BarTalk June 2000
Volume 12, Number 3

by Brad Daisley LLB

Pre-paid legal service plans providing families and small businesses with reduced-cost legal advice for a small monthly fee have arrived in BC and the Canadian Bar Association wants to keep you informed.

Relatively new in Canada, legal service plans (LSPs) have been available in the United States since the 1920s and have been very popular since the 1970s. The American Prepaid Legal Services Institute – an industry organization affiliated with the American Bar Association – estimates 85 million Americans are covered by LSPs and that 23,000 attorneys across the country provide services for plan members. There are more than 20 companies offering LSPs in the US.

If LSPs catch on in Canada the way they have south of the border, there is little doubt they will affect your practice.

In January 2000 the BC Branch established a committee chaired by Heather Holmes to report to the profession on the business and professional issues surrounding LSPs. The committee has now completed an initial review of the LSP insurance industry. This is the first of a series of articles outlining the committee’s findings. The committee also wants to hear the views of the profession.

Most Americans have access to LSPs as a fringe benefit of their employment much the same as dental coverage or extended health insurance in this country. A smaller number of people purchase LSPs directly from an insurance company. These individual plans are often sold through multi-level marketing programs.

From the client’s perspective, there are two basic types of LSPs. The access plan provides members with free telephone advice and a limited number of free or reduced-rate services such as a simple will or review of simple contracts. All other services are paid for at a fixed rate that is lower than the lawyer would normally charge a private client. The comprehensive plan is usually associated with employee group benefit programs and is designed to cover most of an average person’s legal needs in a year such as residential conveyancing and small debts litigation. The plans usually do not cover criminal defence costs or pre-existing legal problems.

From the lawyer’s perspective, there are several different types of LSPs. Some plans pay the lawyer directly while others require lawyers to bill the client who then applies to the LSP for reimbursement. Open panel plans allow members to use any lawyer willing to work according to the plan’s terms. Closed panel plans restrict members to lawyers specifically approved by the provider. Some plans use staff lawyers. Most, but not all, LSPs do not charge lawyers to join their programs.

One major US company is now selling an access plan LSP in BC. It uses one law firm in each state or province. That law firm receives a monthly fee based on the number of plan subscribers in the jurisdiction. It is then in charge of assigning work to other law firms as needed.

The BC Branch first struck a committee to review LSPs in 1971. Since then several other committees have looked at the issue. (Current committee member, Peter Kennedy has served on a number of these committees.) In 1979, the BC Branch began preparing a model LSP it hoped to market through an outside organization such as a credit union. That proposal ended when a private insurer came up with an identical plan. The private plan was not successful.

The first significant LSP in Canada was established by the Canadian Auto Workers union in Ontario in 1985. Other unions have adopted similar programs. The next major development for the LSP industry in this country was not until 1999 when American companies began selling policies to individual subscribers in BC, Ontario and Alberta.

To date, LSPs operating in Canada appear to have made every effort to conform to law society and CBA guidelines.

LSPs are not subject to regulation in BC as insurance if they provide only for the advance payment for services that can be demanded at will, at any time. The Financial Institutions Commission, however, says LSPs offered by a non-lawyer third party will be regarded as a contract of insurance and, therefore, subject to regulation if the entitlement to a service under the contract turns on the happening of some uncertain misfortune such as being charged with a traffic violation or a criminal offence. Comprehensive plans would probably be classified as insurance. The marketing of LSPs is governed by the Trade Practice Act.

The potential benefits of LSPs are the provision of cost-effective legal services for a vast number of people who aren’t wealthy enough to afford a lawyer but don’t qualify for legal aid. LSPs may also provide the legal profession with new business opportunities for the same reason.

But not all lawyers like the idea of LSPs. One particular concern is the lack of control over the way LSPs are sold and the representations made by marketers who are not lawyers and are not subject to the Law Society’s regulations. Many lawyers also question the benefit subscribers receive from an LSP. They point out that many lawyers already offer much the same services as LSPs – free telephone advice and reduced rates for simple transactions – without the need for the client to sign up for any monthly premiums.

The CBA’s prepaid legal insurance committee wants to hear your views and concerns. Please contact any of the Committee members: Heather Holmes (Chair), Peter Kennedy, Nancy Henderson, Deanna Ludowicz, Thomas Johnston, Stephen Jackson and Brad Daisley.

Want to learn more about prepaid legal insurance? Check out the home page of the American Prepaid Legal Services Institute (www.abanet.org/api). Also see an article from “The Wisconsin Lawyer” magazine that gives an overview of the LSP industry and its impact on the legal profession (www.wisbar.org/wislawmag/archive/june99/group.html).

Brad Daisley LLB, Vancouver Bureau Chief, The Lawyers Weekly

This article was published in the June 2000 issue of BarTalk and is subject to the copyright by the British Columbia Branch of the Canadian Bar Association, 2005, all rights reserved.