times.
Across the industry, when rate negotiation, invoice review, payment delays, and expense reimbursement practices become unusually rigid or aggressive, they can combine to increase financial strain on many defense firms and potentially lead to short cuts which may provide insureds less coverage or protection than their policy requires. These practices may also interfere with counsel’s ability to effectively represent the insured and/or appropriately manage the claim.
In some cases, defense firms are carrying millions of dollars in expenses even though these costs have already been approved by the carriers because they aren’t paid until the review of the hourly billing is completed, with many carriers enforcing a quarterly billing and payment cadence. The result is that law firms are closing or consolidating, and many are declining new assignments or discontinuing relationships with carriers. It does not benefit our industry or our insureds to have less options in the defense space.
While negotiating rates, setting billing expectations, reviewing invoices, and establishing a reasonable billing cadence can be appropriate tools for helping to manage legal spend, organizations should also recognize that expense-management practices that become overly rigid or aggressive can reduce the availability of quality counsel when they are needed most.
Traditionally, many carriers and insureds have focused on managing expenses through detailed billing guidelines, invoice reductions, discount (“fast pay”) programs, and bill review, each of which can be an appropriate expense-management tool. While these actions can help manage or reduce overall claim expenses, the question is at what cost? Insurers should place the quality and effectiveness of the defense and the ultimate claim outcome ahead of expense management considerations.
Billing guideline disputes and discounts pursued in isolation add relatively little to overall cost management and can create unnecessary friction in the relationship. Reducing a well-supported legal invoice has little value if it contributes to a six- or seven-figure increase in overall claim exposure. An important metric should be overall reduction in projected exposure and the value of avoidance of a nuclear verdict.
CFOs are expected to challenge rising vendor costs and thoughtful management of legal spend. That is both appropriate and expected. Defense counsel should not be exempt from that scrutiny. However, unlike many vendor relationships, defense counsel directly influences a much larger financial outcome. A five percent increase in legal fees may be unacceptable if it produces no measurable benefit. But that same increase becomes irrelevant if it contributes to a twenty percent reduction in overall claim exposure.
The question is not whether legal spend should be managed. The question is whether legal spend is being evaluated in the context of total claim economics, weighing cost as one important consideration alongside the judgment, effectiveness, efficiency, and claim outcomes that sound counsel delivers.
Insurers routinely invest in loss control because preventing a loss is less expensive than paying for one. Defense counsel should be viewed through the same lens. Effective litigation management is a form of loss control. The investment occurs after the claim is filed, but before the ultimate financial outcome is determined.
Carriers and defense counsel should be trusted collaborators invested in each other’s success where the most important metric is not limited to hourly rate or invoice reduction but instead measures the impact that counsel had on the ultimate claim outcome. Defining the value added by counsel and a productive insured/carrier/counsel relationship should be measured and stated in terms of sound judgment, early risk identification, litigation strategy, better negotiation outcomes, stronger trial readiness, efficiency, responsiveness, effective use of technology, and faster and more accurate case resolution. Cost remains one relevant consideration, but it should always be weighed alongside these factors and the overall claim outcome rather than displacing them.
The rapidly changing litigation landscape is outpacing skills development among both carriers and counsel. According to Sedgwick’s Liability Litigation Observations and Trends study published in the summer of 2026, over the last five years, verdict severity has increased in line with inflation at a rate of approximately 3.7%, while settlement severity has increased 12.6% annually.
When only approximately 2% of cases are resolved through trial, and settlement values are rising three times faster than verdict values, strong negotiation skills are more important than ever. High caseloads often result in claim professionals delegating the negotiation responsibilities to counsel but only 8% of defense attorneys surveyed in the 2024 CLM Defense Counsel Study reported having any formal training in negotiation. If nearly every litigated case is resolved through negotiation, then negotiation proficiency is not a soft skill. It is a primary driver of economic outcomes.
Carriers and risk managers should consider whether the defense resources aligned to a particular claim – including negotiation skill development, AI, and litigation technologies – match the needs of that claim. Where a claim warrants greater investment, supporting negotiation effectiveness can generate returns that justify the added cost. The emphasis should always be on paying what is owed under the policy and providing a defense consistent with the policy’s terms.
Measuring hourly rate and invoice reduction is easy, but what are those metrics telling us? Moving from defense cost monitoring to total outcome monitoring is more likely to provide insight into the value provided by counsel.
We should be tracking the total cost of risk. This can be measured by tracking the indemnity-to-defense ratio; policy limit settlement frequency; cycle time; and other metrics that measure the effectiveness of counsel and claim outcomes consistent with policy requirements and the facts and circumstances of each claim without regard to the number of lawyers working on a file, their hourly rate, or the amount of time spent. Think about ways to quantify how much value the lawyer created, not how much time it took.
A firm with exceptional negotiation skills and lower cycle times may generate value that its hourly rate alone does not capture. The objective is to align the right defense resources with the needs of each claim rather than to equate a lower rate with lesser value or a higher rate with greater value. The key caveat is that efficiency is important but that faster is not always better. The goal must be efficient resolution in alignment with the needs of the claim and the insured, not simply rapid closure.
Today’s litigation environment features Third Party Litigation Funding and therefore better-funded plaintiffs who can sustain the battle in litigation over the long haul. AI-enabled demand generation will require carriers to invest in AI tools that can help the claim professionals and counsel to more efficiently unpack and respond to those demands.
And, meanwhile, social inflation and attorney advertising are resulting in escalating indemnity costs. When you combine this with talent shortages in the defense bar and among claims professionals, the end result is obvious.
Organizations that treat defense counsel as strategic partners, invest in their effectiveness, and align around total claim outcomes will be better positioned to control ultimate loss costs. Ultimately, risk managers and CFOs should think about defense counsel the same way they think about any strategic investment.
If current trends continue, insurers will face a shrinking pool of qualified defense firms, increasing competition for legal talent, higher rates driven by supply-and-demand economics, and a growing technology gap relative to the plaintiff bar. In that environment, the cost of rebuilding defense capacity will be significantly greater than the cost of sustaining it today.
The insurance industry has spent decades perfecting the measurement of defense cost. The next decade will require us to perfect the measurement of defense value.
In an era of social inflation, AI-enabled plaintiff advocacy, third-party litigation funding, and defense talent shortages, success will not belong to the organizations that simply spend less on defense. It will belong to the organizations that achieve the best claim outcomes through sound judgment and by aligning the right defense resources with the needs of each claim.
To learn more, please visit: https://www.westfieldspecialty.com/.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Westfield Specialty. The editorial staff of Risk & Insurance had no role in its preparation.
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