85-F-102 - Prepaid Legal Service Plans


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

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
(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;
(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
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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