N.J. Stat. § 17:46C-1 Short title
This act shall be known and may be cited as the "New Jersey Legal Services Insurance Act." L.1981, c. 160, s. 1.
N.J. Stat. tit. 17, ch. 46C
N.J. Stat. tit. 17, ch. 46C
in effectN.J. Stat. § 17:46C-2 Legislative declarations
It is declared that there is a need to encourage the development of effective and economically sound methods for making legal services more readily available at reasonable cost to the citizens of New Jersey; that there is a need to protect the interest of the users of legal services and of the public of this State with a minimum of restrictions on experimentation with new forms of organization, administration, or benefits; that the risks inherent in experimentation with legal services plans should be borne by the promoters of new plans rather than by the customers; that persons other than professional insurers should be permitted and encouraged to provide legal services, subject to practical and reasonable financial and regulatory requirements; that effective competition between the various systems of financing legal services should be permitted and encouraged; and that it is the purpose of this act to meet the aforementioned needs and accomplish the aforementioned objectives. L.1981, c. 160, s. 2.
N.J. Stat. § 17:46C-3 Definitions
As used in this act: a. "Commissioner" means the Commissioner of Insurance. b. "Insurer" means any person who obtains a certificate of authority in accordance with the provisions of section 4 of this act and any person authorized to transact the business of insurance under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes. c. "Legal insurance" means the assumption of a contractual obligation to provide specified legal services or reimbursement for legal expenses in consideration of a specified payment for an interval of time, regardless of whether the payment is made by the beneficiaries individually or by a third person for them, in such a manner that the total cost incurred by assuming the obligation is to be spread directly or individually among a group of persons. Legal insurance shall not include the provision of or reimbursement for legal services incidental to other insurance coverages such as the duty to defend, nor shall the following be considered legal insurance under the laws of this State: (1) Retainer contracts made with individual clients with the fees based on estimates of the nature and the amount of services that will be provided to the specific client, and similar contracts made with a group of clients involved in the same or closely related legal matters such as class actions. (2) Plans providing no benefits other than a limited amount of consultation and advice on simple matters either alone or in combination with referral services or the promise of fee discounts for other matters. (3) Plans providing limited benefits on simple legal matters on an informal basis not involving a legally binding promise, in the context of an employment or educational or similar relationship. (4) Legal services provided by unions or employee associations to their members in matters relating to employment or occupation. (5) Employee benefit plans regulated by the "Employee Retirement Income Security Act of 1974," (P.L. 93-406, 29 U.S.C. 1001 et seq.). (6) Plans or legal services provided by a legal aid office or public defender office, a military legal assistance office, a lawyer referral service operated, sponsored or approved by a bar association representative of the general bar of the geographical area in which the association exists, or any other nonprofit organization that recommends, furnishes or pays for legal services to its members or beneficiaries in a manner incidental and reasonably related to a primary purpose of such organization to promote a public interest, including, without limitation, defense of human and civil rights, elimination of prejudice and discrimination as to race, religion, sex and national origin, lessening neighborhood tensions, preservation of scenic beauty, combatting or preventing pollution, preservation of natural resources, protection of consumer interest, promotion of cultural, historical or other educational activities, and prevention of cruelty to animals. As used herein, "contractual obligation" includes any arrangement in which those persons for whom services are to be provided under the arrangement have reasonable expectations of enforceable rights. L.1981, c. 160, s. 3.
N.J. Stat. § 17:46C-4 Certificate of authority; persons entitled to transact business without; necessity for other persons; application; fee; exemptions
a. (1) A person entitled to transact the business of insurance under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes may transact the business of legal insurance in this State without having to obtain a certificate of authority under this act. This paragraph shall not by itself enlarge the powers of any corporation entitled to transact the business of insurance under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes given by its articles of incorporation or charter, but shall authorize such a corporation formed under Title 14A of the New Jersey Statutes, Subtitle 3 of Title 17 of the Revised Statutes, Subtitle 3 of Title 17B of the New Jersey Statutes, Title 15 of the Revised Statutes or Title 16 of the Revised Statutes, including a hospital service corporation organized pursuant to P.L. 1938, c. 366 (C. 17:48-1 et seq.) to include in its powers the authority to transact the business of legal insurance. (2) No other person may transact the business of legal insurance unless he applies for and obtains a certificate of authority to transact the business of legal insurance in compliance with this act. (3) An application for a certificate of authority to transact the business of legal insurance shall be in a form prescribed by the commissioner and shall be accompanied by a fee of $250.00. If the applicant is not domiciled in this State, the application shall be accompanied by a power of attorney duly executed by the applicant appointing the commissioner and his successors in office, and duly authorized deputies, as the true and lawful attorney of the applicant in and for this State, upon whom all lawful process in any legal action or proceeding against the applicant on a cause of action arising in this State shall be served. b. Except for section 26 of this act, this act shall not apply to any person issuing group or blanket policies if fewer than 5% of the certificate holders of insureds reside in this State and the person is regulated to a comparable extent by another state in which a larger number of certificate holders or insureds reside. Any person exempt under this subsection shall file an annual report with the commissioner in accordance with the rules and regulations promulgated by the commissioner. L.1981, c. 160, s. 4. Amended by L.1983, c. 342, s. 1, eff. Sept. 8, 1983.
N.J. Stat. § 17:46C-5 Conditions for issuance; order stating person provides legal insurance
a. A certificate of authority shall be issued if the commissioner is satisfied that the following conditions are met: (1) The persons responsible for the conduct of the affairs of the applicant are competent, trustworthy, and of good reputation; (2) The applicant demonstrates the willingness and ability to assure that the promised benefits can be provided. In making this determination the commissioner shall consider so far as applicable: (a) The adequacy of capital and surplus considered in relation to the other items in subsection a. (2) of this section; (b) The financial soundness of the applicant's arrangements for legal services and the rating system proposed to be used in connection therewith; (c) Any agreement with another person authorized to do business under this act, an insurer licensed under the general insurance law to do business in this State, a reinsurer eligible under the laws or regulations of this State to provide reinsurance, or an agency of the Federal or State Government for insuring the payment of the cost of legal services or the provision for automatic applicability of an alternative coverage in the event the insurer is unable to perform its obligations; (d) Any surety bond or deposit of cash or securities as a guarantee that the obligation will be duly performed; and (e) If the applicant is licensed as an insurer under insurance laws of other states, whether the applicant has complied with the requirements of those laws. b. At the request of an applicant, the commissioner shall issue an order stating whether a person is providing legal insurance as defined in section 3c. of this act. L.1981, c. 160, s. 5.
N.J. Stat. § 17:46C-6 Policy or master policy; certificate of coverage; forms; rating system; approval; hearings
a. (1) Each contractual obligation for legal insurance shall be evidenced by a policy or master policy. Legal insurance may be written on an individual basis or on a group or blanket basis in accordance with the provisions of chapter 27 of Title 17B of the New Jersey Statutes. Each person insured under a group policy shall be issued a certificate of coverage. No legal insurance policy or certificate of any kind may be issued or delivered in this State unless and until a copy of the form thereof has been approved by the commissioner. (2) The forms shall meet the following requirements: (a) Policies shall contain a detailed list and description of the legal services promised or the legal matters for which expenses are to be reimbursed and the amount or method of reimbursement; (b) Policies and certificates shall indicate prominently the name of the insurer and the full address of its principal place of business; (c) Certificates issued under group policies may summarize the terms of the master contract but shall contain a full and clear statement of the benefits provided; and (d) Such other requirements as the commissioner shall determine. (3) The commissioner shall disapprove a form if it is found that it: (a) Does not meet the requirements of subsection a. (2) of this section; (b) Is unfair, unfairly discriminatory, misleading, obscure or encourages misrepresentation or misunderstanding of the contract, including cases where the form: (i) Provides coverage or benefits that are too restricted to achieve the purposes for which the policy is designed; (ii) Fails to attain a reasonable degree of readability, simplicity and conciseness; or (iii) Is misleading, deceptive or obscure because of its physical aspects such as format, typography, style, color, material or organization; (c) Provides coverage or benefits or contains other provisions that would endanger the solvency of the insurer; (d) Is contrary to law; or (e) Provides coverage or benefits for legal services rendered in connection with defending criminal charges in which the victim of the crime or a member of his immediate family or any corporation or partnership in which the victim has a substantial interest contributed to the plan on behalf of the insured. b. (1) Every person shall, before using or applying any rate to legal insurance, file with the commissioner for approval a copy of the rating system upon which such rate is based, or by which such rate is fixed or determined. From and after the date of the approval of its rating system, every insurer shall charge and receive rates fixed or determined in strict conformity therewith. The commissioner may permit an insurer to file and use a rate for a 3-year period before approving or disapproving the rate so that appropriate expense and claims experience can be obtained through a statistical plan for use in his determination of the rate. (2) The rates produced from such rating system shall meet the following requirements: (a) They shall 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; and (b) They shall not be excessive, inadequate or unfairly discriminatory. Rates shall not be deemed unfairly discriminatory because they are averaged broadly among persons insured under group or blanket policies. (3) The commissioner may, by written order, suspend or modify the requirement for filing and approval for any risk, group or class of risk the rates for which cannot practically be filed before they are used. c. If the commissioner disapproves a filing he shall notify the person making it in writing specifying therein the reasons for disapproval. A hearing shall be granted after a request in writing by any such person aggrieved by the disapproval. The commissioner may, after notice and hearing, disapprove any rating system that has been previously approved; provided that such disapproval shall apply only to rating systems used on and after the date of said disapproval. d. The commissioner may require the submission of whatever relevant information is reasonably necessary in determining whether to approve or disapprove a filing made pursuant to subsection a. or b. of this section. L.1981, c. 160, s. 6.
N.J. Stat. § 17:46C-7 Transaction of business of legal insurance along with any other business; segregated accounts
Except for employee welfare benefit plans regulated by the "Employee Retirement Income Security Act of 1974" (P.L. 93-406, 29 U.S.C. 1001 et seq.), a person who obtains a certificate of authority under this act and who transacts the business of legal insurance along with any other business shall transact legal insurance wholly within a segregated account in accordance with the following requirements: a. The segregated account shall satisfy the financial requirements for issuance of a certificate of authority; b. Except under subsections f. and g. of this section the income and assets attributable to a segregated account shall always remain identifiable with the account but, unless the commissioner so orders, the assets need not be kept physically separate from other assets of said person. The income, gains and losses, whether or not realized, from assets attributable to a segregated account shall be credited to or charged against the account without regard to other income, gains or losses of said person; c. Except under subsection d. of this section, the assets attributable to a segregated account shall not be chargeable with any liabilities arising out of any other business of the person, nor shall any assets not attributable to the account be chargeable with any liabilities arising out of the segregated account; d. The segregated account shall be deemed an insurer within the meaning of P.L.1975, c. 113 (C. 17:30C-1 et seq.). Claims remaining unpaid after completion of the liquidation under P.L.1975, c. 113 (C. 17:30C-1 et seq.) shall be liens against the interests of shareholders, if any, in all of said person's assets that are not liquidated; e. Assets allocated to segregated accounts shall be the property of said person, which person shall not be nor hold himself out to be a trustee of the assets; f. Said person may allocate a portion or part of a particular asset to the segregated account; g. Said person may by an identifiable act transfer assets to or from the segregated account if: (1) The terms are fair and reasonable; and (2) The books, accounts and records of each party having an interest in the account are so maintained as to clearly and accurately disclose the precise nature and details of the transaction. L.1981, c. 160, s. 7.
N.J. Stat. § 17:46C-8 Management contract; approval
a. An insurer who obtains a certificate of authority in accordance with the provisions of section 4 of this act may not enter into any management contract, unless the contract is first filed with the commissioner and not disapproved under this section. b. The commissioner shall disapprove a contract under subsection a. of this section if he finds that: (1) It subjects the insurer to excessive charges; or (2) The contract extends for an unreasonable period of time; or (3) The contract does not contain fair and adequate standards of performance; or (4) The persons empowered under the contract to manage the insurer are not sufficiently trustworthy, competent, experienced and free from conflict of interest to manage the insurer with due regard for the interests of its insureds, creditors or the public; or (5) The contract contains provisions which impair the interests of the insurer's insureds or creditors or the public. L.1981, c. 160, s. 8.
N.J. Stat. § 17:46C-8.1 Legal insurance, prepaid, defined, certain related services differentiated.
1. a. A prepaid legal insurance plan shall be considered “legal insurance” subject to all provisions of the “New Jersey Legal Services Insurance Act” except as provided in this section. Notwithstanding the provisions of any other law to the contrary, a person shall not sell, or offer to sell, coverage under a prepaid legal insurance plan unless licensed as a limited lines prepaid legal insurance plan producer pursuant to the provisions of the “New Jersey Insurance Producer Licensing Act of 2001,” P.L.2001, c.210 (C.17:22A-26 et seq.) or as authorized under this section. Notwithstanding the provisions of section 14 of P.L.1981, c.160 (C.17:46C-14) or any law to the contrary, a person authorized to sell or offer to sell prepaid legal insurance plans to consumers under this section may be paid commissions through an entity or a designated representative of the entity that obtains a limited lines prepaid legal insurance producer plan license. b. The employees and authorized representatives of an entity that obtains a certificate of authority under the “New Jersey Legal Services Insurance Act,” P.L.1981, c.160 (C.17:46C-1 et seq.), may sell or offer to sell prepaid legal insurance plans to consumers as permitted by this section and shall not be subject to individual licensure as an insurance producer under P.L. 2001, c.210 (C.17:22A-26 et seq.) as a condition of selling or offering to sell prepaid legal insurance plans to consumers, provided that: (1) The entity or a designated representative of the entity obtains a limited lines prepaid legal insurance producer plan license to authorize its employees or authorized representatives to sell or offer prepaid legal insurance plans pursuant to this section; (2) The entity possessing the certificate of authority and issuing the prepaid legal insurance plan either directly supervises, or appoints a supervising entity that is a licensed limited lines prepaid legal insurance plan producer to supervise, the employees and authorized representatives selling or offering to sell prepaid legal insurance plans pursuant to this section; and (3) The entity possessing the certificate of authority and issuing the prepaid legal insurance plans develops a training program for employees selling or offering to sell prepaid legal insurance plans. The training required by this paragraph shall: (a) be delivered to every employee and authorized representative who is directly engaged in the activity of selling or offering prepaid legal insurance plans; and (b) include basic instruction about the prepaid legal insurance plans offered to consumers, including the provisions of the prepaid legal insurance plan and the requirements of the “New Jersey Legal Services Insurance Act,” P.L.1981, c.160 (C.17:46C-1 et seq.). c. Consistent with the provisions of the “New Jersey Insurance Producer Licensing Act of 2001,” P.L.2001, c.210 (C.17:22A-26 et seq.), an application for a limited lines insurance producer license under this section shall be made to and filed with the Department of Banking and Insurance on forms prescribed and furnished by the commissioner. d. Limited lines prepaid legal insurance plan producer licenses issued pursuant to this section shall renew biennially in accordance with regulations promulgated by the commissioner. e. Each entity shall pay to the commissioner a fee as prescribed by the commissioner for an initial limited lines prepaid legal insurance plan producer license and for each renewal thereof. f. For purposes of this section, “prepaid legal insurance plan” means legal insurance that consists of an arrangement through which members prepay for specified legal services, which are available to the members, or their dependents, through an organization that contracts directly with attorneys for the provision of the specified legal services and the organization pays the attorneys fixed, pre-arranged payments and the attorneys receive no additional payment or reimbursement from the organization for the specified legal services or the specified legal expenses. L.2025, c.170.
N.J. Stat. § 17:46C-9 Annual report by insurers; exceptions
An insurer other than an insurer authorized to transact the business of insurance under subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes shall annually, on or before the first day of March, file with the commissioner a report covering the preceding calendar year verified by at least two principal officers. The report shall be on forms prescribed by the commissioner and shall include: a. A financial statement of the insurer's legal insurance business on December 31 of the year last preceding, including: (1) Its balance sheet, and (2) Its receipts and disbursements for the preceding year; b. Any material changes in the information submitted pursuant to section 5 of this act; c. Such information about the number of persons insured and terminated as may be prescribed by the commissioner; d. Such other information relating to the performance of the insurer as is necessary to enable the commissioner to carry out his duties under this act. L.1981, c. 160, s. 9.
N.J. Stat. § 17:46C-10 Reserves
An insurer shall maintain the reserves necessary for the sound operation of the business including unearned premium reserves in a manner to be determined by the commissioner. L.1981, c. 160, s. 10.
N.J. Stat. § 17:46C-11 Investments
The investable funds generated through the transaction of the business of legal insurance by a person who obtains a certificate of authority under this act shall be invested in securities or other investments permitted by the laws of this State for the investment of assets of life insurers or in such other securities or investments as the commissioner shall permit. L.1981, c. 160, s. 11.
N.J. Stat. § 17:46C-12 Regulation of trade practices
Except where inconsistent with this act, P.L.1947, c. 379 (C. 17:29B-1 to 17:29B-14) shall apply to persons obtaining a certificate of authority under this act. L.1981, c. 160, s. 12.
N.J. Stat. § 17:46C-13 Rules and regulations
The commissioner shall promulgate rules and regulations to provide for the licensing of agents and brokers under this act, including the establishment of examination and licensing fees, and such other rules and regulations as are necessary or proper to carry out the provisions of this act, which rules and regulations are consistent with licensing requirements and standards in Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes. L.1981, c. 160, s. 13.
N.J. Stat. § 17:46C-14 Commissions to nonlicensees and rebates; prohibition
Commissions may not be paid to nonlicensees. Rebates are prohibited to the same extent as under Titles 17 of the Revised Statutes and 17B of the New Jersey Statutes. Penalties for noncompliance with this section shall be consistent with the licensing provisions of Titles 17 of the Revised Statutes and 17B of the New Jersey Statutes. L.1981, c. 160, s. 14.
N.J. Stat. § 17:46C-15 Examination of insurers; expenses; payment
The commissioner, in accordance with the procedures set forth in R.S. 17:23-4 et seq., shall make an examination of the affairs of any insurer obtaining a certificate of authority under this act as often as he deems it necessary for the protection of the interest of the people of this State. The commissioner shall have the power to charge the expenses of examination to the insurer in the manner in which they are charged under Titles 17 of the Revised Statutes and 17B of the New Jersey Statutes. L.1981, c. 160, s. 15.
N.J. Stat. § 17:46C-16 Report of violations of Code of Professional Responsibility
The commissioner shall report to the New Jersey Supreme Court any information which he considers to be indicative of possible violations of the Code of Professional Responsibility of the American Bar Association as amended by the New Jersey Supreme Court. L.1981, c. 160, s. 16.
N.J. Stat. § 17:46C-17 Suspension or revocation
The commissioner may suspend or revoke any certificate of authority issued to a person transacting the business of legal insurance under this act, after notice and hearing, for violation of any provision of the act. L.1981, c. 160, s. 17.
N.J. Stat. § 17:46C-18 Liquidation or dissolution
Any liquidation or dissolution of a person transacting the business of legal insurance shall be accomplished in accordance with the provisions of P.L.1975, c. 113 (C. 17:30C-1 et seq.). L.1981, c. 160, s. 18.
N.J. Stat. § 17:46C-19 Fees; payment
Every person subject to this act shall pay to the commissioner fees required by R.S. 17:33-1. L.1981, c. 160, s. 19.
N.J. Stat. § 17:46C-20 Retaliatory tax provisions; application
The provisions of P.L.1950, c. 231 (C. 17:32-15) relating to retaliatory tax provisions shall apply to insurers under this act. L.1981, c. 160, s. 20.
N.J. Stat. § 17:46C-21 Applications, filings and reports as public documents; application of attorney-client privilege; validity of independent judgment of attorney
All applications, filings, and reports required under this act shall be treated as public documents. Nothing contained in this act shall require the filing, reporting or disclosure of information or material which is subject to an attorney-client privilege or confidence, and no insurer shall question the independent judgment of an attorney providing legal services hereunder. L.1981, c. 160, s. 21.
N.J. Stat. § 17:46C-22 Unauthorized insurers; submission to jurisdiction of state
Subject to the provisions of this act, P.L.1952, c. 330 (C. 17:51-1 to 17:51-5), relating to unauthorized insurers, shall apply to persons transacting the business of legal insurance. L.1981, c. 160, s. 22.
N.J. Stat. § 17:46C-23 Application of Titles 17 and 17B to insurers authorized to transact business under Subtitle 3
The provisions of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes shall apply generally to legal insurance offered by insurers authorized to transact the business of insurance and regulated under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes; provided, however, that legal insurance sold by such insurers shall be subject to sections 2, 3, 4b., 6, 8, 13, 14, 18 and 20 of this act rather than to the corresponding sections of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes; and further provided that the provisions of P.L.1974, c. 17 (C. 17:30A-1 et seq.) shall not apply to legal insurance offered by such insurers. L.1981, c. 160, s. 23.
N.J. Stat. § 17:46C-24 Titles 17 and 17B; application to orders or rules and regulations; inapplicability to insurer authorized under this act
a. Orders or rules and regulations issued under the provisions of this act shall be issued in accordance with the provisions of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes. The provisions of N.J.S. 17B-34:11 shall apply in matters not specifically provided for herein. b. Except as otherwise provided in this act, the provisions of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes shall not apply to insurers authorized under this act. L.1981, c. 160, s. 24.
N.J. Stat. § 17:46C-25 Violations; penalty; enforcement; expenses for enforcement of act; payment
The penalty for each violation of any section of this act or any supplement thereto, shall be a penalty not exceeding $1,000.00 for the first offense and not exceeding $2,000.00 for each succeeding offense. Any penalty provided for herein shall be enforced and collected by the commissioner in the name of the State in a summary proceeding in accordance with "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.). A warrant may issue in lieu of a summons. Upon the failure of the defendant to pay forthwith the amount of any money judgment rendered against him, such defendant shall be committed to the county jail as provided in said penalty enforcement law until the penalty and costs are paid. Penalties shall be paid to the commissioner for the use of the State. The necessary expenses for enforcing the provisions of this act when not otherwise provided for, shall be paid out of the penalties so collected and the fees and taxes paid by insurance companies of other States and foreign countries. L.1981, c. 160, s. 25.
N.J. Stat. § 17:46C-26 Person transacting business prior to effective date; application; continuance of operation
Any person who has been transacting the business of legal insurance for more than 90 days prior to the effective date of this act shall submit an application for a certificate of authority under section 4 of this act within 90 days of the effective date of this act and that applicant may continue to operate until the commissioner acts upon the application. In the event that an application is denied under section 5 of this act, the applicant shall be treated as a legal insurer whose certificate of authority has been revoked. L.1981, c. 160, s. 26.
N.J. Stat. § 17:46C-29 Nonapplicability of authority of commissioner to discipline or regulation of attorneys
Nothing contained in this act shall give the commissioner authority concerning regulation or suspension of attorneys admitted to practice in this State, or authority over attorneys' agreements or fees with individual clients or organizations. L.1981, c. 160, s. 29.
N.J. Stat. § 17:46C-30 Severability
If any section in this act or any part of any section is declared invalid or unconstitutional, such declaration of invalidity shall not affect the validity of the remaining portions thereof. L.1981, c. 160, s. 30.
N.J. Stat. § 17:46C-31 Liberal construction of act
This act shall be liberally construed to effectuate the purposes set forth in section 2. L.1981, c. 160, s. 31.
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