FOREWORD
This study on Prepaid Legal Services and Hawaii is presented in response to Senate Concurrent Resolution 54, House Draft 1, adopted during the 1975 legislative session.
This report gathers into one place numerous writings on prepaid Legal Services concerning its history and development, the types of prepaid legal service plans and considerations in developing such plans, and the legal problems which have been resolved and which yet remain to be resolved at the national and state level. The report contains suggestions for legislative action that will expedite the development of prepaid legal service plans in Hawaii.
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Chapter 1
INTRODUCTION TO PREPAID LEGAL SERVICES
PART I. INTRODUCTION
The following file on pay-as-you-go criminal services is submitted in response to Senate Concurrent Resolution 54, Residence Draft 1, which was adopted throughout the 1975 legislative consultation. Senate Concurrent Resolution fifty-four requested the Legislative Reference Bureau to have a look at the national improvement of prepaid felony offerings, to provoke and propose any law to expedite the development of a prepaid prison services application inside the country of Hawaii, and to report findings and recommendations to the 1976 legislative consultation. at some point in the improvement of prepaid felony offerings, one-of-a-kind phrases were used to consult these services.
Additionally, different phrases inappropriately had been used to talk about those offerings whilst in truth the terms efficaciously observe to any other interest. As a way to avoid confusion in a discussion of pay-as-you-go legal offerings, sure phrases utilized in this record are defined. organization LegaZ services. institution felony offerings is a prevalent time period figuring out felony offerings concerning corporations or individuals and no longer necessarily containing an element of prepayment. Usually, the term identifies applications through which organized businesses, which include exertions unions or expert or fraternal institutions, provide legal help as a benefit of membership. similarly to regarding companies of consumers, but, the time period is now and again used to consult groups of providers inclusive of regulation firms or clinics.
1. Pay-as-you-go LegaZ services. Pay-as-you-go prison offerings are a form of a group legal provider. A prepaid prison service plan can be described as a gadget for turning in criminal services to a huge variety of customers, reasonably associated with corporations having a common interest wherein the cost of provider has been paid as you go with the aid of the institution member or through a few agencies on his behalf.
2. A parallel to pay-as-you-go medical service plans can be made. An affected person, or client (patron), can pay an annual top-class or authorize a periodic deduction from his or her paycheck;
Pay-as-you-go prison offerings AND HAWAII
The plan member then will become entitled to a fixed quantity of scientific (legal) services which may be defined either in terms of a fixed greenback amount a year or in terms of most quantities for precise services. Criminal care and judicare are terms that can be every so often used to consult pay-as-you-go prison services, however in the states using a system so named the offerings furnished are similar to the ones provided by legal aid in Hawaii. three therefore, those phrases should no longer be used to consult Prepaid Legal Services.
Prepaid LegaZ insurance. pay-as-you-go felony insurance additionally referred to as prepaid legal cost insurance is from time to time differentiated from prepaid felony offerings although the distinction is philosophical and is to a certain quantity a try and avoid the law of prepaid criminal provider plan below insureance statutes.
4. The distinction is about forth as follows:
Criminal fee insurance is a shape of insurance that indemnifies (reimburses) subscribers for precise (by means of settlement) prison costs they could incur. As in a coverage settlement, a blanketed character makes "premium" bills to an insurer, in this case, the "plan". If he uses a lawyer, the insurer or plan reimburses his expenses up to the coverage limits. As a result, prison fee coverage makes use of the principle of insurance in spreading the price of the danger over the individuals of the organization, thereby accomplishing lower prices for personal contributors of the organization who use legal offerings.
Pay-as-you-go prison offerings~ however, are not covered. pay-as-you-go criminal service plans (as described by way of this report) do no longer provide indemnity towards legal prices however as a substitute finance and deliver legal services. Contributions are collected from contributors earlier than any legal offerings are utilized, and the plan gives the institution individuals with legal services through its personal lawyers. As such, those plans commonly restrict the number of legal professionals that service the members. The pay-as-you-go felony provider plans use what is called a "closed panel", i.e., the plan retains its own felony team of workers or a lawyer or firm to whom participants should go for criminal services. five The problem with such differentiation is that both systems gather money in advance, and each provides distinctive.
INTRODUCTION
services and both spread the cost (risk); however, the closed panel is not necessary for a prepaid legal services plan. Reimbursement to the covered individual through an "insurance plan" is not necessary in all cases since the cost of the service may be paid directly to the attorney. For the purposes of this report, prepaid legal services and prepaid legal insurance will be treated identically. As discussed later both may fall under the definition of insurance contained in section 431-3, Hawaii Revised Statutes. Open Panel. A prepaid plan using an open panel means one in which the members of the plan are free to choose any attorney in the community.
The plan may be likened to the HMSA method of delivering medical services in Hawaii. Closed Panel. A prepaid plan using a closed panel is one in which the plan retains one or more attorneys to service the plan and the members of the plan are restricted to use these attorneys in obtaining the benefits of the plan. This is similar to the Kaiser method of delivering medical services.
Attorneys handling a particular closed panel plan may all be members of a single law firm, may be scattered throughout a number of law firms; or, in the case of a labor union, may be staff attorneys hired by the union solely to service plan members. Legal Clinics. A legal clinic is a relatively new term to legal practice and means a law office that attempts to furnish legal services at a cost lower than normally available through an orthodox legal office.
Costs are reduced through the use of paralegals to process clients, low rent, and extensive use of forms and mechanical devices. The theory is that the more intensively an attorney is used on legal matters, the less the cost to the client since the time spent on clerical and nonlegal matters is being spent by persons other than attorneys.
A clinic may be the firm that also provides legal services under a prepaid plan, but a clinic is not necessary for the furnishing of prepaid legal services. In summary, it should be noted that although neatly defined in this part, actual prepaid plans may include one or more components of each definition. For example, semi-closed panel plans exist in which if a member is not satisfied with the attorney servicing the plan, the member may go to an attorney outside of the plan and be reimbursed by the plan.
PART II. HISTORICAL
DEVELOPMENT
Group legal service plans have existed since the early 20th century. Many of the plans were formed by unions or other groups and the early plans were attacked in court by the various state bar associations as being unethical under the Code of Professional Responsibility. The attacks on the state bar associations were generally upheld by the courts until 1962.
Development in the Courts
a. State Courts
One of the earliest attempts to provide group legal services involved Merchants Protective Associations in a series of cases between 1915 and 1925. The Associations contracted with attorneys to provide the members of the Associations with legal advice and consultation on all personal, business, and private matters, both civil and criminal. Yearly membership fees, of which the attorneys received part, were charged. The Association corporation performed no other function. When the activities of the Associations were challenged in court, the arrangements were found to involve the unlawful practice of law by a corporation and the corporation lost its charter. In some instances, the attorneys involved were suspended or disbarred.
6. In the 1930s automobile clubs attempted to provide members with legal services relating to the ownership and use of automobiles. The attorneys for the clubs were either staff attorneys hired by the club or were attorneys retained by the clubs. These plans when challenged by the state bar associations also were struck down in court.
7. During the period 1930 to 1960 the Brotherhood of Railroad Trainmen established various 'legal service plans for its members. These plans were challenged in court by the state bar associations and in most instances the bar associations prevailed. The plans involved the establishment of regional counsel appointed by the Brotherhood. The attorneys brought litigation for injuries to Brotherhood members and agreed to charge a lower contingency fee than usual and to return a percentage of the fee to meet the expenses of the Legal Aid Department of the Brotherhood. When the Brother Hood Plans lost in court, its attorneys were reprimanded.
INTRODUCTION
Disciplined for soliciting employment, a breach of the Code of Professional Responsibility.
8. b. United States Supreme Court
The United States Supreme Court did not hear a group legal services case until 1962. Once presented with the concept, the Court, in a series of 4 major decisions, found that "meaningful access" to the courts is a group right protected under the First Amendment of the United States Constitution. In N.A.A.C.P. v. Button, 371 U.S. 415 (1962), the Court overruled the Virginia Supreme Court and held that the activities of the N.A.A.C.P. and its legal staff were modes of expression and association protected by the First and Fourteenth Amendment to the United States Constitution. The activities engaged in by the N.A.A.C.P. involved the solicitation of plaintiffs for desegregation suits challenging statutes in Virginia.
The specific activities involved included: financing litigation; maintaining an elected, paid legal staff to handle such litigation; distributing letters and bulletins to promote meetings designed to explain the legal aspects of desegregation efforts; and passing out forms on which the signatories could authorize the "firm" of N.A.A.C.P. and Defense Fund Lawyers to represent them in desegregation actions. The court stated that: In the context of NAACP objectives, litigation is not a technique of resolving private differences; it is a means for achieving the lawful objectives of equality of treatment by all government, federal, state, and local, for the members of the Negro community in this country. Therefore, it is a means of political expression.
9. In 1964, the Virginia State Bar, again trying to enforce the statute against solicitation of legal business by attorneys, brought suit to enjoin the Brotherhood of Railroad Trainmen from carrying on activities that the Bar charged constituted the solicitation of legal business and the unauthorized practice of law. In Brotherhood of Railroad Trainmen v. Virginia ex. rel. Virginia State Bar, 377 U.S. 1 (1964), the Court extended constitutional protection to the union's legal department. The activities engaged in involved soliciting personal injury claims of injured union members and referring them to attorneys who had agreed with the union to charge contingent fees lower than those of other practitioners.
Relying on the First Amendment guarantees of free speech, petition, and assembly as giving the railroad workers the right to help and advise each other in asserting rights granted by Congress under the Safety Appliance Act and the Federal Employees' Liability Act, the Court concluded: We hold that the First and Fourteenth Amendments protect the right of members through their Brotherhood to maintain and execute out their process for suggesting that injured workers seek legal counsel and by selecting certain attorneys. •.•. [ajnd, of course, lawyers accepting employment under this constitutionally protected plan have a like protection which the State cannot abridge.
10. The Brotherhood case was of major importance in that protection was granted to purely economic interests of union members rather than the promotion of the national, social objective of desegregation allowed in Button. Its importance is reflected in the fact that 44 state and 4 local bar associations joined the American Bar Association in a motion for rehearing the Brotherhood case which was
denied.
11. Opposition by the bar associations of various states continued by attempting to read the Button and Brotherhood cases narrowly. This attempt failed in United Mine Workers of America~ District 12 v. Illinois State Bar Association, 389 u.S. 217 (1967), in which the court upheld a plan by which the union hired a licensed attorney, solely compensated by an annual salary, to represent union members and their dependents in connection with their claims under the Illinois Compensation Act.
The Court held that Button and Brotherhood were controlling. Thus, the Court found one type of closed panel plan for the first time. The final case in this series was United Transportation Union v. State Bar of Michigan, 401 u.S. 576 (1971), in which the Court upheld a union plan that channeled claimants under the Federal Employees' Liability Act to designated counsel and informed the claimant that the council would not charge more than 25 percent of the recovery which was lower than that charged nonunion members. The Court laid to rest bar opposition by stating: 6
INTRODUCTION
The principal here involved cannot be limited to the facts of this case. At issue is the basic right to group legal action... The common thread running throughout decisions in NAACP v. According to Button, Trainmen, and United Mine Workers, engaging in collective action to gain meaningful access to the courts is a fundamental right covered by the First Amendment's protection. However, that right would be a hollow promise if courts could deny associations of workers or others the means of enabling their members to meet the costs of legal representation.
Thus, for the present, the legal decisions protect the extension of legal services through a variety of plans.
National Bar Association Developments
As indicated by the court cases, the state bar associations were against the development of group legal services during the first half of this century. The activities of the state bar associations lessened after the Brotherhood case; and, although there is still resistance in some states, state bar associations are now attempting to encourage the formation of group plans.
The first state bar association to attempt such encouragement was the State Bar of California in 1964. A special committee of the bar made an inquiry into group legal
services in 1964 and made a report to the bar.13 Although the report was rejected at that time, it should be noted that California is now a leader in the formation of group and prepaid legal plans.
While some state bar associations were resisting the development of group legal services through 1971, the American Bar Association passed a strong resolution in 1965 on the availability of legal services and formed the Special Committee on Availability of Legal Services. The special committee was to study, among other topics, systems of prepaid legal services as one means of improving the delivery of legal services in the United States. In 1970 the special committee recommended the formation of a special committee to concentrate on prepaid legal services alone. Later in 1970, the Special Committee on Prepaid Legal Cost Insurance was formed which in 1971 changed its name to the Special Committ
ee on Prepaid Legal Services.
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