SENATE BILL REPORT

SB 6577

BYSenators Pullen, Newhouse and Talmadge; by request of Washington State Bar Association

Regulating prepaid legal service plans.

Senate Committee on Law & Justice

Senate Hearing Date(s):February 3, 1988; February 5, 1988

Majority Report:  That Substitute Senate Bill No. 6577 be substituted therefor, and the substitute do pass.

      Signed by Senators Pullen, Chairman; McCaslin, Vice Chairman; Halsan, Madsen, Newhouse, Niemi, Talmadge.

Senate Staff:Ben Barnes (786-7465)

                  February 10, 1988

AS REPORTED BY COMMITTEE ON LAW & JUSTICE, FEBRUARY 5, 1988

BACKGROUND:

Prepaid legal service plans are designed to make access to an attorney more affordable.  They are conceptually similar to existing health insurance programs in which a consumer pays a fixed amount each year or month in exchange for certain service benefits to be used as needed.  Two forms in which prepaid legal service plans comeare the access plan, and the comprehensive plan.  The primary purpose of an access plan is to provide easy access to a lawyer for legal advice and other non-complex preventive services.  In contrast, typical benefits under the comprehensive plan include unlimited legal advice on any subject, negotiations with adverse parties, drafting legal documents, such as contracts, wills, deeds, and representation in court, or before administrative agencies.

The insurance commissioner has no authority to regulate prepaid legal service plans within the state.

SUMMARY:

The original bill was not considered.

EFFECT OF PROPOSED SUBSTITUTE:

Prior to offering a prepaid legal plan within the state, a prepaid legal service organization must be insured under a prepaid legal service plan reimbursement policy and obtain a registration certificate from the insurance commissioner.

An application for a certificate of registration must be accompanied by a filing fee.  The amount of the filing fee, the renewal fee, and any other fees necessary to administer the act will be determined by the insurance commissioner.  In the event that reimbursement insurance policies are unavailable, the insurance commissioner may establish an alternative means for prepaid legal service organizations to guarantee their ability to perform their contractual obligations.

Each prepaid legal service organization is required to provide an annual report to the insurance commissioner regarding its assets, liabilities, number of plan members, and providing attorneys.  The sales representative of a prepaid legal service organization may be subject to the licensing provisions of RCW 48.17.

Failure to comply with the provisions of this act constitutes an unfair or deceptive practice in violation of RCW 19.86.020.  Any plan member who is injured by such violation may bring an action against the prepaid legal service organization and its insurer.  The insurance commissioner is appointed attorney for service of process for each prepaid legal service organization operating within the state.

Any prepaid legal service organization which fails to obtain a certificate of registration is subject to a $10,000 fine.  Any other violation of the provisions of the act is subject to the following penalties:  (1) revocation, suspension, or non-renewal of the registration certificate; (2) a $10,000 fine, or (3) an order to cease and desist objectionable practices.

Retainer contracts, employee welfare benefit plans, legal assistance plans, and group legal plans are specifically excluded from the provisions of the act.

The effective date of the act is postponed to May 1, 1989.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 29, 1988

Effective Date:May 1, 1989

Senate Committee - Testified: Scott Horenstein, Washington State Bar Assocation; Scott Jarvis, Insurance Commission; John Brown, Amway Corporation