BILL NUMBER: S4863A

SPONSOR: COONEY
 
TITLE OF BILL:

An act to amend the insurance law, in relation to the sale of a non-in-
demnity legal service plan

 
PURPOSE OR GENERAL IDEA OF BILL:

The purpose of the bill is to enact legislation to address treatment of
modern non-indemnity prepaid legal service plan to better serve New
Yorkers who utilize such plans.

 
SUMMARY OF PROVISIONS:

Section 1 amends Article 11, Section 1101(b) of the Insurance Law by
adding subparagraph (9) to provide as follows:

(9)(A) Notwithstanding the foregoing, the sale of a non-indemnity legal
service plan shall not constitute doing an insurance business in this
state.
              

(B) For purposes of this paragraph a non-indemnity legal service plan
includes any plan, regardless of the benefits, where legal services are
available to members, or their dependents, through an organization that
contracts directly with independent attorneys for the provision of the
legal services and the organization pays the independent attorney via a
capitated arrangement and the independent attorney receives no addi-
tional payment or reimbursement from the organization for specified
legal services or specified legal expenses.

Section 2 establishes the effective date.

 
JUSTIFICATION:

Unlike traditional legal services insurance policies, non-indemnity
prepaid legal service plans provide customers ("members") with access to
an attorney ("network attorney") who has agreed to abide by a schedule
of free and discounted services in return for a membership fee. While
some of these plans do provide services in response to fortuitous
events, the primary purpose of a non-indemnity prepaid legal plan is to
provide members with certain limited services, consultation and advice
and discounts for other legal services.  Critically, non-indemnity
prepaid legal plans do not pay or reimburse members for the rendering of
specific legal services. Members seek services from network attorneys
for the benefits contained within their non-indemnity prepaid legal
service plan. Network attorneys are obligated to provide the services to
the members.

These plans should not be regulated like traditional insurance policies.
This bill would remove non-indemnity prepaid legal service plans from
insurance regulation while retaining regulation of traditional legal
service insurance policies. At present, over 30 states no longer regu-
late non-indemnity prepaid service legal plans.

This small revision will align New York law with the majority of states,
including Illinois and California, that do not regulate non-indemnity
prepaid legal service plans and is also consistent with the Access to
Justice initiative in New York and other states across the country. New
York's Permanent Commission on Access to Justice was established in 2015
and continues the efforts of the original Task Force to Expand Access to
Civil Legal Services in New York, established in 2010, to provide
increased access to legal counsel to New York residents.

This revision is consistent with the Overview on the New York Permanent
Commission on Access to Justice website which states, "For the Judici-
ary, there can be no higher priority than ensuring meaningful access to
justice for all persons. The Permanent Commission on Access to Justice
plays a critical role in, our institutional efforts to promote the fair
and effective delivery of justice to all New Yorkers regardless of
economic status."

Non-indemnity prepaid legal service plans provide affordable access to
New York residents for legal services in areas including, but not limit-
ed to, housing (foreclosure, landlord tenant disputes), family (child
custody), consumer rights (creditor/debtor disputes, garnishments), and
unemployment benefits. Access to legal services for individuals, fami-
lies, and businesses has never been more important. The proposed amend-
ment will result in lower costs and allow greater flexibility in the
pricing and the delivery of legal services to New York residents similar
to that which is already available in the majority of other States in
the country.

Members receive no reimbursement or indemnification under non-indemnity
prepaid legal service plans. Members pay a monthly fee for their plan
with specific legal services that are provided directly by the provider
law firm.

 
LEGISLATIVE HISTORY:

New Bill

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None

 
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.