Legal Plans & Prepaid Legal Services

Shipkevich PLLC advises legal plan and prepaid legal services companies on how their plans are regulated, how they should be structured, and how to respond when a regulator, an insurance examiner, or a bar authority raises questions. We represent national plan providers, companies launching their first plan, sponsors and marketing partners, the law firms and attorneys who serve plan members, and the consumer finance companies that offer legal plans alongside other products.

Legal plans occupy an unusual place in American law. A plan is a consumer product, sold and administered like one, but what it delivers is legal services. That places it at the intersection of insurance regulation, state bar regulation, and the professional conduct rules that govern how lawyers may be paid and by whom. Very few firms work in that intersection, and the questions it produces have no single answer that applies nationally.

How legal plans are regulated in the United States. There is no federal legal plan statute. Regulation is state by state, and a single plan can be regulated on more than one track at the same time. Some states treat a prepaid legal plan as insurance and require a certificate of authority from the insurance department. Others require registration with the state bar or the state supreme court before a plan may operate. A third group regulates plans under standalone prepaid legal statutes administered by a consumer protection agency, usually with a bond and contract form approval. Layered on top of all three are the rules of professional conduct, which restrict sharing legal fees with nonlawyers, limit what may be paid for a referral, and define the unauthorized practice of law. Those rules shape what a plan may be, who may own it, and how the attorneys in its network may be compensated.

When a legal plan needs an insurance license. In most states the threshold question is whether the benefit turns on a fortuitous event. A plan that pays or reimburses legal fees when something happens to the member looks like insurance. A plan that provides defined services on demand, for a fee that covers the cost of providing them, generally does not. New York frames this distinction directly in its prepaid legal services regulations, defining an access plan as an arrangement to provide legal services on a prepaid basis that does not depend on a fortuitous event, and permitting legal services insurance to be written only in connection with such a plan. We analyze where a product falls on that line before it goes to market, because the answer determines whether the company needs an insurance license, a carrier partner, a bar registration, or none of them.

Registration, licensing, and market entry. We map a plan against the requirements of every state in which it will be sold and handle the filings that follow. That includes insurance department authority where legal expense insurance is involved, bar or supreme court registration in states such as North Carolina and Ohio, State Bar of Texas approval or Texas Department of Licensing and Regulation registration depending on how the plan is structured, and consumer agency registration and bonding in states such as South Carolina and Virginia. Where a plan is best delivered through a carrier, we evaluate fronting, surplus lines, and reinsurance arrangements and negotiate the agreements that support them.

Plan design, attorney networks, and professional responsibility. We draft and review member agreements, network attorney agreements, sponsor and marketing agreements, and the disclosure architecture around them. The drafting is governed by three constraints that apply in nearly every state: legal fees generally may not be shared with nonlawyers, no sponsor, marketer, or investor may direct a participating lawyer’s professional judgment, and a lawyer may participate in a prepaid or group legal service plan only where the plan is operated by an organization the lawyer does not own or direct. We also advise on alternative business structures, including the Arizona program, and on the recent wave of state legislation restricting fee sharing and nonlawyer ownership.

Enforcement, examinations, and disputes. Legal plans draw scrutiny from several directions at once, including consumer financial regulators, state attorneys general, insurance examiners, and bar disciplinary authorities. We defend plan companies in civil investigative demands and investigations, respond to examination findings, handle consumer arbitrations and complaints, and manage disputes with network attorneys, including the bar complaints that sometimes follow them.

What it takes to launch a plan nationally. A national rollout is rarely a single filing. It usually involves some combination of insurance department authority or a carrier relationship, bar or supreme court registration in the states that require it, consumer agency registration and bonding in several others, and telemarketing and advertising compliance wherever the plan is marketed. Sequencing those steps correctly, and identifying at the outset the states where an exemption applies, is what separates a launch measured in months from one measured in years.

The firm publishes on this subject as well as practicing in it, including the whitepaper and webinar The Regulatory Landscape of Prepaid Legal Plans and a Law360 analysis of the attorney exemption and the boundary between legal services and regulated consumer financial activity.

Representative Experience

Represented a national legal plan provider and three of its principals in responding to multiple Consumer Financial Protection Bureau civil investigative demands issued to the company and to individual officers, negotiating the scope of the demands, a tolling agreement, and privilege disputes, and managing a large document production, with the Bureau ultimately closing its multi-year investigation without enforcement action.
Serve as ongoing outside regulatory counsel to a national prepaid legal plan provider across state insurance and plan regulation, plan design, attorney network management, claims practices, and commercial transactions.
Advised a legal plan provider on structuring its product for Florida, including the Office of Insurance Regulation’s legal expense insurance requirements and the fronting, surplus lines, and reinsurance alternatives available through an admitted carrier.
Represented a licensed debt settlement provider before a state banking regulator on examination findings concerning its sale of a prepaid legal plan, and counseled the client and the plan provider through parallel inquiries in two additional states.
Counsel companies entering the legal plan market, including a subscription legal services startup, a legal access plan sponsored by a debt resolution platform, and established plan operators, on plan structure, member agreements, network attorney compensation, and unauthorized practice of law risk.

Key contact: Felix Shipkevich, Founder and Principal. Special Professor of Law at the Maurice A. Deane School of Law at Hofstra University; Arbitrator, National Futures Association Board of Arbitrators (since 2006). Read full bio. To schedule a consultation, call (212) 252-3003 or contact the firm.

Legal Plans & Prepaid Legal Services

Representative Experience

Shipkevich PLLC

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