This chapter shall be known and may be cited as the 'Legal Expense Insurance Act'.
(a) Legal expense insurance may be written as individual, group, blanket or franchise insurance. Each contractual obligation for legal expense insurance must be evidenced by a policy. Each person insured under a group policy must be issued a certificate of coverage.
(b) No policy or certificate of legal expense insurance may be issued in this state unless a copy of the form has been filed and approved by the commissioner.
(c) The commissioner may not approve any form that does not meet the following requirements:
(1) Policies must contain a list and description of the legal service payments promised or the legal matters for which expenses are to be reimbursed and any limits on the amounts to be paid or reimbursed;
(2) Policies and certificates must indicate the name of the insurer and the full address of its principal place of business;
(3) Certificates issued under group policies must contain a full statement of the benefits provided and exceptions thereto, but may summarize the other terms of the master policy;
(4) Policies promising payment for legal services to be provided by a limited number of attorneys who have concluded provider contracts with the insurer, whether the attorney in an individual case is to be selected by the insured or by the insurer, must provide for alternative benefits in the case where the insured is unable to find a participating attorney willing to perform the promised services or the attorney selected by the insurer is disqualified or otherwise unable to perform the promised services. The alternative benefit may consist of furnishing the services of an attorney selected and paid by the insurer or paying the fee of an attorney selected by the insured. The policy must also provide a procedure that includes impartial review for settling disagreements about the grounds for demanding an alternative benefit;
(5) No policy except one issued by a mutual or reciprocal insurance company may provide for assessments on policyholders or for reduction of benefits for the purpose of maintaining the insurer's solvency;
(6) Policies must contain a statement that the subscriber has a right to complain to the State Bar of Alabama about attorney conduct pursuant to the plan; and
(7) Policies must contain a statement that the individual beneficiary has the right to retain, at his own expense, except where the policy provides otherwise, any attorney authorized to practice law in the state;
(d) The department may disapprove a policy or certificate form if it finds that it:
(1) Is unfair, unfairly discriminatory, misleading, ambiguous or encourages misrepresentation or misunderstanding of the contract;
(2) Provides coverage or benefits or contains other provisions that would endanger the solvency of the insurer; or
(3) Is contrary to law.
(a) No policy of legal expense insurance may be issued in this state unless the premium rates for the insurance have been filed with and approved by the commissioner.
(b) Premium rates must be established and justified in accordance with generally accepted insurance principles, including, but not limited to, the experience or judgment of the insurer making the rate filing or actuarial computations.
(c) The commissioner may disapprove rates that are excessive, inadequate or unfairly discriminatory. Rates are not unfairly discriminatory because they are averaged broadly among persons insured under group, blanket or franchise policies.
(d) The commissioner may require the submission of whatever relevant information is deemed necessary in determining whether to approve or disapprove a filing made under this section or Section 27-43-10.
(a) Contracts made between the insurer and participating attorneys, management contracts and contracts with other providers of services by the legal expense insurance policy must be filed with and approved by the commissioner.
(b) Insurers must annually report to the commissioner, in such detail as is reasonably required, the number and geographical distribution of attorneys and other providers of services covered by the legal expense insurance policy with whom it maintains contractual relations and the nature of the relations. For individual insurers or groups of insurers, the commissioner may require more frequent reports.
(a) A legal service insurance corporation will pay the prescribed fees and taxes required of a domestic casualty insurer.
(b) The following provisions of the insurance laws of this state apply to legal service insurance corporations authorized under Section 27-43-8, to the extent that they are not inconsistent with the provisions of this chapter:
(1) Chapters 27-1 and 27-2 - Administration and General Provisions;
(2) Chapter 27-4 - Fees and Taxes;
(3) Chapter 27-6 - Administration of Deposits;
(4) Chapter 27-11 [27-12], Code of Alabama, 1975 - Unfair Trade Practices; and
(5) Chapter 27-32 - Insurer Insolvency; Rehabilitation and Liquidation.
(c) The commissioner may by rule modify or waive any requirements referred to in subsection (b) of this section for legal service insurers if it is necessary to avoid unreasonable hardship, expense or inconvenience and if the interests of policyholders continue to be adequately protected.
Persons representing or aiding a legal service insurance corporation in the solicitation of legal expense insurance contracts in this state and the legal service insurance corporation with respect thereto shall be subject to Chapters 7 and 8A of this title, except that legal service insurance corporation producers shall be exempt from the 40-hour prelicensing course and written examination requirements of Chapter 7 of this title and the continuing education requirements of Chapter 8A of this title.
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
The purpose of this chapter is to authorize state certification and regulation of organizations which provide programs for the payment of the costs of legal services.
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
All moneys received from licenses and fees shall be deposited to the credit of the Examiners' Revolving Fund of the Department of Insurance.
The commissioner shall devise and promulgate rules and regulations, not inconsistent with the provisions of this chapter, as he deems advisable for effectuating its orderly administration.
Nothing contained in this chapter shall be construed to regulate the practice of law or limit the powers or authority of the Supreme Court of Alabama or State Bar of Alabama in the regulation of the conduct of attorneys.
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context requires otherwise:
(1) DEPARTMENT. The Department of Insurance;
(2) COMMISSIONER. The Commissioner of Insurance of this state;
(3) INSURER. Any person authorized to do a casualty insurance business or life, accident and sickness insurance business as an insurer in this state and organizations authorized to transact legal expense insurance under Section 27-43-8;
(4) LEGAL EXPENSE INSURANCE. Such term means, irrespective of the definition of insurance in other chapters under this title, the assumption of a contractual obligation to pay for specific legal services or to reimburse for specific legal expenses, in consideration of a specified payment in advance for an interval of time, regardless of whether the payment is made by the beneficiaries individually or by a third person for them, but does not include the provision of or reimbursement for legal services incidental to other insurance coverages.
The insurance laws of this state, including this chapter, do not apply to:
(1) Retainer contracts made by attorneys-at-law with individual clients with fees based on estimates of the nature and amount of services to be provided to the specific client and similar contracts made with a group of clients involved in the same or closely related legal matters;
(2) Any lawyer referral services authorized by the State Bar of Alabama;
(3) The furnishing of legal assistance by labor unions and other employee organizations to their members in matters relating to employment or occupations;
(4) The furnishing of legal assistance to members and/or dependents by churches, cooperatives, educational institutions, credit unions, labor unions or other organizations of employees, where such organizations contract with and pay directly a lawyer or law firm(s) for the provision of legal services, where the assistance is provided as an incident to membership and not on the basis of an optional fee or charge and the administration of such program of legal assistance is wholly conducted by the organization; and
(5) Employee welfare benefit plans to the extent that state laws are superseded by Section 514 of the Employee Retirement Income Security Act of 1974, provided evidence of exemption from state laws is shown to the department.
(a) No person or organization may do a prepaid legal expense insurance business in this state unless authorized to do so by the commissioner.
(b) This section does not apply to organizations exempt pursuant to Section 27-43-4.
(a) Any domestic, foreign or alien insurer authorized to transact casualty insurance or life, accident and sickness insurance in this state may transact legal expense insurance in this state.
(b) Legal service insurance corporations possessing a valid certificate of authority may transact legal expense insurance in this state.
(a) Any number of corporate or adult natural persons may organize a legal service insurance corporation under this section.
(b) The articles of incorporation shall conform to the requirements applicable to corporations, except that:
(1) The name of the corporation shall indicate that payment for legal services or indemnity for legal expenses is to be provided; and
(2) The purposes of the corporation shall be limited to payment for legal services or indemnity for legal expenses and business expenses reasonably related thereto.
(a) The incorporators shall file with the commissioner an application for a certificate of authority to do business upon a form to be furnished by the department, which shall include or have attached the following:
(1) The names and, for the preceding 10 years, all addresses and all occupations of all incorporators and proposed directors and officers;
(2) A certified copy of the corporate articles and bylaws and a list of the names, addresses and occupations of all directors and principal officers and, if previously incorporated, for the three most recent years, the corporation annual statements and reports;
(3) All agreements relating to the corporation to which any incorporator or proposed director or officer is a party;
(4) A statement of the amount and sources of the funds available for organization expenses and the proposed arrangements for reimbursement and compensation of incorporators or other persons;
(5) A statement of compensation of directors and officers;
(6) The forms to be used for any proposed contracts between the corporation and providers of legal services and any corporations which perform administrative, marketing or management services, concerning the provision of services to insureds;
(7) The plan for conducting the insurance business, including all of the following:
a. The geographical area in which business is intended to be done in the first five years;
b. The types of insurance intended to be written in the first five years, including specification whether and to what extent indemnity rather than service benefits are to be provided;
c. The proposed marketing methods;
d. Actuarial data or other similar statistical data, documented and verified in such manner as the department may reasonably require, affirmatively demonstrating the anticipated income and expenses in the first five years, including, without limitation, the projected expenditure for legal services and projected source of funds to make up any anticipated deficits.
(8) A current statement of the assets and liabilities of the applicant;
(9) Forms of all prepaid legal service contracts the applicant proposes to offer showing the rates to be charged for each form of contract; and
(10) Such other documents or information as the department may reasonably require;
(b) Copies of the documents filed pursuant to subdivisions (6) and (9) of subsection (a) of this section shall be filed with the State Bar of Alabama within five days of filing with the commissioner;
(c) The commissioner shall issue a certificate of authority if he is satisfied that:
(1) All requirements of law have been met;
(2) All natural persons who are incorporators, the directors and principal officers of corporate incorporators and the proposed directors and officers of the corporation being formed are trustworthy and competent and collectively have the competence and experience to engage in the particular insurance business proposed; and
(3) The business plan is consistent with the interests of the corporation's potential insureds and of the public.
(a) To assure the faithful performance of its obligations in the event of insolvency, each corporation authorized under Section 27-43-8 shall, through the commissioner, deposit and maintain with the Treasurer of the State securities of the type eligible for deposit by insurers under Section 27-6-3, which securities shall have at all times a market value as follows:
(1) An insurer which has transacted no legal expense insurance in this state prior to January 1, 1982, shall, prior to the issuance of its certificate of authority and before receiving any premiums, place in trust with the Treasurer of the State, through the commissioner an initial amount of $50,000.00;
(2) An insurer transacting a legal expense insurance business in this state prior to January 1, 1982 and having in force in this state less than $300,000.00 of gross written premiums, membership fees or similar charges shall place in trust with the Treasurer of the State, through the commissioner, a sum equal to 50 percent of the gross premiums in force or $50,000.00, whichever is less;
(3) An insurer transacting a legal expense insurance business in this state prior to January 1, 1982 and having in force in this state more than $300,000.00 but less than $750,000.00 of gross written premiums, membership fees or similar charges in this state shall place in trust with the Treasurer of the State, through the commissioner, an amount not less than $75,000.00; and
(4) An insurer transacting a legal expense insurance business in this state prior to January 1, 1982 and having in force in this state $750,000.00 or more of gross written premiums, membership fees or similar charges in this state shall place in trust with the Treasurer of the State, through the commissioner, an amount equal to $100,000.00.
(b) In lieu of any deposit of securities required under subsection (a) of this section and subject to the commissioner's approval, a legal service insurance corporation may file with the Treasurer of the State a surety bond issued by a surety insurer authorized to serve as surety under the provisions of Chapter 24 of this title. The bond shall be for the same purpose as the deposit in lieu of which it is filed. The department shall not approve any bond under the terms of which the protection afforded against insolvency is not equivalent to the protection afforded by those securities provided for in subsection (a) of this section.
(c) Securities or bonds posted pursuant to this section shall be for the benefit of and subject to action thereon in the event of insolvency or impairment of any legal service insurance corporation by any person or persons sustaining an actionable injury due to the failure of the corporation to faithfully perform its obligations to its insureds.
(d) The state shall be responsible for the safekeeping of all securities deposited with the Treasurer of the State under this chapter. Such securities shall not, on account of being in this state, be subject to taxation, but shall be held exclusively and solely to guarantee the legal service insurance corporation's performance of its obligations to its insureds.
(e) Such deposit or bond shall be maintained unimpaired as long as the legal service insurance corporation continues in business in this state. Whenever the corporation ceases to do business in this state and furnishes the commissioner proof satisfactory to the commissioner that it has discharged or otherwise adequately provided for all its obligations to its insureds in this state, the Treasurer of the State shall release the deposited securities to the parties entitled thereto, on presentation of the Treasurer's receipts for such securities, or shall release any bond filed with it in lieu of such deposit.
(f) The commissioner may at any time enter an order increasing the amount of the deposit or bond specified under subsections (a) and (b) of this section if he finds that there has been a substantial change in the facts, including an increase in the amounts of premiums, membership fees or similar charges in force in this state on which the original determination was based. The commissioner shall hold a hearing within 30 days after receiving a request from the corporation submitted within 30 days after being notified of the modification order. Failure to meet the new requirements within 30 days after final decision or after the expiration of the 30-day period for submitting the hearing request constitutes a ground for rehabilitation.
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