§ 1116 — Prepaid legal services plans and legal services insurance

§ 1116. Prepaid legal services plans and legal services insurance. (a)\n(1) An authorized insurer subject to the provisions of this chapter\n(except an insurer organized to write the kinds of insurance specified\nin paragraph eighteen, twenty-three or twenty-five of subsection (a) of\nsection one thousand one hundred thirteen of this article or any\ncorporation licensed or organized pursuant to article sixty-six of this\nchapter) may, if licensed to transact legal services insurance, as\ndefined in paragraph twenty-nine of subsection (a) of section one\nthousand one hundred thirteen of this article, be authorized by the\nsuperintendent to issue contracts of legal services in connection with a\nprepaid legal services plan, if such plans satisfy the criteria set\nforth in subsection (b) of this section and the superintendent makes the\ndeterminations set forth in subsection (g) of this section. The\nprovisions of this section shall be applicable to a corporation\norganized pursuant to article forty-three of this chapter only if the\nproposed plan and method of operations have been approved by a vote of\nat least two-thirds of the corporation's board of directors before the\nplan is submitted to the superintendent.\n (2) A prepaid legal services plan may include legal services insurance\nas part of the plan, provided however, not more than an incidental\namount of the premium with respect to such prepaid legal services plan\nshall be attributable to legal services for defense only coverages for\ncommercial or other business related lawsuits or arbitration proceedings\ncommenced against the business entity that purchased the policy.\n (3) Legal services insurance may not be written except (i) in\nconjunction with prepaid legal services plans as authorized in this\nsection, or (ii) pursuant to a regulation promulgated by the\nsuperintendent permitting legal services insurance to be written as part\nof a policy of liability insurance covering related risks and, provided\nfurther, that legal services for defense only coverages for commercial\nor other business related lawsuits or arbitration proceedings commenced\nagainst the business entity that purchased the policy is not more than\nan incidental part of such liability insurance.\n (b) The superintendent may, in accordance with the provisions of\narticle twenty-three of this chapter, authorize the issuance of\ncontracts in connection with a prepaid legal services plan when such\nplan satisfies the following criteria:\n (1) its provisions are not misleading, confusing or inconsistent with\nthe needs of the public;\n (2) it avoids interference with judicial supervision over the\nprofessional and public obligations of lawyers;\n (3) it provides for prompt resolution of grievances concerning\nbenefits;\n (4) it does not restrict the beneficiary's choice of attorney,\nprovided, however, that compensation by the plan for attorneys not\nparticipating in the plan shall be subject to the schedule of benefits\nand fee structure set forth in the applicable contract and, provided\nfurther, that nothing herein shall be construed as prohibiting an\nattorney who is not participating in the plan from charging a fee for\nservices provided in excess of the schedule of benefits or fee structure\nset forth in the applicable contract;\n (5) it provides for a broad range of legal services, through personal\nand telephone consultations, such as wills, residential real estate\nmatters and domestic relations matters, provided nothing herein shall\nrequire or prohibit the offering of a particular type of legal services\nby a prepaid legal services plan;\n (6) it provides for written disclosure to contract holders, including\na description of the schedule of benefits, fee structure, exclusions or\nother limitations on benefits, and an explanation of a covered person's\nfinancial responsibility for the payment of premiums, co-payments,\ndeductibles or amounts charged in excess of the schedule of benefits or\nfee structure by attorneys not participating in a plan;\n (7) unless it provides for a shorter period, as provided in a\nparagraph two of subsection (d) of section three thousand four hundred\ntwenty-six of this chapter, or for a longer period, the plan shall be\nissued or renewed for a one-year policy period;\n (8) it may be cancelled by an insurer only if cancellation is based on\none or more of the reasons set forth in paragraph one of subsection (c)\nof section three thousand four hundred twenty-six of this chapter upon\nno less than fifteen days written notice to a contract holder and shall\ninclude no less than a fifteen-day grace period in the event of a\ncancellation based on non-payment of premium, provided, however, in the\nevent a contract is issued on a group basis, an individual group member\nmay be canceled upon termination of his or her employment with or\nmembership in the group contract holder;\n (9) it may be nonrenewed by an insurer for any reason upon at least\nforty-five, but not more than sixty, days written notice to a contract\nholder; and\n (10) it may be cancelled by a contract holder for any reason upon\nthirty days written notice to an insurer.\n (c) The contracts may be issued on a group basis subject to\nregulations promulgated by the superintendent.\n (d) Such contracts shall be subject to all other applicable provisions\nof this chapter and regulations thereunder.\n (e) The superintendent may permit an authorized insurer subject to the\nprovisions of this section to enter into contracts with any corporation\nor other organization, which provides or sponsors a prepaid legal\nservices plan not subject to this chapter, to administer such plan if\nthe plan satisfies the criteria set forth in subsection (b) of this\nsection and provided the superintendent makes the determinations set\nforth in subsection (g) of this section. Such administration may\ninclude, but need not be limited to, marketing, actuarial, data\nprocessing, accounting, claims and other related services. Such\ncontracts shall provide for the payment of a reasonable fee for such\nadministrative services.\n (f) The superintendent may permit an authorized insurer subject to the\nprovisions of this chapter to reinsure the risk of any prepaid legal\nservices plan as if it were legal services insurance if the plan\nsatisfies the criteria set forth in subsection (b) of this section,\nprovided the superintendent makes the determinations set forth in\nsubsection (g) of this section. Such reinsurance agreements shall\nprovide for the payment of a reasonable premium.\n (g) The superintendent may take the actions set forth in subsections\n(a), (e) and (f) of this section only if the superintendent determines,\nwith respect to each such action, that:\n (1) the sponsors and other participants in the plan can reasonably be\nanticipated to be able to carry out their responsibilities under the\nplan, and\n (2) the plan attempts to address the problem that desired legal\nservices are unavailable to some citizens of this state because some\nindividuals and families who are not eligible for government subsidized\nprograms cannot afford the cost of those services, and\n (3) the proposed activity by the authorized insurer will not cause or\nconstitute an impairment of the insurer's ability to satisfy its\nexisting and anticipated contracts and other obligations, including such\nstandards as the superintendent prescribes concerning adequate capital\nand financial requirements.\n (h) The superintendent shall promulgate such regulations that are\nnecessary to implement the provisions of this section.\n