Sunday, November 29, 2009

Webinar on "Contract Outsourcing needs - The Indian Edge"

As a part of the legal fraternity, you are invited to this related event about issues and concerns regarding Outsourcing of Contract services to India. The aim of this free webinar is to evaluate the different benefits and challenges in offshore outsourcing of Contract Drafting, Review and Management needs. This webinar, "Contract Outsourcing needs - The Indian Edge", is a must attend for Attorneys, Law-firms, Counsels of Corporate legal department, LPO professionals and law students.

Holistically the webinar shall look into the history of the Contracts with an aim to segregate different types of contracts being outsourced, and the Indian advantage in effectively catering to the contract needs of foreign Law firms and Corporations.

Learn what it takes to close a profitable and useful global deal in the arena of Contract Review, Management, Compliance and Drafting.

You know there is a confirmed benefit in outsourcing Contract services. You also know that you save more by outsourcing to offshore destinations than to your own country. But you still do not want to take the plunge. The grounds are untested and you do not want to be a net looser instead of a gainer by outsourcing offshore. You know there is a clear benefit from the labor arbitrage but you are positive that given the uncertainties and risk involved, the benefit just may translate to real-time losses.

If that is what exactly your thoughts are, please join us in critically examining the concepts and facts of the India advantage in catering the Contract outsourcing needs.

Topics Covered in the web cast are:

  • History of Contracts and its development in the Common Law system.
  • Analysis of the ethical and regulatory aspects of Contract outsourcing.
  • Issues of Confidentiality and Quality
  • Drivers & Risks of Offshore outsourcing, particularly to India.
  • Evaluating the importance of Contract Excellence.
  • Process flow.
  • Our free trial offer

Title: "Contract Outsourcing needs - The Indian Edge"
Date: Thursday, December 10, 2009
Time: 11:00 AM - 11:55 AM GMT

Register now by clicking the link below:

After registering you will receive a confirmation email containing information about joining the Webinar.

System Requirements
PC-based attendees
Required: Windows(R) 2000, XP Home, XP Pro, 2003 Server, Vista

Macintosh(R)-based attendees
Required: Mac OS(R) X 10.4 (Tiger(R)) or newer

I look forward to interacting with you at this webinar.

Thursday, November 12, 2009

Impact of the new health care legislation on the outsourcing industry

President Barack Obama had a hard won victory on Saturday night (the 7-8th day of November 2009) when the landmark health care reform legislation (HR 3962) was passed with 220-215 votes. Now if everything goes the Obama way, then by the end of the year '09 "Affordable Health Care for America Act" would apply as a law impacting almost fifty million US lives. But what does this Act actually imply? How does it stand to impact an average US life? How does the Act affect the outsourcing industry at large? Through my article below I endeavor to answer these and many more questions.

Ab-initio we will refresh the fundamentals of federalism, stating the Roles, Duties, Nature, Scope and Restrictions on the government in a written federal constitution. Next we proceed to see whether the above attempt by the federal government to accede healthcare legislation is ultra-vires the powers granted by the US Constitution.

What is Federalism?

According to the traditional classification followed by the political scientists, constitutions are either unitary or federal. In a unitary constitution, the powers of the government are centralized in one government viz., the Central Government. In the federal constitution, on the contrary, there is a division of power between the federal and the state governments in a way that they are both inter-dependent and independent at the same time.

As we all know that Constitutions are organic documents which operate as fundamental law. The governments and their organs owe their origin to the constitution, derive their authority from the constitution and discharge their responsibilities within the framework of the constitution. The judiciary has the power to declare a law unconstitutional if the law is found to have contravened any provision of the constitution. The American Constitution is the oldest and a well praised example of federalism.

What are the powers granted by the US Constitution to the State Government?

Powers reserved for State Governments are:

  • Establishing local governments
  • Issuing licenses (driver, hunting, marriage, etc.)
  • Regulating intrastate commerce
  • Conducting elections
  • Ratifying amendments to the U.S. Constitution
  • Providing for public health and safety
  • Exercising powers which are neither delegated to the Federal Government nor were prohibited from the States by the Federal Constitution (residuary powers)
  • Framing other domestic law (for example, setting legal drinking and smoking ages etc.)

What are the powers granted by the US Constitution to the Federal Government?

Under the Constitution, powers reserved for the Federal Government are:

  • Printing of money
  • Declaration of war
  • Establishing the armed forces
  • Entering into treaties with foreign governments
  • Regulating commerce domestically and internationally
  • Establishing post offices and issuing postage
  • Making laws necessary to enforce the Constitution

What are the powers shared by Federal and State Government?

Under the Constitution, the shared, or "concurrent" powers are:

  • Setting up courts
  • Creating and collecting taxes
  • Building highways
  • Borrowing money
  • Making and enforcing laws
  • Chartering banks and corporations
  • Spending money for the betterment of the general welfare
  • Acquiring private property with appropriate compensation

What is the HR 3962 Act ?

The HR 3962 Act conceptualizes a new, voluntary, public, long-term care insurance program to help purchase services and support for people who have functional limitations. The Act endeavors to form a new national program to provide affordable coverage for those who can't get health insurance today because of pre-existing conditions. Under this, the insurance companies must spend 85 cents out of every premium dollar on medical services, thereby fostering the expansion of Medicaid and improving the Medicare. Under this, the young adults, till the age 26, are covered within their parents' policies.

The Obama administration intends to attain this by creating mandates. As a self-sustaining public insurance option (that is financed not by tax dollars but by insurance premiums), this provides an alternative to and competes with private health insurance companies, on a level playing field. Additionally, the Act intends to eliminate the antitrust exemption for health insurers and medical malpractice insurers thereby fostering competition thus targeting the existing monopolies in the health insurance market. It aims to establish a new mandatory essential benefits package that shall become the minimum quality standard for employer plans, with the passage of time. The package places a cap for annual out-of-pocket spending, at a maximum of $5,000 per individual and $10,000 per family to prevent bankruptcies from medical expenses.

This Act requires the employers to either provide insurance to their employees or contribute to the cost of their coverage through the public plan/exchange, though the small businesses are exempted from this requirement.

Arguments regarding Constitutionality of HR 3962

The legal fraternity is divided between two schools of thought about the constitutionality of the Act. First school believes that the Act is unconstitutional and places reliance on Articles I §8 and V of the US constitution and on Tenth Amendment. They claim that their argument is supported by the celebrated case of MARBURY v. MADISON, 5 U.S. 137 (1803) and some federalist opinions. The second school of thought places reliance on Article I §8 and the celebrated case of McCulloh v. Maryland, 4 Wheaton 316 (1819); Steward Machine Co. v. Davis, 301 U.S. 548 (1937); United States v. Butler, 297 U.S. 1 (1936) and some federalist opinions. An in-toto analysis of these school of thoughts would conclude that the true interpretation of the word 'general welfare' in Article I §8 of the U.S. Constitution can only determine the constitutionality of an Act like HR 3962. Till date the court opinions have been more inclined towards Hamilton (Federalist 33, 83 etc.) and Story rather than Madison (Federalist 41, 45 etc.).

Simply put, when the government mandates welfare as a quid-pro-quo for premiums collected, such welfare translates to nothing but a tax liability for the country men. Such an attempt by the government to regulate insurance sector by masquerading as an industry player is inspired from socialism. I personally feel that socialism is a Marxian concept and may not go well in an economy with capitalist foundations. The good thing is that people all over the world should buy insurance; this however turns bad when the government forces people to do so.

What are the implications of HR 3962 on the Outsourcing industry?

The object clause to the Act states that it is meant to provide affordable, quality health care for all Americans and reduce the growth in health care spending.

In reality, the act is a victim of haste. Ideally if the intention of the Obama administration and the object clause of the Act were actually in-sync then the administration should have awaited a confirmed indication of the end-of-recession. The administration should have first looked at strengthening the fundamentals of the economy, by:

  • better regulating the existing insurance sector,
  • improving the US agrarian culture and making the country self sufficient regards its food requirements,
  • checking the cost-of-living index and
  • creating more jobs in the private sector.

But if the intention is to make more and more Americans dependant on Federal Government for basic requirements, then the attempt is bang on.

Impact on the outsourcing industry:

Prima-facie it may seem complex but there are clear indications for the outsourcing industry to benefit once the HR 3962 is implemented. The benefit roots from the fact that the employees will become expensive for the employers post this Act's applicability. Now given the very competitive market scenarios, thin profit margin and the inability of the employer to transfer this increased cost to the end consumer, the employer is forced to search for the less costly alternatives. It is needless to say here that the Act magnifies the already existing labor arbitrage opportunities internationally. To appreciate the existing labor arbitrage opportunities you can refer to my older blog post in my blog on Legal Process Outsourcing.

Saturday, November 7, 2009

Malpractice insurance and Legal Process Outsourcing

[Please remember that only the insurance policy can give actual terms, coverage amounts, conditions & exclusions. This article neither renders legal opinion nor recommends the pros and cons of malpractice insurance. The article is a simple compilation of the requirement of malpractice insurance for Legal Outsourcing vendors. The article is not a substitute of recipients' obligation to ensure compliance.]

This issue was discussed with brevity in the last article posted. The previous article collectively dealt with seven myths in the Legal Outsourcing Industry. However a need was felt to exhaustively deal with this issue of malpractice insurance, hence this article.

What is Insurance?

Insurance is an agreement (generally in standard form) between the policy holder and the insurer, where the insurer agrees to indemnify the policy holder upon the occurrence of a contingent event. In the absence or lapse of insurance, the wrongdoer is personally liable to compensate the alleged victim.

What is Malpractice Insurance and what does it cover?

Malpractice Insurance is one category of insurance, specifically meant for professional practitioners like physicians, lawyers, accountants etc., which provides coverage to these policyholders against potential negligence claim made by their clients/patients. The malpractice insurance taken by attorneys is popularly known as legal malpractice insurance. Legal malpractice is defined as the failure of an attorney to deliver competent services to his client. If the latter is harmed by the failure of the attorney, then he can pursue a claim for legal malpractice. This insurance generally covers defense costs, deposition representation, defendant expenses, license protection, and any liability occurrences. Some also offer the coverage of assaults, personal liability, personal injury, first aid expenses, medical payments, and damage to the property of others depending upon the scope of agreement. Malpractice Insurance is a general liability insurance.

Who are covered under a Legal Malpractice Insurance?

By the doctrine of respondent superior and vicarious liability, the employer is responsible for the torts of their employees or agents when the wrongdoing occurs within the scope of employment. Under the same principle, in case if a paralegal or junior associate commits a tort within the scope of employment, the client can sue the paralegal, the associate, the attorney or all. This is a reason why most of the legal malpractice insurance covers each and all of them.

Is it mandatory for the US Attorneys' to have legal malpractice insurance?

Oregon is currently the only state to have a mandatory program requiring all private practice attorneys to carry malpractice insurance. Four states - Alaska, Ohio, South Dakota and Virginia - have varying requirements for disclosure of professional liability coverage. The Supreme Court of California adopted new Rule of Professional Conduct 3-410 on August 26, 2009, effective from January 1, 2010. This Rule 3-410 requires lawyers without professional liability insurance to provide written disclosure of their lack of coverage to all, i.e. to both the new clients as well as the clients which return to the attorney with new assignments. The mandatory disclosure is to be made at the onset of any client's engagement, beginning January1, 2010. It is imperative to note here that although having such an insurance cover just may be desirable, but is not a mandate to follow even after Rule 3-410 is effective. But this rule is widely opposed by the legal fraternity at large. It is believed that once the Rule is made effective, it shall bring to foyer larger difficulties for uninsured attorney's to generate business. At this time, I would like to quote a study by Louisiana State Bar, Oral Report to the House of Delegates, January 19, 2002 that "…. only half of American attorneys carried insurance protection (at that time)…..".

How painful is it for a client to sue an attorney for a malpractice?

Areas of law practice where lawyers get most frequently sued are Personal Injury, Domestic Relations, General Corporate and Real estate. The most common errors due to which lawyers get sued are: failure to timely file or respond, improper advice, unethical conduct, failure to advise, misrepresentation, inadequate investigation or preparation, failure to follow instructions etc. In case of any malpractice on account of the attorney, the client has two options: either to approach the state bar with a written complaint or to file a malpractice case.

In case of the former, if the ABA data has to be believed, only 0.27% attorneys were formally charged for disciplinary action in 2004 [American Bar Association, Center for Professional Responsibility, Survey on Lawyer Discipline Systems2004, available at] .

Unfortunately, it is also hard to win a malpractice case. Malpractice means that the lawyer failed to deploy the ordinary skill and care that would have been deployed by other lawyers in handling a similar problem or case under similar circumstances. To win a malpractice case against an attorney, the alleged victim needs to prove four basic things:

  • Duty -- that the attorney owed a duty to act properly,
  • Breach -- that the attorney breached that duty,
  • Causation -- that this conduct caused actual damages, and
  • Damages -- that financial loss resulted due to this above conduct.

The biggest hurdles amongst the 4 above are: Causation and Damages. To win a malpractice case, the alleged victim must first (I) show that he would have won the case that the lawyer mishandled. And second(II), he is required to prove that the victim would have been able to collect compensation from the defendant (unless he is in the state of Ohio, where the second part is not required).

For example, let us say the victim who was hit by a vehicle, hired an attorney who failed to file the claim-suit within limitation. To win the malpractice case against his attorney, this victim, inter alia, has to show that the vehicle driver has sufficient funds or insurance. Now if the victim cannot prove that the driver has assets which can be used to pay the judgment, then the victim will not win this malpractice case despite the fact that both the lawyer and the driver were at fault. Additionally, expert evidence may also be sought to facilitate the case proceeding. Malpractice cases often fail because mere bad outcomes or ill-advised strategic choices by an attorney are not considered deviations from the standard of care, though in more complicated cases this can be a very gray area. Limitation, case within a case, standard of care and attorney judgment rule are some strong defenses available with attorneys in cases of legal malpractice. To sum up, without an expert attorney on the claimant's side, the chances of winning a legal malpractice case are bleak.

In an effort to reimburse defrauded clients who cannot get reimbursement from the attorney who caused the loss or from insurance, some states have Client Protection Fund. The fund is financed through annual registration fees and administered by the state courts. But unfortunately a client's ability to recover under the Client Protection Fund is usually severely limited.

Now let us look at how the legal malpractice insurance and the Legal Process Outsourcing industry norms are intertwined.

Understanding the models of Legal Process Outsourcing:

Traditionally there are two popular modules in which legal processes are outsourced, Third Party Service Providers/vendors (TPSP's) and owned captive unit. A TPSP vendor (commonly referred to as LPO vendors) assists foreign law firms and in-house legal departments to achieve cost effective legal support. TPSP's are not law firms and do not practices law in any domestic or foreign location. They are engaged by foreign attorneys and work on set guidelines to assist them. They have internal Quality checks to ensure consistent quality work product (deliverables). This work product (deliverables) is also supervised by licensed US attorney. Captive unit in the simplest way is an extension of your office.

Do LPOs need malpractice insurance?

The answer as obvious is NO. Since an LPO is not engaged in practice of law, it does not require insurance cover for malpractice. The law firm outsourcing work should ensure from their insurance agent, for the coverage of TPSP's attorney. LPOs do not take malpractice insurance. With malpractice insurance, the argument is that a TPSP or its employee does not work in direct contact with clients and therefore would not be sued for malpractice. In fact for the reasons mentioned above in the article, the probability for TPSP's being sued as defendant, co-defendant or even a third-party defendant in a malpractice suit is limited. To the extent they can be, TPSP's are covered by the malpractice insurance of the outsourcer. Associates of counsels, paralegals and virtual lawyers are generally covered in malpractice insurance policy depending on how broad the coverage is. Please contact the insurance broker or agent for more detail.

Which Insurance cover is then required by TPSP?

It is necessary and desirable that TPSPs have an E & O (Errors and Omissions) insurance coverage. Though it is interchangeably used, there is a difference between malpractice and E & O insurance cover. Malpractice insurance covers defense costs, deposition representation, defendant expenses, license protection, and any liability occurrences. Some insurer also covers assaults, personal liability, personal injury, first aid expenses, medical payments, and damages to the property of others. E & O insurance protects TPSP and its employees in the event a client alleges to have suffered a financial loss as a result of an error and/or omission committed by TPSP in the delivery of legal outsourced services. It is unlikely that any foreign attorney who understands the nature and scope of malpractice insurance and the scope and obligations of outsourcing would ask a TPSP to have malpractice insurance.

E & O insurance coverage is flexible and can be taken exclusively for each assignment to better cover a specific situation. In majority of cases the SLA signed between the outsourcer and TPSP, provides for some form or the other of indemnity. This indemnity risk can be better covered by entering a clause in the SLA to an effect that TPSP obtains E & O insurance cover for risk mitigation.

It is not just a fundamental but also a technical analysis of the scenarios in the outsourcing industry today that inspires someone to outsource work to TPSP. Weigh the dependability and reliability of the organizations to which you want to outsource. A thorough due diligence should be made about TPSP. Free trials are occasionally offered, which helps the outsourcer to understand the nature, scope and standard of work-product (deliverables), before outsourcing.

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