Priced out of the market

February 11, 2009
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A handful of partners and attorneys are leaving Bingham McHale in Indianapolis to start their own insurance litigation firm because as one partner said, “We were pricing ourselves out of the market.”

The amicable split between the attorneys and the fifth-largest firm in Indianapolis raises a few eyebrows and questions. An article in today’s Indiana Lawyer Daily about the new firm quotes partner Jim Strenski as saying an increase in overhead costs and pressure to raise client rates contributed to the new firm’s creation.

If this is happening in one practice area in one firm, it must be happening in other areas and in other firms. Could this be contributing to the layoffs of legal support staff and rumored layoffs or departure of attorneys around town?

This is a smart move by these attorneys and support staff creating Cantrell Strenski & Mehringer. There seems to be a trend among businesses to take their business to smaller firms when economic times get tough because smaller firms are able to provide their services for a lower price. Why stay with a firm where you are struggling to keep or attract clients because of high rates and costs when you can start a small firm that may be more attractive to businesses? And if the firm is struggling economically, it wins too because it’s reduced overhead, salaries, and benefits without having to fire anyone.

I’m usually not a betting person, but I think this move may spur other attorneys in Indianapolis at larger firms to take a look at starting a new firm. With the economy how it is and with no signs of it getting better soon, smaller firms may be more attractive to clients and the wave of the legal immediate future.

Plus, if this same issue of having to raise clients’ rates and meet increasing overhead costs is happening elsewhere, larger firms are going to be struggling to maintain clients and attorneys. A struggling firm may lead to attorney cuts. Why not jump ship and start your own firm before things get really tough at your firm or you’re let go?
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  • This type of thing is really relatively old news within the insurance defense bar all across the country. Since the early 1990\'s larger firms literally kicked out their lower billing insurance defense attorneys as they grew fat on the profits of higher billing corporate clients. The larger firms felt that their insurance defense lawyers were literally taking up space that could be used by higher billing attorneys. The only thing that appears to be different about the Bingham-McHale situation is that this time, the insurance defense attorneys are apparently taking the initiative to leave.

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