85-F-102 - Prepaid Legal Service Plans




Inquiry is made concerning the propriety of participating in prepaid legal service plans.

Group and prepaid legal service plans vary in coverage and structure for the delivery of legal services. The plans are "open" or "closed" depending on the selection of who provides the legal services. Open plans allow the consumer to select any attorney. Closed plans allow the consumer to choose an attorney from a closed panel of attorneys designated by the sponsoring group, organization or insurance company, or a particular designated attorney.

The American Bar Association (ABA) at the August, 1972 annual meeting of its House of Delegates adopted a resolution strongly urging that each prepaid legal service plan provide that the members or beneficiaries have freedom of choice of attorneys (open panel) in the rendering of legal services under the plan. ABA Formal Opinion 332 approved open panel prepaid legal service plans provided that the attorneys selected by the consumer are free to exercise their independent judgment on behalf of the client and otherwise act in accordance with the Code of Professional Responsibility. ABA Formal Opinion 332 required that the plans must meet the interim standards adopted at the August, 1972 annual meeting. Those standards are adopted in this opinion, to-wit:

(1) The entire plan shall be reduced to writing and a description of its terms shall be distributed to the members or beneficiaries thereof:

(2) The plan and description shall:

(a) State clearly and in detail the benefits to be provided, exclusions therefrom and conditions thereto;

(b) Describe the extent of the undertaking to provide benefits and reveal such facts as will indicate the ability of the plan to meet the undertaking;

(c) Provide that there shall be no infringement upon the independent exercise of professional judgment of any lawyer furnishing service under the plan;

(d) Specify that a lawyer providing legal service under the plan shall not be required to act in derogation of his professional responsibilities; and

(e) Set forth procedures for the objective review and resolution of disputes arising under the plan;

(3) There shall be a periodic written report not less often than annually disclosing to members or beneficiaries of the plan, to this Association and to the bar of any state in which benefits are paid a summary of the operations of the plan including, but not limited to, all relevant financial data, the number of members or beneficiaries receiving legal services, and the kinds of benefits provided;

(4) Each plan should provide for an advisory group including members of the bar and beneficiaries of the plan which shall meet periodically to review and evaluate the organization and operation of the plan and to offer suggestions for its improvement.

There is no impropriety in an attorney participating in open prepaid legal service plans as hereinabove described. The attorney participating in such plans should investigate the plan or plans to insure compliance with the conditions described herein; and, further should ascertain that the sponsoring group or organization has filed an annual report with the Board of
Professional Responsibility of the Supreme Court of Tennessee in compliance with Disciplinary Rule 2-103(D)(4)(g) of the Code of Professional Responsibility.

Disciplinary Rule 2-103(D)(4)(a) of the Tennessee Code of Professional Responsibility prohibits attorneys from participating in plans offered by for-profit organizations, such as insurance companies, where the organization selects or furnishes the attorney to be used by plan members to receive all or a portion of the covered legal services.

Further, Disciplinary Rule 2-103(D)(4)(b) prohibits attorneys from participating in any plan that is promoted by his partner, associate, or any other attorney or lay person affiliated with him.

Participating in closed plans offered by non-profit organizations and delivery of legal services in compliance with NAACP v. Button, 371 U.S. 415 (1963), Brotherhood of Railroad Trainmen v. State of Virginia, 377 U.S. 1 (1964), United Mine Workers v. Illinois State Bar Assn., 389 U.S. 217 (1967) and The United Transportation Union v. State Bar of Michigan, 401 U.S. 576 (1971) are matters of law, not proper subjects of ethics opinions, and not addressed herein.

This 16th day of December, 1985.


Henry H. Hancock
W. J. Flippin
Edwin C. Townsend