Are prepaid legal services worthwhile?

Although it may not take as much to keep a good employee as it did when jobs were more abundant, employers are generally always on the lookout for benefits they can offer which attract and keep employees at reasonable terms. One benefit that some firms now offer is “legal insurance.” The basic concept is that for a premium payment, the employee will have access to a lawyer for covered services. While every insurer who offers this product can come up with its own terms, there is enough commonality among them to give you a general idea of how these legal insurance benefits work.

• Somebody pays the fee: That could be the employer or the employees. Just as with any other insurance, if the premium isn't paid, coverage stops although the “plan attorney” will continue to provide service for ongoing matters. If the employee is to pay the premium, he or she has to have made an assessment of the value of the coverage.

• Go to a plan attorney: Just as health insurance plans have in-network and out-of-network hospitals, clinics and doctors, legal services insurance relies on the participation of attorneys who agree to accept what the insurer will pay in fees. If a client uses the plan attorney, he or she does not pay anything for the attorney's time (although the client will be responsible for out-of-pocket expenses such as court filing fees, transcripts, etc.). If a client wants to use a non-plan attorney, he or she can be reimbursed for up to as much as the plan attorney would have charged. The difference here is that while many, if not most, doctors agree to accept health insurance, not many lawyers have yet signed up for this relatively low-rate work, so the client's choice of a lawyer is probably a lot more limited.

• Not everyone is covered: Dependent children (including adopted or stepchildren) can usually be covered, but you have to check the fine print as to how they define “dependent.” Also, even if the legal services insurance is offered at no cost to the participating employee, the plan may require the employee to pay for dependent coverage, to cover spouses as well as children.

• Not all services are covered: This is probably the hardest area to sort out because, as with other insurance policies, policies are not very detailed in telling you what is not service. In general, these insurers are covering day-to-day personal kinds of issues, but not all of them.

For example, it will cover the defense of traffic citations, but not driving under the influence. It will not cover criminal matters, except for a minor in juvenile court. It will pay for preparing wills, adopting children, filing bankruptcy, and buying or selling a house. It will pay for routine consultation with a lawyer on covered subjects and defend an employee if he is sued, but will not pay for him to sue other people (so if the employee sues and gets a counterclaim, he has to pay the lawyer himself).

It will not represent the employee in any matter adverse to the employer, including worker's comp claims. It will counsel and defend an employee against debt collectors or garnishments or foreclosures, and represent the employee in filing bankruptcy, but not in filing claims as a creditor in someone else's bankruptcy.

It is not going to provide business advice, so if the employee has his own rental property and wants to evict a tenant, or she has an idea she wants to patent, or she wants to sue her employer, the policy won't cover the legal work. It will represent a victim of domestic abuse, but not an accused abuser (or other criminal charges, for that matter).

The policies reviewed here did not cover divorces, child support, alimony or support disputes, which are among the most frequently used legal services, and will only cover representing the employee (and not the prospective spouse) in drafting a pre-marital agreement.

Most of the types of services covered are the ones for which it is easier to predict costs, and the ones that are not covered are the types that could run into a lot of money. Since most people don't access lawyers frequently, it may be much harder to judge what the worth is of purchasing legal services insurance.

So, before an employee signs up for this insurance, or an employer offers to pay for it, it would be a good idea to take a poll of what are the most frequently used legal services and what employees are paying for them.

Susan McGreevy is a partner at Stinson, Morrison, Hecker LLP, Kansas City, Mo., 816/842-4800, e-mail to [email protected].