N.Y. Insurance Law § 1116: Prepaid legal services plans and legal services insurance

§ 1116. Prepaid legal services plans and legal services insurance. (a)

(1) An authorized insurer subject to the provisions of this chapter

(except an insurer organized to write the kinds of insurance specified

in paragraph eighteen, twenty-three or twenty-five of subsection (a) of

section one thousand one hundred thirteen of this article or any

corporation licensed or organized pursuant to article sixty-six of this

chapter) may, if licensed to transact legal services insurance, as

defined in paragraph twenty-nine of subsection (a) of section one

thousand one hundred thirteen of this article, be authorized by the

superintendent to issue contracts of legal services in connection with a

prepaid legal services plan, if such plans satisfy the criteria set

forth in subsection (b) of this section and the superintendent makes the

determinations set forth in subsection (g) of this section. The

provisions of this section shall be applicable to a corporation

organized pursuant to article forty-three of this chapter only if the

proposed plan and method of operations have been approved by a vote of

at least two-thirds of the corporation's board of directors before the

plan is submitted to the superintendent.

(2) A prepaid legal services plan may include legal services insurance

as part of the plan, provided however, not more than an incidental

amount of the premium with respect to such prepaid legal services plan

shall be attributable to legal services for defense only coverages for

commercial or other business related lawsuits or arbitration proceedings

commenced against the business entity that purchased the policy.

(3) Legal services insurance may not be written except (i) in

conjunction with prepaid legal services plans as authorized in this

section, or (ii) pursuant to a regulation promulgated by the

superintendent permitting legal services insurance to be written as part

of a policy of liability insurance covering related risks and, provided

further, that legal services for defense only coverages for commercial

or other business related lawsuits or arbitration proceedings commenced

against the business entity that purchased the policy is not more than

an incidental part of such liability insurance.

(b) The superintendent may, in accordance with the provisions of

article twenty-three of this chapter, authorize the issuance of

contracts in connection with a prepaid legal services plan when such

plan satisfies the following criteria:

(1) its provisions are not misleading, confusing or inconsistent with

the needs of the public;

(2) it avoids interference with judicial supervision over the

professional and public obligations of lawyers;

(3) it provides for prompt resolution of grievances concerning

benefits;

(4) it does not restrict the beneficiary's choice of attorney,

provided, however, that compensation by the plan for attorneys not

participating in the plan shall be subject to the schedule of benefits

and fee structure set forth in the applicable contract and, provided

further, that nothing herein shall be construed as prohibiting an

attorney who is not participating in the plan from charging a fee for

services provided in excess of the schedule of benefits or fee structure

set forth in the applicable contract;

(5) it provides for a broad range of legal services, through personal

and telephone consultations, such as wills, residential real estate

matters and domestic relations matters, provided nothing herein shall

require or prohibit the offering of a particular type of legal services

by a prepaid legal services plan;

(6) it provides for written disclosure to contract holders, including

a description of the schedule of benefits, fee structure, exclusions or

other limitations on benefits, and an explanation of a covered person's

financial responsibility for the payment of premiums, co-payments,

deductibles or amounts charged in excess of the schedule of benefits or

fee structure by attorneys not participating in a plan;

(7) unless it provides for a shorter period, as provided in a

paragraph two of subsection (d) of section three thousand four hundred

twenty-six of this chapter, or for a longer period, the plan shall be

issued or renewed for a one-year policy period;

(8) it may be cancelled by an insurer only if cancellation is based on

one or more of the reasons set forth in paragraph one of subsection (c)

of section three thousand four hundred twenty-six of this chapter upon

no less than fifteen days written notice to a contract holder and shall

include no less than a fifteen-day grace period in the event of a

cancellation based on non-payment of premium, provided, however, in the

event a contract is issued on a group basis, an individual group member

may be canceled upon termination of his or her employment with or

membership in the group contract holder;

(9) it may be nonrenewed by an insurer for any reason upon at least

forty-five, but not more than sixty, days written notice to a contract

holder; and

(10) it may be cancelled by a contract holder for any reason upon

thirty days written notice to an insurer.

(c) The contracts may be issued on a group basis subject to

regulations promulgated by the superintendent.

(d) Such contracts shall be subject to all other applicable provisions

of this chapter and regulations thereunder.

(e) The superintendent may permit an authorized insurer subject to the

provisions of this section to enter into contracts with any corporation

or other organization, which provides or sponsors a prepaid legal

services plan not subject to this chapter, to administer such plan if

the plan satisfies the criteria set forth in subsection (b) of this

section and provided the superintendent makes the determinations set

forth in subsection (g) of this section. Such administration may

include, but need not be limited to, marketing, actuarial, data

processing, accounting, claims and other related services. Such

contracts shall provide for the payment of a reasonable fee for such

administrative services.

(f) The superintendent may permit an authorized insurer subject to the

provisions of this chapter to reinsure the risk of any prepaid legal

services plan as if it were legal services insurance if the plan

satisfies the criteria set forth in subsection (b) of this section,

provided the superintendent makes the determinations set forth in

subsection (g) of this section. Such reinsurance agreements shall

provide for the payment of a reasonable premium.

(g) The superintendent may take the actions set forth in subsections

(a), (e) and (f) of this section only if the superintendent determines,

with respect to each such action, that:

(1) the sponsors and other participants in the plan can reasonably be

anticipated to be able to carry out their responsibilities under the

plan, and

(2) the plan attempts to address the problem that desired legal

services are unavailable to some citizens of this state because some

individuals and families who are not eligible for government subsidized

programs cannot afford the cost of those services, and

(3) the proposed activity by the authorized insurer will not cause or

constitute an impairment of the insurer's ability to satisfy its

existing and anticipated contracts and other obligations, including such

standards as the superintendent prescribes concerning adequate capital

and financial requirements.

(h) The superintendent shall promulgate such regulations that are

necessary to implement the provisions of this section.