Legal plans pose ethical questions

Attorneys who are considering participating in a legal plan should be aware of a variety of ethical considerations and are well-advised to educate themselves about how such plans operate. While legal plans offer consumers valuable access to legal assistance, they are not regulated by the State Bar and are not required to meet any minimum standards to operate.

Legal plans are a legal version of an HMO (health maintenance organization), and like HMOs, they are becoming more readily available to consumers. They can be made available as a membership benefit, e.g., to union members or credit card users whose membership is automatic by virtue of their status, or they can be purchased by individual consumers.

Legal plans are sometimes confused with lawyer referral services which the bar does regulate under Business & Professions Code §6155. Section (c) of the statute, however, declares that the following are not lawyer referral services: legal insurance plans, as defined in §119.6 of the Insurance Code, and group or prepaid legal plans which (a) recommend, furnish or pay for legal services to their members or beneficiaries; and (b) provide telephone advice or personal consultation.

Legal plans also differ from lawyer referral services in that membership in a plan is ongoing -- preceding and following any legal event -- while lawyer referral services are typically used by consumers in response to a legal event.

Legal plans contract with attorneys to provide specified services to plan members rather than just referrals. Participating lawyers are compensated differently by different plans; lawyers should obtain compensation information directly from the legal plan.

Types of legal plans

Group legal plans are offered to members of a defined group who, when they desire legal services, have direct access to participating attorneys. Benefits usually include limited consultation and advice, with the group member having the option of retaining the attorney directly, usually at a reduced rate, for further representation.

Prepaid legal plans offer legal services to paying members; typically, a small monthly fee is charged. A member has access to participating attorneys for services at no cost which are typically limited annually; for example, two telephone consultations, one document review, and two letters per year. Some plans provide more comprehensive services, such as litigation defense.

Insured legal plans, like other insurance policies, reimburse the insured against all or a portion of fees, costs and expenses of legal services covered by the plan, with legal services not covered by the plan paid for by the insured. A true insurance plan is regulated by the California Department of Insurance as is any insurance provider.

Relevant authorities

Although legal plans themselves are not regulated in California, the conduct of participating lawyers is governed by applicable professional standards. For example, lawyers should ensure that their participation in such plans conforms with the Rules of Professional Conduct and the B&P Code, including: rules 1-100 (Rules of Professional Conduct in general), 1-300 (unauthorized practice of law), 1-320 (financial arrangements with non-lawyers), 1-400 (advertising and solicitation), 1-600 (legal services programs), 3-110 (failing to act competently), 3-310 (avoiding the representation of adverse interests), 3-600 (organization as client), 3-700 (termination of employment), and §6068 (duties of attorney) and §6150 et seq (unlawful solicitation).

With respect to insured legal plans, lawyers should be familiar with Insurance Code §119.6 (legal insurance) and §§12120-12124 (group and individual plans for legal insurance).

Additional non-binding authorities include Los Angeles County Bar Association ethics opinion 444 (sharing legal fees), and ABA ethics opinions 324 and 332 (exercising independent professional judgment).

Other ethical considerations for a lawyer considering providing services through a legal plan include maintaining client confidences (B&P §6068e) and protecting against conflicts of interest (rule 3-310 of the Rules of Professional Conduct).

Questions to ask

If you are solicited by a legal plan to become a participating attorney, be sure to inquire about the following:

For more information about ethical issues relating to participation in a legal plan, contact Randall Difuntorum in the bar's office of competence (415/241-2161) or Tim Toller at the ethics hotline (415/241-2150).

General questions about group, prepaid and insured legal plans should be directed to Ellen Miller in the office of legal services (415/561-8268).

Questions about lawyer referral activity should be directed to Hilary Winslow in the LRS certification program (415/561-8253).