From the Ethics Committee
Prepaid Legal Services: Can lawyers refer clients?
The Law Society has recently received a number of questions from lawyers about a prepaid legal services plan offered by "Pre-paid Legal Services Inc." This company has arranged with a law firm in B.C. to provide toll-free legal advice by telephone, to provide certain legal services and to offer discount legal fees to subscribers who pay a monthly fee.
Pre-paid Legal Services Inc. is encouraging B.C. lawyers to refer people to the plan. Lawyers would be paid a commission based on the number of referrals they make to the plan, as well as on the number of referrals that their referrals make to the plan.
One lawyer recently asked for an opinion from the Ethics Committee:
1. What obligations does a lawyer have when acting for a person who is covered by prepaid legal insurance?
2. May a lawyer properly refer a client to a plan such as Pre-paid Legal Services and, if so, what obligations does the lawyer have to the client if such a referral is contemplated?
Lawyers acting for persons covered by a prepaid legal services plan
The Ethics Committee notes that Chapter 9, Rule 4 of the Professional Conduct Handbook sets out the obligations of a lawyer who agrees to act for a client who was referred to that lawyer by a prepaid legal services plan. That rule reads:
A lawyer who accepts a client referred by a prepaid legal services plan shall advise the client in writing of:
(a) the scope of work to be undertaken by the lawyer under the plan, and
(b) the extent to which a fee or disbursement will be payable by the client to the lawyer.
Lawyers making referrals to a prepaid legal services plan
It is the Ethics Committee’s opinion that a lawyer may properly refer a client to the plan offered by Pre-paid Legal Services Inc. or to another prepaid legal services plan. However, if the lawyer does refer a client to such a plan, the lawyer’s duties include the following:
1. The lawyer must have a genuine belief that clients the lawyer refers to the plan may benefit from joining the plan;
2. The lawyer must canvas other options suitable to a client’s needs, if any;
3. The lawyer must advise clients of the lawyer’s own assessment of the suitability of the plan to the client’s needs; and
4. The lawyer must advise the client of any prospective benefit the lawyer may derive from the referral and secure the client’s consent to receiving the benefit, in accordance with Chapter 9, Rule 8 of the Professional Conduct Handbook.
Chapter 9, Rule 8 of the Handbook provides:
A lawyer shall take no fee, reward, costs, commission, interest, rebate, agency or forwarding allowance or other compensation whatsoever related to the lawyer’s professional employment from anyone other than the client or the person who is paying part or all of the lawyer’s fee on behalf of the client, without full disclosure to and consent of the client or that other person.
If lawyers are considering (outside their legal practice) referring people who are not clients to a prepaid legal services plan, they should be aware of the provisions of Chapter 7, Rule 6 of the Handbook, which reads:
A lawyer shall not carry on any business or occupation other than the practice of law in such a way that:
(a) a person might reasonably find it difficult to determine whether in any matter the lawyer is acting as a lawyer, or
(b) a person might reasonably expect that in the carrying on of the other business or occupation the lawyer will exercise legal judgement or skill for the protection of that person.