Can a West Virginia lawyer participate in a prepaid legal services plan, and who is responsible for the plan's advertising?

Plain-English summary

The Lawyer Disciplinary Board addressed inquiries about prepaid legal services plans, which it described as a form of insurance marketed to potential insureds or to an employer or fiduciary seeking a supplier of legal services for others. Because such plans are usually owned and operated by non-lawyers, the Board does not directly regulate them; instead it exercises jurisdiction over lawyers to decide whether a lawyer will violate the Rules by participating in a particular plan. The Board had two primary concerns: whether the plan's advertising and solicitation should conform to West Virginia's Rules, and whether the operation of the plan rendered it a for-profit referral service.

On advertising and solicitation, the Board relied on Rule 8.4(a), which bars a lawyer from violating the Rules through the acts of another, and concluded that attorneys who garner clients through improper advertising or solicitation by a plan violate that rule, because the harm to the public from misleading advertising is the same whether the attorney advertises directly or indirectly through an organization. As examples, the Board pointed to a brochure testimonial creating an unjustified expectation about results (a violation of Rule 7.1(b)) and a plan actively advertising with no participating West Virginia attorney (making the advertising misleading). The Board noted that under the comment to Rule 7.3, a plan may contact representatives of organizations or groups about establishing a plan because that is not directed to a prospective client, but communications directed specifically to a prospective client must still comply with the solicitation rules. The Board placed the burden on any participating attorney to inquire about and review the plan's marketing and advertising in West Virginia to ensure compliance, warning that plan violations may be imputed to participating attorneys, who will be subject to sanctions.

On operation, the Board relied on Rule 7.2(c), which bars giving anything of value for recommending the lawyer's services except the reasonable cost of permitted advertising and the usual charges of a not-for-profit lawyer referral service or other legal service organization (referencing earlier guidelines in L.E.I. 90-3). A prepaid plan generally anticipates the organization will pay all or part of the attorney's fee, an arrangement routinely practiced by insurers. But the Board described a plan in which the organization pays nothing to the participating lawyer while the lawyer pays the organization a $400 administrative fee (ostensibly for computer and Internet set-up) plus a $200 annual fee per area of law in which the lawyer wishes to be designated; members get a 25% discount through a "panel attorney." The Board concluded that such an arrangement is essentially payment to the organization for referring its insured to a lawyer and is thus impermissible under Rule 7.2(c).

Currency note

This opinion was issued in 1997, before the West Virginia Supreme Court of Appeals' comprehensive 2015 revision of the West Virginia Rules of Professional Conduct (effective January 1, 2015). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Was a participating lawyer responsible for a prepaid plan's advertising?

A: Yes. The opinion concluded that under Rule 8.4(a) a lawyer who garners clients through a plan's improper advertising or solicitation violates the Rules, and placed the burden on the lawyer to inquire about and review the plan's marketing in West Virginia.

Q: Could plan violations be imputed to the lawyer?

A: Yes. The opinion stated that violations of the Rules by a plan may be imputed to its participating attorneys, who will be subject to sanctions for the plan's violations.

Q: When did a prepaid plan cross into being an impermissible referral service?

A: When the plan paid the lawyer nothing but the lawyer paid the organization fees, the Board concluded the arrangement was essentially payment to the organization for referrals, impermissible under Rule 7.2(c).

Background and rules framework

The opinion interpreted West Virginia's Rules as they stood in 1997. Rule 8.4(a) (Model Rule 8.4) barred violating the Rules through the acts of another. Rule 7.1(b) (Model Rule 7.1) barred communications creating unjustified expectations. Rule 7.3 (Model Rule 7.3) governed solicitation, with a comment addressing contact with organizations versus prospective clients. Rule 7.2(c) (Model Rule 7.2) barred giving anything of value for recommending the lawyer's services, except permitted advertising costs and the usual charges of a not-for-profit referral service or legal service organization. The Board referenced its earlier guidelines distinguishing group advertising plans from impermissible referral services in L.E.I. 90-3, and noted that the former Code of Professional Responsibility (in effect until 1989) set out in detail the circumstances under which a lawyer could be recommended by an organization furnishing legal services (former DR 2-103(D)(4)).

Citations and references

Rules of Professional Conduct:

• Model Rule 7.1 / WV Rule 7.1(b) (communications creating unjustified expectations)
• Model Rule 7.2 / WV Rule 7.2(c) (giving value for recommending services; referral services)
• Model Rule 7.3 / WV Rule 7.3 (solicitation; contact with organizations vs. prospective clients)
• Model Rule 8.4 / WV Rule 8.4(a) (violating the Rules through the acts of another)

Other opinions cited:

• WV L.E.I. 90-3: Lawyer Referral/Advertising Programs

See also

• WV Ethics Op. 2005-02: Legal Funding Plans
• WV Ethics Op. 2006-01: Referral Fee From a Financial Services Provider
• Alabama Ethics Op. 1999-04: Law Firm Selling Prepaid Legal Services
• ABA Formal Op. 474: Referral Fees and Conflicts

Source

• Landing page: https://wvodc.org/Legal-Ethics-Opinion
• Original PDF: https://storage.googleapis.com/msgsndr/Rgd68xOkcVdteTsBkf6O/media/66a7ea7ea57ce54c1361382c.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

L.E.I. 97-03

ATTORNEY PARTICIPATION IN PREPAID LEGAL SERVICES PLANS

The Lawyer Disciplinary Board has received inquires from West Virginia lawyers concerning certain practices of various prepaid legal services plans. In general, prepaid legal services plans are a form of insurance which is marketed directly to potential insureds or to an employer or fiduciary seeking a supplier of legal services for others. Because such plans are usually owned and operated by nonlawyers, the Lawyer Disciplinary Board does not directly regulate them.[1] Instead, the Board exercises its jurisdiction over lawyers to determine whether a lawyer will violate the Rules of Professional Conduct by participating in a particular prepaid legal services plan.

From the material reviewed, the Board has two primary concerns: (1) whether the advertising and solicitation practices of a prepaid legal services plan should conform to West Virginia's Rules of Professional Conduct; and (2) whether the operation of the plan renders it a for-profit referral service. As set forth in greater detail below, the Board has concluded: (1) a lawyer participating in a prepaid legal services plan is ethically responsible for the plan's advertising and solicitation practices in West Virginia; and, (2) plans which pay nothing to the lawyer may be, in effect, for profit referral services in which West Virginia lawyers may not participate.

A. Advertising and Solicitation

Rule 8.4(a) of the Rules of Professional Conduct prohibits a lawyer from violating the Rules of Professional Conduct through the acts of another. It is the opinion of the Board that attorneys who garner clients through improper advertising or solicitation by a prepaid legal services plan violate this rule. The harm to the public through misleading advertising about attorney services is the same whether the attorney advertises directly or indirectly through an organization. Attorneys also should not be permitted to profit from violations of the Rules of Professional Conduct by prepaid legal services plans.

For example, a sample brochure from one plan contains a client testimonial which says, "My first attorney sent me a settlement check for $50,000. I was referred to [the plan's attorney] for a second opinion. [The plan's attorney] negotiated a settlement of my case for $500,000." This testimonial creates an unjustified expectation about results the lawyer can achieve in violation of Rule 7.1(b) of the Rules of Professional Conduct.

Another plan is actively advertising its services, but currently has no participating West Virginia attorney, which makes the advertising misleading. This particular plan has "independent sales associates" who are permitted to recruit and develop their own sales organization. The plan appears to have problems monitoring its associates' local advertising.

With respect to solicitation practices, the Board notes that the comment section to Rule 7.3 of the Rules of Professional Conduct makes clear that a prepaid legal services plan may personally or telephonically contact representatives of organizations or groups that may be interested in establishing a prepaid legal services plan for its members, insureds or beneficiaries because this form of communication is not directed to a prospective client. Communications directed specifically to a prospective client would still need to comply with the solicitation rules.

The Board therefore places the burden upon any attorney subject to its jurisdiction who is already participating or intends to participate in a prepaid legal services plan to inquire about and review any marketing and advertising within the State of West Virginia to ensure that the prepaid legal services plan complies, at all times, with the Rules of Professional Conduct. Violations of the Rules by a plan may be imputed to its participating attorneys. Any lawyer who participates in a prepaid legal services plan is responsible for any marketing and advertising which violates the Rules of Professional Conduct and will be subject to sanctions for any such violations by the plan.

B. Operation of Prepaid Legal Services Plans

Rule 7.2(c) of the Rules of Professional Conduct states that a "lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertisements or communications permitted by this rule and may pay the usual charges of a not-for-profit lawyer referral service or other legal service organization." This Board has previously set forth guidelines to distinguish between a group advertising plan and an impermissible referral service. See L.E.I. 90-3, Lawyer Referral/Advertising Programs.

A prepaid legal services plan generally anticipates that the organization will pay all or a portion of an attorney's fee for certain services provided to its beneficiaries or insureds. This arrangement is routinely practiced by insurance companies which provide a lawyer to insureds under their home or vehicle insurance policies.

For example, in one plan reviewed by the Board, members are entitled to certain free legal services, such as reviewing a contract, writing a letter, drafting a will, and one 30 minute consultation per year. These services are rendered by a local attorney called a "counseling attorney". The attorney's name is given to members calling a toll free number. The counseling attorney is paid $2.00 per member in West Virginia monthly for providing these services as needed.

However, if the member has a serious matter which goes beyond the services provided by the counseling attorney, the member is referred to a "panel attorney". The "panel attorney" is a lawyer who has entered into a contract with the organization to give members a 25% discount. The lawyer pays the organization a $400 administrative fee which ostensibly goes toward the cost of computer and Internet set-up. There is also an annual "administrative fee" of $200 per area of law in which the attorney wishes to be designated. The organization pays nothing to the participating lawyer.

It is the opinion of the Board that such an arrangement is essentially payment to the organization for referring its insured to a lawyer and is thus impermissible under Rule 7.2(c) of the Rules of Professional Conduct.

APPROVED this 19th day of November, 1997.

Paul M. Friedberg, Chairperson
Lawyer Disciplinary Board
State of West Virginia

[1] The Code of Professional Responsibility, in effect until 1989, set out in detail the circumstances under which a lawyer could be recommended by an organization furnishing legal services to its members or beneficiaries. The organizations were required to file an annual report with The West Virginia State Bar. See DR 2-103(D)(4).