JURY OUT ON PREPAID LEGAL PLANS rTC Employees get advise as a group benefit


Proponents liken them to having a lawyer on a permanent retainer.

Critics say they abhor complicated law problems, because the payoff isn't worth the time and effort.

They're prepaid group legal plans, a concept that's been around for about two decades and in recent years has been growing steadily and winning major clients.

AT&T;, Procter & Gamble Co., General Motors Corp., the University of California and Signet Bank are some of the institutions that have prepaid legal programs in their benefits packages.

The legal plans work like prepaid dental or medical plans, in that a specified amount of money is deducted from a participating employee's paycheck periodically. The only difference is that the commodity being paid for is legal services, and the telephone is often used to deliver it.

If a lawyer is needed to appear in court in a divorce, personal injury, landlord-tenant or probate case, most prepaid legal plans make provisions for such services, said Adrian Hochstadt, staff counsel for the American Prepaid Legal Services Institute. Criminal proceedings and business matters usually aren't covered, he added.

Detractors note that people who have intricate legal problems often wind up paying fees above and beyond their premiums.

Encore Marketing International Inc., a Prince George's County company with 600 employees, has had a prepaid legal services option for its workers for about three years, according to Jeffrey A. Barlow, Encore's human resources director.

"We're very satisfied," said Mr. Barlow, whose Lanham firm contracts with a company called LawPhone. "Many of these people have basic legal needs such as tenant leases, major purchases -- cars, homes -- things like that.

"We're set up to charge $2 per pay period per employee and we have 26 pay periods, so its $52 dollars," Mr. Barlow said. "So, it's a very inexpensive plan for these people. The quality of service has been good, and the participation has been good."

LawPhone, also based in Lanham, has roughly 800,000 clients and is the second-largest prepaid legal services firm in the nation, said Executive Vice President Sandra H. DeMent.

"People get involved with LawPhone because they realize that it can be enormously helpful to be able to just pick up the telephone and talk to an attorney without having to pay for that call -- without having to make an appointment to go see their lawyer, or hassle with finding the law office or paying for parking," she said. "It's a very affordable and easy way to get access to basic legal information and advice."

Lawyers don't sit around LawPhone with headphones on awaiting calls, she said. When a subscriber dials a special toll-free number, the attorney on the other end of the line is at a law firm contracted by LawPhone, Ms. DeMent said. LawPhone has ties with about 3,100 law firms nationwide, including one in Owings Mills, Edelstein and Stahl. At least five of those firms will be paid $100,000 apiece this year by LawPhone, Ms. DeMent said.

If a member's question is too complicated to deal with quickly, it is passed on to another firm with LawPhone ties, Ms. DeMent said. The attorneys charge fees for these referred cases, but there is a 25 percent discount, she said.

"Only about 15 percent of our calls require" such a referral, Ms. DeMent said.

Attorneys working for privately held LawPhone, which has 25 staffers and lists Diners Club among its clients, must have at least 10 years of experience and be in good standing with their local bar association, Ms. DeMent said.

Ralph Warner, a lawyer who is publisher of Nolo Press Inc. -- a Berkeley, Calif., company that prints self-help legal books -- is not enamored of prepaid legal plans.

Noting that "I'm not advocating self-help law books over lawyers in every situation by any means," Mr. Warner levels some pointed criticisms at the prepaid industry.

"By and large, the lawyers who sign up for these things are not the best lawyers," he said. "For many of these plans, all you have to do is be in practice for two years and be in good standing with the local bar association. What you're getting is a selection of people who are fairly new to practice and, for whatever reason or another, are not generating a lot of business."

William I. Weston, a University of Baltimore law professor, said that he dislikes the fact that prepaid legal plans won't pay to resolve complicated issues.

"I think the big problem with them is that none of them provide the whole service," Mr. Weston said. "To me, my insurance premium ought to cover a will, whether it's a complicated one or an uncomplicated one.

"If I have a gall bladder removed, Blue Cross doesn't say, 'We only cover simple operations, not complex ones.' "

Mr. Weston likes the basic idea behind prepaid legal services, which were originated in the 1970s by labor unions trying to cut their legal costs. Many unions then began to negotiate with corporations to put the plans into benefits packages.

"It was a wonderful concept to try to deliver legal services to people of moderate means," he said. "In some cases, these prepaid programs are good, for labor unions and for very basic, simple services."

Alec M. Schwartz, head of the American Prepaid Legal Services Institute, said about 17 million workers and their relatives use prepaid law services, compared with roughly 5 million 10 years ago.

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