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Legal services plan LegalShield seeks deregulation.

Byline: Peter Vieth

A national legal services plan says it's time for Virginia to end administrative oversight over such programs.

Virginia regulates legal services plans as if they were insurance companies. The State Corporation Commission's Bureau of Insurance enforces laws requiring review of financial responsibility and regular audits, among other oversight.

The Oklahoma-based company operating as LegalShield has hired lobbyists and advanced legislation that would entirely remove SCC regulation of all legal services plans.

Legal services plans have sometimes been referred to as "legal insurance," but the top legal officer for LegalShield says there is no meaningful connection between prepaid legal services and conventional insurance.

Prepaid Legal Services Inc. the formal name of the corporation provides individuals and families with access to licensed attorneys to discuss legal issues for monthly payments of just under $25, according to Keri Norris, the company's chief legal counsel. The company said it has more than 1.7 million members covered by legal and identity theft protection plans.

The program has dedicated law firms in all 50 states and four provinces in Canada. In Virginia, LegalShield's dedicated firm is Friedman,Framme&Thrush in Richmond, supported by a network of referred attorneys for special practice areas. Norris said LegalShield has just under 37,000 legal plan customers in Virginia.

Not an industry effort

Despite the broad sweep of House Bill 2444, the proposal is a project of just the one company. Other legal service plans and the national Group Legal Services Association were not involved in the deregulation effort.

LegalShield is somewhat different from most prepaid legal services plans, according to Matthew R. Hahne. The Virginia Beach lawyer is acting president of the GLSA.

While many legal services plans are offered to employees and paid for by employers, LegalShield markets to consumers directly, Hahne said.

Despite leading the trade association, Hahne said he had not been aware of the deregulation effort before the bill was introduced.

"We're the ones who are pushing this," confirmed LegalShield lobbyist William A. Gray.

Not insurance

LegalShield hopes to toss the yoke of state insurance regulation because it's really not like insurance, according to Norris.

"We don't see this as an insurance product," Norris said. "We don't pay claims. It's not the best fit for what we do any longer."

Regulation can impede innovation in the business, she said.

"It's a cost and expense. It can delay what we do. "We'd like to have some flexibility and creativity in what we offer."

Total deregulation

The legislation, sponsored by Republican Del. Tony O. Wilt of Harrisonburg, would eliminate all of Chapter 44 of Title 38.2 in the Virginia Code which currently regulates legal services plans.

Those statutes bar annual re-licensing of a legal services organization until the SCC is "satisfied that the financial condition, the method of operation, and the manner of doing business of the organization enable it to meet its contractual obligations to all subscribers and that the organization has otherwise complied with all the requirements of law."

Wilt's bill would remove that and other statutes applicable to legal services plans. It would expressly state that the definition of "insurance" does not include "any arrangement whereby legal services are provided in consideration of a specified payment consisting in whole or in part of prepaid or periodic charges, regardless of whether the payment is made by an individual or by a third person for them."

The SCC's Bureau of Insurance has no position on the deregulation proposal, according to a spokesperson for the SCC. Likewise, the Virginia Trial Lawyers Association will not address the legislation.

"We did not take any position on it," said VTLA lobbyist Mark D. Dix.

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Title Annotation:Virginia
Author:Vieth, Peter
Publication:Virginia Lawyers Weekly
Date:Jan 21, 2019
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