Stricken language would be deleted from and underlined language would be added to present law.
1 State of Arkansas As Engrossed: H4/8/21
2 93rd General Assembly A Bill
3 Regular Session, 2021 HOUSE BILL 1380
5 By: Representatives Ray, Dotson
6 By: Senator Gilmore
8 For An Act To Be Entitled
13 Subtitle
15 ACT.
20 SECTION 1. Arkansas Code Title 23, Chapter 91, Subchapter 2, is
21 repealed.
22 Subchapter 2 Arkansas Legal Insurance Act
24 23-91-201. Title.
25 This subchapter shall be cited as the Arkansas Legal Insurance Act.
27 23-91-202. Construction and purposes.
28 This subchapter shall be interpreted liberally in order to achieve the
29 following purposes:
30 (1) To encourage the development of effective and economically
31 sound methods of making legal services more readily available;
32 (2) To protect the interests of the users of legal services and
33 of the public of this state with a minimum of restrictions on experimentation
34 with new forms of organization, administration, or benefits;
35 (3) To seek to have the risk inherent in experimentation borne
36 by the promoters of new plans rather than by the consumers;
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1 (4) To permit and encourage the providing of legal services
2 through persons other than professional insurers subject to practical and
3 reasonable financial and regulatory requirements;
4 (5) To permit and encourage fair and effective competition among
5 the various systems of financing legal services; and
6 (6) To ensure that each person being provided with legal
7 insurance has the right to seek performance of covered legal services by the
8 attorney of his or her choice. The attorney shall be required to reasonably
9 comply with the plan provisions.
11 23-91-203. Definitions.
12 As used in this subchapter:
13 (1) Commissioner means the Insurance Commissioner;
14 (2) Insurer means any person who obtains a certificate of
15 authority under this subchapter;
16 (3)(A) Legal insurance means that assumption of a contractual
17 obligation to provide, during a specified interval of time, specified legal
18 services or reimbursement for legal expenses in consideration of a specified
19 payment, regardless of whether the payment is made by the beneficiaries
20 individually or by a third person for them, in such a manner that the total
21 cost incurred by assuming the obligation is to be spread directly or
22 indirectly among a group of persons. It does not include the provision of,
23 or reimbursement for, legal services incidental to other insurance coverages.
24 The following are not considered insurance under the insurance laws of this
25 state:
26 (i) Retainer contracts made with individual clients
27 with the fees based on estimates of the nature and amount of services that
28 will be provided to the specific client and similar contracts made with a
29 group of clients involved in the same or closely related legal matters such
30 as class actions;
31 (ii) The providing of no benefits other than
32 consultation and advice in connection with, or a part of, referral services;
33 (iii) The providing of limited legal services
34 regarding simple legal matters on an informal basis, not involving a legally
35 binding promise, in the context of an employment, educational, or similar
36 relationship;
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1 (iv) Legal services provided by unions or employee
2 associations to their members in matters relating to employment or
3 occupation; and
4 (v) Legal services provided by an agency of the
5 federal or state government or a subdivision thereof to its employees.
6 (B) Contractual obligation in subdivision (3)(A) of this
7 section includes any arrangement in which those persons for whom services are
8 to be provided under the arrangement have reasonable expectations of
9 enforceable rights; and
10 (4) Person means the definition as used in 23-60-102.
12 23-91-204. Applicability of insurance law.
13 (a) The provisions of the insurance law apply generally to legal
14 insurance offered by insurers licensed to write other kinds of insurance.
15 However, legal insurance sold by insurers under a certificate of authority
16 obtained under this subchapter shall be regulated by the provisions of 23-
17 91-202, 23-91-203, 23-91-206, 23-91-208 23-91-212, 23-91-214, 23-91-219,
18 23-91-221, 23-91-224, and 23-91-226 instead of corresponding sections of the
19 Arkansas Insurance Code.
20 (b) Orders or rules of the Insurance Commissioner issued under the
21 provisions of this subchapter shall be subject to the provisions of the
22 general insurance laws and the provisions of the Arkansas Administrative
23 Procedure Act, 25-15-201 et seq., relating to hearings and appeals.
24 (c) Except as otherwise provided in this subchapter, the provisions of
25 the general insurance law shall not apply to insurers authorized under this
26 subchapter.
28 23-91-205. Applicability of unauthorized insurance law.
29 Subject to the provisions of this subchapter, the relevant and
30 applicable provisions of the Unauthorized Insurers Process Act, 23-65-201
31 et seq., and the provisions of 23-65-101 and 23-65-102 apply to persons
32 transacting the business of legal insurance.
34 23-91-206. Exemption.
35 (a)(1) This subchapter does not apply to any person not domiciled in
36 this state but issuing only group, blanket, or franchise policies or
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1 certificates to certificate holders or policyholders who reside in this state
2 if fewer than twenty-five percent (25%) of the certificate holders or
3 policyholders reside in this state and the person is regulated to a
4 comparable extent by another state in which a larger number of certificate
5 holders or insureds reside.
6 (2)(A) However, any person who is exempt from the provisions of
7 this subchapter pursuant to this section shall, prior to the issuance of any
8 group, blanket, or franchise policies or certificates in this state, file
9 these policies or certificates with the Insurance Commissioner for
10 informational purposes, together with a document to support the person's
11 exempt status under this section.
12 (B) Also, each person shall file annually with the
13 commissioner, on or before April 15, a report to verify that the exemption is
14 still valid.
15 (b)(1) Prior to administering a legal referral services program, or
16 prior to enrollment of members in a program in this state, any person who is
17 exempt from the provisions of this subchapter shall file with the
18 commissioner program materials and documents to support the program's exempt
19 status under this subchapter.
20 (2) Subsequent to the commissioner's approval of the exemption
21 of the program from the provisions of this subchapter, the person shall
22 promptly file documents referencing any modifications or changes in the
23 program for the commissioner's review and determination as to whether the
24 program as modified is exempt from the provisions of this subchapter.
26 23-91-207. Penalty provisions Applicability of 23-60-108 and 23-
27 60-109.
28 The relevant and applicable provisions of 23-60-108 and 23-60-109
29 apply to violations of this subchapter.
31 23-91-208. Authorization required.
32 (a) No person may transact the business of legal insurance in this
33 state without first obtaining a certificate of authority under this
34 subchapter.
35 (b)(1) Any person may apply to the Insurance Commissioner for, and
36 obtain, a certificate of authority to transact the business of legal
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1 insurance in compliance with this subchapter.
2 (2) This section does not by itself enlarge the powers of any
3 corporation given by its articles of incorporation or charter but does
4 authorize a corporation formed under the general business, insurance, or
5 general nonprofit corporation laws of this state, including hospital service
6 corporations, medical service corporations, and hospital and medical service
7 corporations, to include in its power the authority to transact the business
8 of legal insurance.
9 (c)(1) Any application shall be in a form prescribed by the
10 commissioner. If the applicant is not domiciled in this state, the
11 application must be accompanied by a power of attorney executed by the
12 applicant appointing an Arkansas resident as its registered agent for service
13 of process, to be filed in writing with the commissioner and his or her
14 successors in office, as the true and lawful attorney of the applicant, in
15 and for this state, upon whom all lawful process in any legal action or
16 proceeding against the applicant, on a cause of action arising in this state,
17 may be served.
18 (2) On and after January 1, 2003, all foreign and alien insurers
19 licensed under this chapter shall file with the commissioner a designation of
20 an Arkansas resident as an agent for service of legal process, and the
21 commissioner shall maintain a listing in conformity with 23-63-301 et seq.
23 23-91-209. Conditions for issuing certificate of authority.
24 (a) Upon receipt of an application for a certificate of authority, the
25 Insurance Commissioner shall issue or deny a certificate pursuant to this
26 subchapter within sixty (60) days of the application. This may be extended
27 for an additional thirty (30) days by notice to the applicant prior to the
28 expiration of the first sixty (60) days. A certificate of authority shall be
29 issued upon payment of the application fee prescribed in 23-91-225 if the
30 commissioner is satisfied that the following conditions are met:
31 (1) The persons responsible for the conduct of the affairs of
32 the applicant are competent, trustworthy, and of good reputation;
33 (2) The applicant has paid-in capital in an amount not less than
34 one hundred thousand dollars ($100,000) and additional working capital or
35 surplus funds in an amount deemed by the commissioner to be adequate in
36 relation to the proposed plan of operation; and
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1 (3) The applicant demonstrates the willingness and ability to
2 assure that the promised benefits can be provided. In making this
3 determination, the commissioner shall consider so far as applicable:
4 (A) Any agreements with lawyers or paralegal personnel for
5 the provisions of legal services;
6 (B) The financial soundness of the applicant's
7 arrangements for legal services and the schedule of rates proposed to be used
8 in connection therewith;
9 (C) Any agreement with another person authorized under
10 this subchapter, an insurer licensed under the general insurance laws to do
11 business in this state, a reinsurer eligible under the laws or rules of this
12 state to provide reinsurance, or an agency of the federal or state government
13 for insuring the payment of the cost of legal services or the provision for
14 automatic applicability of an alternative coverage in the event the insurer
15 is unable to perform its obligation;
16 (D) Any deposit of securities, in kind and an amount
17 determined to be appropriate by the commissioner, as a guarantee that the
18 obligations to provide the promised benefits will be performed; and
19 (E) If the applicant is licensed as an insurer under other
20 insurance laws, whether the applicant has complied with the requirements of
21 those laws.
22 (b) A certificate of authority shall be issued in accordance with this
23 subchapter and may be continued within the applicable provisions of 23-63-
24 211, but reference therein to 23-63-216 and payment of taxes shall instead
25 refer to the applicable provision of this subchapter.
27 23-91-210. Regulation of policy forms.
28 (a)(1) Each contractual obligation for legal insurance shall be
29 evidenced by a policy or master policy.
30 (2) Legal insurance may be written on an individual, group,
31 blanket, or franchise basis.
32 (3) Each person insured under a group policy must be issued a
33 certificate of coverage.
34 (4) No legal insurance policy or certificate of any kind may be
35 issued or delivered in this state unless and until a copy of the form thereof
36 has been filed with the Insurance Commissioner and approved by him or her
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1 except as provided in 23-91-206.
2 (b) The forms must meet the following requirements:
3 (1) Policies must contain a detailed list and description of the
4 legal services promised or the legal matters for which expenses are to be
5 reimbursed and the amount of reimbursement;
6 (2) Policies and certificates must indicate prominently the name
7 of the insurer and the full address of its principal place of business;
8 (3) Certificates issued under group policies may summarize the
9 terms of the master contract but must contain a full and clear statement of
10 the benefits provided; and
11 (4)(A) No policy shall unreasonably restrict the right of any
12 person covered by legal insurance to seek performance of legal services by
13 the attorney of his or her choice in a matter covered by the policy.
14 (B)(i) If the policy contemplates the use of a prearranged
15 panel of attorneys to render the legal services covered under the policy, the
16 commissioner shall not approve that policy unless the policy also authorizes
17 payment for covered services rendered by an insured's attorney who is not a
18 member of the panel.
19 (ii) Payments to attorneys who are not members of
20 the panel shall be reasonably equivalent to the cost incurred by the insurer
21 when similar services are rendered by attorneys who are members of any panel.
22 (c) The commissioner may disapprove a form if the commissioner finds
23 that it:
24 (1) Does not meet the requirements of subsection (b) of this
25 section;
26 (2) Is unfair, unfairly discriminatory, misleading, obscure, or
27 encourages misrepresentation or misunderstanding of the contract, including
28 cases in which the form:
29 (A) Provides coverage or benefits that are too restricted
30 to achieve the purposes of which the policy is designed;
31 (B) Fails to attain a reasonable degree of readability,
32 simplicity, and conciseness; or
33 (C) Is misleading, deceptive, or obscure because of its
34 physical aspects such as format, typography, style, color, material, or
35 organization;
36 (3) Provides coverage or benefits or contains other provisions
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1 that would endanger the solidity of the insurer; or
2 (4) Is contrary to law.
4 23-91-211. Regulation of rates.
5 (a) Rate filings shall be subject to the following procedures and
6 requirements:
7 (1) Every insurer shall file with the Insurance Commissioner
8 every manual of classifications, rules, and rates, every rating plan, and
9 every modification of any of the foregoing which it proposes to use;
10 (2) Every filing shall state the proposed effective date thereof
11 and shall indicate the cha