Types of Plans | GROUP LEGAL EXPENSE INSURANCE

The types of group legal expense plans vary significantly in the ways they provide legal services. When an employer or negotiated trusteeship establishes a group legal expense plan, benefits can be self-funded or purchased from another organization. These other organizations include state bar associations, groups of attorneys, or other organizations (either profit or nonprofit) formed for this purpose. However, most group legal expense coverage is purchased from a relatively small number of organizations, several of which have recently affiliated with insurance companies.

Existing plans fall into one of three types of arrangements:

1. Referral and discount plans

2. Access plans

3. Comprehensive plans

Referral and Discount Plans

The most basic form of legal expense plan is one that involves referrals and discounts. Plan members are referred to an attorney who provides services based on a fee schedule or at a discount from his or her usual fees, but the attorney's charges are paid by the plan member. In some cases, plan members may be eligible to be referred to attorneys who provide free services, such as a clinic for low-income persons or an attorney hotline of a local bar association.

Access Plans

This form of legal expense plan, sometimes also called a telephone access plan, provides plan members with unlimited legal consultation over the telephone for most legal matters. The plan may also provide simple legal services, such as the preparation of wills or powers of attorney or the review of legal documents.

Plan members are referred to an attorney for more complex legal matters. The attorney will often provide an initial free consultation (usually either one-half or one hour), after which the attorney will bill at some discount (often 25 percent) from normal fees. A plan member is responsible for paying this discounted fee.

Access plans can often be provided at a cost of $5 to $10 per month per member.

Comprehensive Plans

Most legal expense plans can be categorized as comprehensive plans, and premiums usually fall in the range of $10 to $20 per month per member, depending on the level of services provided.

In addition to telephone consultation, comprehensive plans cover in-office and trial work of attorneys. The term comprehensive may be a slight misnomer because most plans are not designed to cover 100 percent of a member's potential legal services; 80 to 90 percent is probably a better figure.

Comprehensive plans usually contain a list of covered services. While there are significant variations among plans, most cover at least the following:

• Unlimited legal advice by telephone

• Document review and preparation

• Name changes

• Adoptions

• Purchase or sale of primary residences

• Eviction defense

• Civil actions

• Driver's license suspension

• Juvenile court proceedings

• Consumer protection

• Bankruptcy

• IRS audits

• Debt collection

• Child custody and support

• Divorce, but possibly only for the covered employee and not dependents

If a particular legal service that is required is not on the list of covered services, there may be some limited coverage as long as the service is not otherwise excluded. This limited service, for example, may be in the form of telephone consultation or a limited amount of work by the attorney, such as two to four hours per family per year.

Legal expense plans have exclusions, and common exclusions include the following:

• Business activities or transactions

• Preparation of tax returns

• Class-action suits

• Actions involving the legal expense plan

• Actions involving the employer

• Actions involving the union that bargained for the coverage

• Cases that have contingent fees

Comprehensive plans take three approaches to the method by which a plan member may select an attorney. Many plans use a closed-panel approach, under which a panel of attorneys has agreed to provide covered services at a predetermined fee or hourly rate for which they bill the plan. The plan member selects the attorney, and benefits are generally available at little or no additional cost. However, plans may limit some benefits to a scheduled maximum (such as $500) and usage limitation (such as four hours). A few plans also have deductibles and copayments.

Other plans are open-panel. A plan member can choose any licensed attorney; however, plan benefits are usually subject to scheduled dollar maximums.

Many plans are modified-panel plans. Under such plans, a plan member may choose either a panel attorney, as in a closed-panel plan, or select his or her own attorney. The election of a panel attorney often results in benefits being paid in full, while the election of a nonpanel attorney results in the use of benefit maximums.