Is prepaid legal insurance an answer to bridging the gap in access to justice? The insurance company ARAG believes it is. A longtime provider of legal insurance through employer-sponsored benefit plans, it is today introducing a direct-to-consumer plan, ARAGlegal.com, that will allow consumers to purchase coverage for a range of legal matters for just $16.25 a month, plus a per-matter deductible of $250.
“With the growing divide between consumers that need access to affordable legal help and the high cost of attorney fees, we knew the time was right to make legal insurance available to all consumers,” David Murray, ARAG president and CEO, said in announcing the plan.
Available in every state except Alaska, coverage will work in much the same way as health insurance. Consumers will pay either $16.25 or $24.50 a month, depending on the coverage level they choose. When they need legal help, they contact ARAG and are given the names of network attorneys in their vicinity who handle the particular type of matter. Once they establish a relationship with a lawyer, they can return to that lawyer without going through ARAG.
The basic plan, Legal Protection, covers such matters as wills and trusts, civil damages litigation defense, home improvement and contractor issues, adoptions and guardianships, landlord/tenant matters, real estate matters, IRS tax collections, juvenile crime, misdemeanors, and more. The higher-level Legal Protection Plus plan adds identity theft protection, financial advice and counseling, and eldercare counseling. The $250 deductible is charged for each new matter.
For matters not covered by the plan, consumers receive a 25 percent discount off a network attorney’s normal rate. Matters not covered by the plan include divorce and alimony, child custody or support, personal injury claims, bankruptcy, credit records, insurance disputes, mediation, driving under the influence, garnishment and easements.
The plans also cover the insured’s spouse or domestic partner and dependent children.
(This sample policy outlines the covered matters.)
Also available is a one-time coverage option, Legal Now, for help with an immediate legal need. It costs $54.95 and gives the consumer one phone consultation with an attorney and the ability to then work with the attorney at reduced rates for up to six months. It also includes access to ARAG’s online legal library and self-help legal documents.
Access to Justice Crisis
In comments submitted last year to the ABA Commission on the Future of Legal Services, ARAG noted that the U.S. ranks 64th out of 99 countries for overall accessibility and affordability of legal services – on par with Kyrgyzstan, Mongolia and Uganda. Much like health insurance does, legal insurance can make legal services available to everyone, the company believes.
“Consumers are in the unfortunate position of having to weigh how legally sick they need to be before investing their scarce dollars in becoming more legally healthy,” ARAG General Counsel Ann Cosimano told me in an interview last week. “Experience in other countries where legal insurance is common has proven that people who have it are more likely to recognize that they have a legal problem and that a lawyer can help with that problem.”
The number one reason people do not consult with attorneys when they have a legal problem, Cosimano says, is the failure to recognize the problem as one a lawyer can help with. To combat that, ARAG’s roll-out of this new product includes a campaign to build consumer awareness. Its website provides educational materials and resources to help people understand when they have a legal issue.
Once they know they have a legal problem, the second greatest barrier to hiring a lawyer is cost, Cosimano says. Legal insurance addresses that by making access to a lawyer affordable for everyone, she believes.
How it Works for Consumers
When a consumer who is covered by the plan has a legal problem, the consumer first contacts ARAG. Many members who call do not know exactly what their legal issue is, Cosimano tells me. For that reason, call receptionists are trained to help draw out the type of legal problem the consumer is experiencing.
Once the issue is identified, ARAG gives the member of list of qualified network attorneys, information about each of them, and general information about selecting, meeting with and working with an attorney. ARAG has a network of 11,000 lawyers throughout the U.S. The consumer then picks an attorney and makes the contact directly.
At the conclusion of every matter, even if it is just a phone call, the member is asked to complete a survey about the experience of working with the attorney and the service provided.
How it Works for Lawyers
As noted, ARAG has a network of 11,000 attorneys nationwide. ARAG initially certifies every attorney’s experience, licensing and disciplinary record and then recertifies them every year.
Attorneys are paid directly by ARAG for the services they render. ARAG sets the fees attorneys are paid for covered services. For non-covered services eligible for the 25 percent discount, attorneys charge their standard hourly rates.
I spoke this week to one ARAG network attorney, Javier Baños Machado, who practices in Miami, Fla., and is a member of ARAG’s Advisory Council. He has been in ARAG’s network for its employer-sponsored plans since 2008.
He sees the program as a win-win for attorneys and clients. The fees ARAG pays him are roughly 60 percent of what he would normally charge, he says. At the same time, however, he does not have to incur any cost in obtaining those clients.
The clients who come to him through ARAG often become repeat clients, he says. Many of them are people such as teachers and firefighters who make too much to qualify for legal aid but too little to easily afford typical legal services. ARAG clients also refer non-ARAG business to him.
“It gives people far better access than they would otherwise have,” Machado says.
The ARAG work helped him start his practice when he first went out on his own. Now his wife, who practices with him, is also in the ARAG network. Between the two of them, the ARAG work brings in roughly $60,000 a year to their firm.
The Legal Insurance Market
Although several companies provide legal insurance plans through employers or benefits consultants, only one other company, LegalShield, offers legal insurance direct to consumers. Its individual plan is $17.95 a month for most states. It also offers a family plan for $26 a month.
LegalShield’s coverage is more restricted than ARAGLegal’s. Its plans cover telephone consultations, letters and phone calls on a member’s behalf, defense in civil lawsuits (with caps on time), a will, a power of attorney, a living will, IRS audits, and assistance with motor vehicle moving violations and related criminal charges. It also offers 25 percent discounts on certain other services.
LegalShield formerly operated under the name Pre-Paid Legal Services and was a publicly traded company from 1984 to 2011, when it was acquired by a new owner, MidOcean Partners, and renamed.
From 2001 to 2009, Pre-Paid Legal faced various legal problems relating to its sales and accounting practices. No such problems have been associated with its current ownership that I am aware of.
A Solution to the Justice Gap?
So is legal insurance an answer to bridging the justice gap? In its comments to the ABA Commission on the Future of Legal Services, ARAG said:
Legal insurance is an existing model that has proven successful in improving access to legal services. Beyond making legal services more affordable, legal insurers educate underserved communities on what a legal event is, and how often everyone experiences them. Buying a used car? Struggling with debt collectors? Dealing with landlord problems? These are all legal events, and people with legal insurance benefit from the expertise and wisdom of credentialed attorneys without having to worry about big out-of-pocket expenses.
One very clear strength of legal insurance is that it is a solution that involves lawyers. Last year, I wrote in the ABA Journal about Washington state’s program of limited license legal technicians. Many in the legal community have raised concerns about that program because it excludes lawyers from the legal-services equation.
Indeed, much of the opposition to the ABA’s recent adoption of Resolution 105 centered on this very issue – that it opens the door to nonlawyers providing legal services.
As a means of addressing the justice gap, legal insurance does not have this problem. It enables consumers to get legal services from qualified lawyers at prices they are more likely to afford.
And is it more affordable than traditional legal services? The answer to that has to be, “It depends.” As with health insurance, the value will vary with how one uses it.
If, in the course of a year, a consumer pays $195 in total monthly payments and then pays the deductible of $250 to have a will done, then the will has cost $445. I suspect there are lawyers who charge less than that for a will.
But if the member is involved in, let’s say, a contested adoption or guardianship matter or a foreclosure, then that $445 is a bargain. And if the member is involved in multiple matters within the same year, then the savings become even clearer.
ARAG GC Cosimano goes back to that 64th place ranking of the U.S. for overall accessibility and affordability of legal services. Of the countries that ranked in the top 10, they all have something in common, she says. They all have widespread acceptance of legal insurance.
Maybe they’re on to something.