PrepTest 44, Section 4, Question 7

The Canadian Auto Workers' (CAW) Legal Services Plan, designed to give active and retired autoworkers and their families access to totally prepaid or partially reimbursed legal services, has been in operation since late 1985. Plan members have the option of using either the plan's staff lawyers, whose services are fully covered by the cost of membership in the plan, or an outside lawyer. Outside lawyers, in turn, can either sign up with the plan as a "cooperating lawyer" and accept the CAW's fee schedule as payment in full, or they can charge a higher fee and collect the balance from the client. Autoworkers appear to have embraced the notion of prepaid legal services: 45 percent of eligible union members were enrolled in the plan by 1988. Moreover, the idea of prepaid legal services has been spreading in Canada. A department store is even offering a plan to holders of its credit card.

While many plan members seem to be happy to get reduced-cost legal help, many lawyers are concerned about the plan's effect on their profession, especially its impact on prices for legal services. Some point out that even though most lawyers have not joined the plan as cooperating lawyers, legal fees in the cities in which the CAW plan operates have been depressed, in some cases to an unprofitable level. The directors of the plan, however, claim that both clients and lawyers benefit from their arrangement. For while the clients get ready access to reduced-price services, lawyers get professional contact with people who would not otherwise be using legal services, which helps generate even more business for their firms. Experience shows, the directors say, that if people are referred to a firm and receive excellent service, the firm will get three to four other referrals who are not plan subscribers and who would therefore pay the firm's standard rate.

But it is unlikely that increased use of such plans will result in long-term client satisfaction or in a substantial increase in profits for law firms. Since lawyers with established reputations and client bases can benefit little, if at all, from participation, the plans function largely as marketing devices for lawyers who have yet to establish themselves. While many of these lawyers are no doubt very able and conscientious, they will tend to have less expertise and to provide less satisfaction to clients. At the same time, the downward pressure on fees will mean that the full-fee referrals that proponents say will come through plan participation may not make up for a firm's investment in providing services at low plan rates. And since lowered fees provide little incentive for lawyers to devote more than minimal effort to cases, a "volume discount" approach toward the practice of law will mean less time devoted to complex cases and a general lowering of quality for clients.

The Canadian Auto Workers' (CAW) Legal Services Plan, designed to give active and retired autoworkers and their families access to totally prepaid or partially reimbursed legal services, has been in operation since late 1985. Plan members have the option of using either the plan's staff lawyers, whose services are fully covered by the cost of membership in the plan, or an outside lawyer. Outside lawyers, in turn, can either sign up with the plan as a "cooperating lawyer" and accept the CAW's fee schedule as payment in full, or they can charge a higher fee and collect the balance from the client. Autoworkers appear to have embraced the notion of prepaid legal services: 45 percent of eligible union members were enrolled in the plan by 1988. Moreover, the idea of prepaid legal services has been spreading in Canada. A department store is even offering a plan to holders of its credit card.

While many plan members seem to be happy to get reduced-cost legal help, many lawyers are concerned about the plan's effect on their profession, especially its impact on prices for legal services. Some point out that even though most lawyers have not joined the plan as cooperating lawyers, legal fees in the cities in which the CAW plan operates have been depressed, in some cases to an unprofitable level. The directors of the plan, however, claim that both clients and lawyers benefit from their arrangement. For while the clients get ready access to reduced-price services, lawyers get professional contact with people who would not otherwise be using legal services, which helps generate even more business for their firms. Experience shows, the directors say, that if people are referred to a firm and receive excellent service, the firm will get three to four other referrals who are not plan subscribers and who would therefore pay the firm's standard rate.

But it is unlikely that increased use of such plans will result in long-term client satisfaction or in a substantial increase in profits for law firms. Since lawyers with established reputations and client bases can benefit little, if at all, from participation, the plans function largely as marketing devices for lawyers who have yet to establish themselves. While many of these lawyers are no doubt very able and conscientious, they will tend to have less expertise and to provide less satisfaction to clients. At the same time, the downward pressure on fees will mean that the full-fee referrals that proponents say will come through plan participation may not make up for a firm's investment in providing services at low plan rates. And since lowered fees provide little incentive for lawyers to devote more than minimal effort to cases, a "volume discount" approach toward the practice of law will mean less time devoted to complex cases and a general lowering of quality for clients.