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ARCHIVED  August 13, 1999

Legal insurance slow to attract customers

It may be time to reassess your personal or professional budget and make room for another precautionary expense: legal insurance. Similar to medical insurance, legal insurance is available in a prepaid form through companies that act as brokers across the nation. And according to recent statistics, which indicate that more people end up in court than in the hospital, legal insurance could turn out to be a better financial investment. By buying prepaid legal insurance, sellers argue, businesses and individuals can operate as if they have a lawyer on retainer to protect them from legal injury. It’s been available since the 1960s, but prepaid insurance is garnering more attention as companies begin to offer it as a voluntary employee benefit and as individual interest increases. In Northern Colorado, however, the concept is still relatively untested.
“It’s not a viable marketing plan for us right now,´ said John Gaddis, a partner in the Longmont-based firm of Bernard, Lyons, Gaddis PC. “There are not many quality plans out there, and it hasn’t been a substantive issue for us.”
This view was echoed by several partners from legal firms in the Northern Colorado area, many of whom have yet to research the option due to lack of interest from their clients.
Gaddis did, however, acknowledge that buying prepaid legal insurance might provide people and corporations with a more-predictable cost structure. By paying for legal services up-front, more people might incorporate legal fees into their annual budgets. “Legal services are not something that individuals usually plan to pay for,” he said.
Nationally, however, that may be changing. And in light of the increasing number of lawsuits that are filed annually, it’s no surprise that more people are interested in protecting themselves from legal issues that can end up costing thousands — if not millions — of dollars.
From personal issues such as neighbor complaints to larger corporate issues such as employment and contract law, prepaid legal insurance can soften the monetary blow of a legal entanglement.
On the employer side of the equation, many companies are incorporating legal insurance into their umbrella of benefits, and some are covering the entire cost of the policies. Other companies contribute to policies for employees who are interested in enrolling, and others simply make the benefit available through a la carte-type plans, which allow individuals to pick and choose what they want.
Kraft Foods Inc. is one company that pays all costs associated with legal insurance through ARAG, a national insurance firm based in Iowa that negotiates agreements with attorneys in Colorado and nationwide.
“Kraft really felt the need to help its employees protect and manage their assets,´ said Ann Dieleman, assistant vice president of marketing for ARAG, which was previously known as Midwest Legal Services.
Golden-based Adolph Coors Co. also offers legal insurance packages to its employees.
On average, prepaid legal insurance costs enrollees anywhere from $6 to $35 per month, depending on the plan and the insurer, and provides them with a menu of services at a reduced and fixed price.
For example, some policies offer members a sliding scale of services that begin with phone consultations, paperwork reviews and procedures such as drafting wills, premarital agreements or divorce settlements. The next grade of policy may include office visits, and more in-depth legal advice. Regardless of the number of times a client calls upon a lawyer, the fees will remain the same unless previously specified.
Legal insurance operates similarly to medical insurance, though some differences between the two exist. Whereas many health maintenance organizations limit the kinds of services available to members, no parameters are set on the types of legal services insured, insurance professionals say.
“There’s a dreadfully negative connotation with HMOs,´ said Crystal Caldwell Virtue, executive vice president of Caldwell Legal, USA, a California-based firm that sells prepaid legal services in Colorado and nationwide. “But we all like the price of HMOs, and that’s where the similarities end, because we don’t limit you.”
As with health insurance, carriers of legal insurance pay a premium. Carriers pay a monthly fee to attorneys who promise to offer clients some free legal advice and charge them a set fee per hour for all paid services. For lawyers affiliated with Caldwell Legal, that fee structure is set at $70 in most cases. And while the fee may be significantly lower than going rates for attorneys, which average nationally at $190 per hour, Caldwell pays attorneys an annual “retainer” and provides them with new clients.
“One of the biggest parts of any practice is getting new business,” Virtue explained. But attorneys who partner with Caldwell or other prepaid insurance carriers have clients delivered to them without any additional effort to advertise or market their services, she said.
Virtue said that most of her company’s clients are individuals but added that the policies are becoming increasingly attractive options for small and large companies.
“It’s a huge employee benefit, and honestly its negligent not to have [prepaid legal insurance] when you consider how crucial having a good attorney is,” she said.
Companies that offer legal-service insurance operate as brokers for lawyers and offer individuals and companies legal packages that may ultimately change the relationship of lawyer and client. In fact, the policies are intended to break down the financial barriers between attorneys and companies so that everyone can benefit from legal advice.
“Most people don’t know where to turn [when they run into a legal problem] and cannot afford legal services,´ said Steven Kroll, senior vice president of marketing for the Insurance Answer Center, a subsidiary of Answer Financial Inc. in California. “This is a true benefit for individuals and companies, and the policies have been very well received so far.”
Insurance Answer Center launched its prepaid legal insurance package in May and has already signed on half a dozen members. Kroll predicts that by the end of the year, the company will have 10 percent of its 230,000 members on board.
And so, while planning ahead for legal emergencies may seem like an unnecessary expense, an increasing number of people are doing just that. In fact, the American Bar Association’s American Prepaid Legal Services Institute estimated that 18 million Americans had enrolled in some sort of legal insurance program in 1995. And considering that a whole year of legal protection can cost the same as one or two hours of market-priced legal advice, pre-paid legal insurance may be increasingly viewed as a sound investment.

It may be time to reassess your personal or professional budget and make room for another precautionary expense: legal insurance. Similar to medical insurance, legal insurance is available in a prepaid form through companies that act as brokers across the nation. And according to recent statistics, which indicate that more people end up in court than in the hospital, legal insurance could turn out to be a better financial investment. By buying prepaid legal insurance, sellers argue, businesses and individuals can operate as if they have a lawyer on retainer to protect them from legal injury. It’s been available since…

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