Link to original WordPerfect Document
151 N.J.L.J. 1430
March 30, 1998
7 N.J.L. 708
March 30, 1998
COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW
Appointed by the New Jersey Supreme Court
OPINION 31
Letters Sent to Third Party Claimants
by Insurance Companies
The Committee on the Unauthorized Practice of Law has received
one inquiry and one grievance
concerning letters and brochures that
certain insurance companies have been sending to prospective third
party claimants who have been involved in automobile accidents with
the companies' insureds. Among other things, the inquirer and
grievant have questioned/complained about language in the documents
that appears to provide legal advice and discourage the recipients
from retaining legal counsel.
The letters and brochures sent by the insurance companies,
which are substantially similar in both layout and content, follow
with the language questioned/complained of emphasized in bold-faced
print:
Letter Sent by Company “A”
Dear [Prospective Claimant]:
I recently received notice of your accident involving our
policyholder. We may have already spoken, but if not, I
will be trying to reach you very soon. In either case, I
want to emphasize [Company A's] policy that we consider
anyone who has been involved in an accident with one of
our policyholders a [Company A] “customer,” who is
entitled to quality customer service.
As your claim representative, my role is to ensure that
you receive this quality customer service, outlined in
the enclosed [brochure]. Please save my business card in
case you need to reach me.
If you have any questions, do not hesitate to call me
during my regular office hours of 8:00 a.m. to 4:30 p.m.,
or leave a message on my voice mail anytime and I will
call you back as soon as I can.
Sincerely,
[John Doe]
Claim Representative
Brochure Enclosed with Letter Sent by Company “A”
If you have been involved in an accident with a [Company
A] policyholder, we consider you our customer. In an
effort to provide you with the highest level of customer
service, we promise you the following:
1) We will fully explain the process, take the time
to answer all questions and concerns that you may
have, and keep you informed throughout the claim
process.
2) We will make a quick, fair, investigation of the
facts in your case.
3) To the extent that our policyholder was at fault
in the accident:
We will provide for repair of your
vehicle and arrange for a rental vehicle;
We will help you determine if you are
eligible to receive compensation over and
above your medical bills and wage loss;
and
We will discuss fair payment for your
claim when you feel you are ready.
Your claim representative is dedicated to carrying out
[this] pledge.
Claimants were also provided with a second brochure concerning
the necessity of retaining an attorney:
DO I NEED AN ATTORNEY?
1) AM I REQUIRED TO HIRE AN ATTORNEY TO HANDLE MY
CLAIM?
No. In fact, each year [Company A] settles
claims directly with many accident victims
with no attorneys involved in the claim
settlement process.
2) WILL AN ATTORNEY MAKE THE CLAIM SETTLEMENT PROCESS
FASTER FOR ME?
A recent study by the Insurance Research Council
found that people who settle insurance claims
without an attorney generally settle their claims
more quickly than those who have hired attorneys.
3) HOW MUCH ARE ATTORNEYS' FEES AND WHO PAYS FOR THEM?
Attorneys often take up to one third of the total
settlement you receive from an insurance company,
plus expenses incurred. If you settle directly with
[Company A], however, the total amount of the
settlement is yours.
4) IF I DON'T GET AN ATTORNEY NOW, CAN I STILL GET ONE
LATER?
You may hire an attorney at any time in the
process. Under New Jersey law, you have up to two
years after your accident to file a court action
against the at-fault party. Before you decide to
see an attorney, you may wish to seek an offer with
[Company A] first. If an attorney believes he or
she can achieve a higher settlement, you can then
see whether the attorney is able to accomplish
that. And, you may wish to hire an attorney on the
condition that the contingent fee apply only to the
settlement amount in excess of what [Company A]
offered to you without the attorney's assistance.
5) SHOULD I SEEK THE ADVICE OF AN ATTORNEY?
Whether you should retain an attorney is your
decision. [Company A] will not penalize you in any
way for retaining an attorney. An attorney may be
able to provide valuable advice, and may be
important in complex or serious cases. Again,
however, you may wish to seek an offer from
[Company A], and when retaining an attorney, make a
condition that the contingent fee apply only to the
settlement amount in excess of what [Company A]
offered to you without the attorney's assistance.
Brochure Enclosed with Letter Sent by Company “B”
We're sorry to hear about your recent automobile
accident.
At [Company B], we are committed to resolving all claims
timely and fairly. We will conduct a prompt investigation
of the accident facts and will work with you to resolve
your claim as quickly as possible.
Our Direct Deal pledge to you!
* We will work directly with you to achieve a
timely resolution of your injury claim.
* We will meet with you and answer
questions you may have regarding the claim
process.
* We will continue to work with you until your
injury claim is concluded.
You do not need a lawyer to handle your claim but you
have the right to obtain one at any time. We will treat
you fairly whether or not you are represented by a
lawyer. However, if you choose to have a lawyer handle
your claim, we can no longer work directly with you.
Also, a recent industry study by the Insurance Research
Council found that, generally, most people settle their
claims more quickly without an attorney than those who
have hired an attorney.
No Fee. Most lawyers will take a sizable fee as part of
the settlement. When dealing directly with [Company B],
you do not pay a fee to anyone. Your [Company B] claims
professional is a salaried employee and does not receive
a bonus or commission for resolving your claim.
Your [Company B] Claims Professional is available to
answer questions regarding your injury claim. They can
work with you and your doctor to help speed your
recovery. An open line of communication between you and
your claims professional will make the claim process
quick and easy.
If you are the owner of the vehicle and the vehicle was
damaged in the accident, your claims professional can
work with you to arrange for an Auto Damage Appraiser to
inspect your vehicle. The Appraiser can complete an
estimate and may be able to issue you a check on the
spot!
Use this brochure as a tool to help keep track of any
expenses you incur as a result of your claim. If you are
in need of immediate financial assistance with out of
pocket expenses related to your claim, your claims
professional may be able to advance you money toward your
final settlement.
The grievant has complained that these documents are sent to
persons who have been involved in automobile accidents immediately
after these accidents have been reported, many times before the
victims have had the opportunity to consider the need for
representation or had an opportunity to retain counsel. This is
important, the grievant maintains, because these accident victims
are in an adversarial relationship with the companies' insureds
and, therefore, with the companies themselves.
Despite this antithetical relationship, the companies
represent that they consider these accident victims to be their
customers. Since the victims are customers, they do not need
representation and can be assured that the companies will offer
fair and equitable settlement terms. In fact, they are informed
that employment of an attorney will only slow or impede the
settlement process.
The inquirer has indicated that the insurance companies have
engaged in the unauthorized practice of law by distributing these
documents for the apparent purpose of discouraging the claimants
from obtaining legal counsel in evaluating and pursuing their
claims. Citing In re Opinion No. 26 of the Committee on Unauth.
Pract., 139 N.J. 323 (1995), the inquirer has pointed out that both
this Committee and the Supreme Court have held that nonlawyers
engage in the unauthorized practice of law when, in furthering
their own pecuniary interests, they attempt to discourage members
of the public from retaining legal counsel. It is the inquirer's
position that an insurance company's advice that a claimant not
retain legal counsel constitutes the practice of law because any
determination of whether to pursue or forego a legal claim assumes
a legal evaluation and balancing of the facts and issues in each
particular case.
The inquirer further asserts that this unauthorized practice
of law is aggravated by the insurance companies' failure to
disclose to the claimants that their interests as insurers are
adverse to those of the claimants. The conflicting interest of the
insurance companies stands in sharp contrast to the role of
attorneys who act solely in the interest of their clients in
advising the pursuit or settlement of a claim, in putting a value
on its possible worth, and in evaluating the possible options that
might be available. By failing to notify the claimants of this
conflict of interests, the letters and brochures are characterized
as being deceitful and misleading.
It is the Committee's understanding that this is not the first
time the grievant has complained about these documents and the
insurance companies' practice of sending them to accident victims.
In fact, the grievant initially filed such a complaint against one
of these companies with the Department of Banking and Insurance in
1996. The gravamen of the complaint at that time appeared to be
that the documents were deceptive in assuring claimants that their
claims would be handled fairly and more quickly if they were not
represented by counsel. Given the antithetical relationship between
claimants and the insurance companies, it was argued, the initial
contact letters and documentation would take advantage of and
mislead accident victims at a time when they are most vulnerable
and in need of counsel.
By letter dated March 22, 1996, Assistant Commissioner Donald
Bryan advised the grievant that these documents had initially come
to the attention of the Department in 1995. At that time, the
Department concluded that they did not violate the Unfair Trade
Practices Act, N.J.S.A. 17:29B-1 et seq., or the Department's rules
concerning unfair claims settlement practices, N.J.A.C. 11:2-17.1
et seq. According to Assistant Commissioner Bryan, subsequent
review had again failed to disclose any violations of the Act or
the Department's rules. The Department did not, however, render any
opinion as to whether the distribution of the documents constituted
the unauthorized practice of law. Rather, it suggested that the
grievant register its complaint with the appropriate authority in
the Administrative Office of the Courts.
It is important to note that insurance companies must comply
with numerous regulations governing their interaction with and
treatment of claimants. For example, pursuant to N.J.S.A. 11:2-
17.7(c)3, the maximum payment period for all third party bodily
injury claims is 90 calendar days from receipt by the insurer of a
notification of claim. If the insurer is unable to settle the claim
within that period of time, the insurer must send the claimant
written notice stating the reasons additional time is needed and
providing instructions for contacting the claims representative
directly. N.J.A.C. 11:2-17(f).
N.J.A.C. 11:2-17.8, in turn, embodies rules for ensuring fair
and equitable settlements. We find the following paragraphs to be
particularly relevant to the issues currently under consideration:
(e) If a claimant is actively negotiating with an
insurer for settlement of a claim, and the claimant's
rights may be affected by a statute of limitations or a
policy time limit, the insurer shall provide the claimant
with written notice that the time limit may be expiring
and may affect the claimant's rights. Such notice shall
be given to claimants 60 calendar days before the date on
which such time limit may expire. This rule shall only
apply if the insurer is negotiating a claims settlement
with a person who is neither an attorney nor represented
by an attorney.
(h) An insurer shall not compel claimants to
institute litigation to recover amounts due under an
insurance policy by offering less than the amounts
recovered in actions brought by such claimants.
(l) If a first party claimant or a third party
claimant not represented by an attorney does not submit
sufficient information to establish his or her
entitlement to the benefits claimed, then the insurer
shall provide the claimant with a general description of
the information and documentation needed to establish
such entitlement.
An examination of these rules makes it quite clear that
insurance companies are obligated to deal fairly and equitably with
claimants, and in particular those claimants who are neither
attorneys nor represented by attorneys. Moreover, they are
obligated to do so within specified periods of time. Simply stated,
they are required by rule to engage in many of the activities that
have been called into question by our correspondents.
In considering the grievant's charges, the Department of
Banking and Insurance found that many of the statements in the
insurance companies' documents appear to be intended to comply
with, and convey to claimants the existence of, regulatory
requirements including those recited above. The Department then
opined that “for a regulator to mandate a standard of conduct, but
then to penalize statements expressing an intent to meet them,
seems capricious and contraindicated.” The Department would not,
therefore, “conclude that distribution of the documents is prima
facie an unfair trade practice and [was] ... reluctant to institute
an action seeking prior restraints on the distribution of truthful
written material in the absence of some clear and compelling
regulatory need.” Bryan Letter, March 22, 1996.
While regulation of insurance companies is within the
jurisdiction of the Department of Banking and Insurance, the New
Jersey Supreme Court has “plenary, exclusive, and almost
unchallenged power over the practice of law in all of its aspects
under [the New Jersey Constitution].” In re LiVolsi, 85 N.J. 576,
585 (1981). In addition to its constitutional grant of power,
N.J. Const. (1947), Art. VI, §2, para. 3, the Court's authority to
regulate the practice of law may also be found in “its traditional,
inherent and integral relationship to the very existence and
functioning of the courts.” American Trial Lawyers v. N.J. Supreme
Ct., 66 N.J. 258, 262 (1974). Simply stated, the Court has been
“given the power to permit the practice of law and to prohibit its
unauthorized practice.” In re Opin. No. 26 of Committee on Unauth.
Pract., supra, 139 N.J. at 326.
The Court, in turn, has authorized this Committee to consider
complaints alleging the unauthorized practice of law, R. 1:22-2(b),
and issue advisory opinions in response to requests or in
connection with any complaints it may consider. R. 1:22-2(a).
Therefore, it is incumbent upon us to examine whether or not any of
the language in and the dissemination of the written materials
constitutes the unauthorized practice of law and, if so, whether
prosecution and enforcement is in the public's best interests.
In undertaking this task, we heed the admonition of the Court
that when considering allegations of the unauthorized practice of
law, “each individual set of circumstances must be passed upon 'in
a common-sense way which will protect primarily the interest of the
public and not hamper or burden that interest with impractical and
technical restrictions which have no reasonable justification.'”
New Jersey Bar Ass'n v. Northern N.J. Mtge. Associates, 32 N.J.
430, 437 (1960)(quoting Gardner v. Conway, 234 Minn. 468, 48 N.W.2d
788, 797 (1951). This is not to say that the public interest should
be the sole criterion for determining whether an individual or
entity has engaged in the unauthorized practice of law. Rather,
“practical considerations and common sense will prevail.” In re
Opin. No. 26 of the Committee on Unauth. Pract., supra, 139 N.J. at
343.
That the brochures refer to claimants as “customers” and reach
them at a time when they are likely to be most vulnerable may be
disquieting. However, the fact remains that insurance companies
are under an obligation to initiate contact and effect a settlement
with an injured third party claimant within a relatively short
period of time after an accident is reported. N.J.A.C. 11:2-
17.7(c)3. Moreover, if an unrepresented claimant is actively
negotiating with an insurer for settlement of a claim, and the
claimant's rights may be affected by a statute of limitations or a
policy time limit, the insurer must provide the claimant with
written notice that the time limit may be expiring and may affect
the claimant's rights. Therefore, even if this particular conduct
could be considered the unauthorized practice of law, practical
considerations would mitigate against our taking any action against
the insurers for such conduct.
Similarly, the interpretation and application of a statute of
limitations by one other than an attorney will ordinarily
constitute the practice of law. The same is true of a determination
that a claimant is or is not entitled or eligible to receive
compensation for any injuries the claimant may have received.
However, “practical considerations and common sense,” as well as
the existence of administrative code regulations requiring the
insurance companies to engage in such conduct, and penalizing them
for noncompliance, demand that this conduct be permitted.
This is not to say that there will not be instances of
coercion, overreaching or other abuses. For example, there may be
situations where claimants will also have claims against other
defendants including a municipality, county, or the State. In such
situations, the Tort Claims Act and its required notices will be
implicated. Failure to notify a claimant of such considerations may
adversely affect the claimant's rights. However, if there are such
abuses, they should be reported to the Department of Banking and
Insurance for such action as the Department deems necessary and
appropriate. On the facts presented, and in the absence of any
other justification, any other conclusion might well interfere with
the Department's regulatory scheme and otherwise hamper or burden
the public interest. In re Opinion No. 26 of the Committee on
Unauth. Pract., supra, 139 N.J. at 343.
Of greatest concern to our correspondents has been that the
documents sent to the claimants discourage them from retaining
legal counsel. These documents repeatedly refer to claimants as
“customers” and suggest that although a claimant will not be
treated any differently if counsel is retained, representation by
an attorney will slow or impede the settlement process. The
documents also claim that most attorneys take a “sizeable fee” as
part of the settlement, often taking up to one third of the total
settlement in addition to the expenses incurred. Therefore, before
retaining the services of an attorney, claimants are advised to
insist upon a fee agreement whereby the contingent fee applies only
to the settlement amount in excess of what the insurer offered
without an attorney's assistance. The message is clear; the
insurance companies would prefer that a claimant not retain the
services of an attorney.
Although relied upon by our correspondents, In re Opinion No.
26 should not be interpreted as supporting the proposition that a
lawyer is the sine qua non for handling a claim against an
insurance company. In fact, the converse is absolute; there is no
legal requirement that a lawyer handle any claim, be it for
physical injury or property damage. We have no doubt that
claimants would be better served if they were represented by
counsel from the moment they are contacted by a claims
representative or otherwise decide to file a claim with an insurer.
However, we cannot mandate that claimants retain counsel, or that
insurers insist that claimants retain the services of counsel,
before commencing negotiations.
As the Court indicated:
In other words, like all of our powers, this power
over the practice of law must be exercised in the
public interest; more specifically, it is not a
power given to us in order to protect lawyers, but
in order to protect the public, in this instance by
preserving its right to proceed without counsel.
Id. At 327.
However, that does not mean that the insurers may subtly or
aggressively discourage claimants from retaining counsel. As the
Court pointed out later in its opinion upholding the right of
buyers and sellers to proceed pro se in real estate transactions:
Of decisive weight in our determination is the
value we place on the right of parties to a
transaction to decide whether or not they will
retain counsel. We should not force them to do so
absent persuasive reasons. Given the importance in
our decision of the assumption that the parties
have chosen not to retain counsel, and without
coercion have made that decision, we have attached
a condition to the conclusion that the South Jersey
practice does not constitute the unauthorized
practice of law. The condition is designed to
assure that the decision is an informed one. If
that condition is not met, the brokers (and title
officers, if aware of the fact) are engaged in the
unauthorized practice of law, and attorneys with
knowledge of that fact who participate are guilty
of ethical misconduct. That ruling is similar to
the clear implication in the brokers' and
accountants' cases that unless those professions
conform to the conditions mentioned in those
decisions, they will be guilty of the unauthorized
practice of law.
Id. at 354. The condition imposed by the Court was that the broker
notify the buyer and seller of the conflicting interests of brokers
and title companies and of the general risk involved in not being
represented by an attorney.
In our view, there is little question that the brochures in
question are, at the very least, designed to provide claimants with
a false sense of security and discourage them from retaining
counsel. This is accomplished in a number of ways. As discussed
earlier, the insurance companies inform third party claimants or
potential claimants involved in accidents with their policyholders
that they consider them to be their “customers” and will provide
them with “quality customer service.” The claimants are also
advised that although they will not be treated any differently if
counsel is retained, representation by an attorney will slow or
impede the settlement process. They are further advised that most
attorneys take a “sizeable fee” as part of the settlement, often
taking up to one third of the total settlement in addition to the
expenses incurred. Therefore, before retaining the services of an
attorney, it is suggested that they insist upon a fee agreement
whereby the contingent fee applies only to the settlement amount in
excess of what the insurer offered without an attorney's
assistance.
In order to further convince claimants that they would be
better off without an attorney, the insurance companies make
reference to a study issued by the Insurance Research Counsel, a
nonprofit organization that was founded by and conducts public
policy research for the property-casualty insurance industry.
Prospective claimants are told that the study “found that people
who settle insurance claims without an attorney generally settle
their claims more quickly than those who have hired attorneys.”
The claimants are not given the name of the study or information
concerning where it may be found. Nor are they told that the
Insurance Research Council was founded by and conducts research for
the insurance industry.
Based upon the foregoing, we are convinced that the insurance
companies have attempted to discourage claimants from, if not
coerced them into deciding against, retaining counsel. They have,
therefore, engaged in the unauthorized practice of law. Cf. In re
Opinion No. 26 of the Committee on the Unauth. Pract., supra, 139
N.J. 323.
We base our opinion upon the fact that third party claimants
may and frequently will be in a legally adversarial position to the
insurance companies and, therefore, are not “customers.” Given the
potential that the insurers may be in an adversarial position vis-
a-vis certain claimants, it may present the appearance of a
conflict of interest for the insurers to represent that they will
assist in making a determination of whether the claimants are
eligible to receive monetary compensation for any injuries suffered
in accidents with the companies' policyholders.
It is also potentially, if not actually, misleading to
indicate that most lawyers will take a sizable fee as part of the
settlement and that more often than not the fee will be up to one-
third of the total settlement received. None of the documents in
question make any reference to R. 1:21-7 which sets forth a
schedule of the fees that may be charged in such cases and also
requires an attorney to advise the client of the right and afford
the client an opportunity to retain the attorney on the basis of
the reasonable value of the services.
We have been advised that one of the insurance companies has
voluntarily modified its “quality customer service pledge” to
delete language indicating that the company will help determine if
the claimant is eligible to receive compensation over and above the
claimant's medical bills and wage loss. However, the “pledge”
still refers to the claimants as the insurer's “customers.” The
brochure entitled “DO I NEED AN ATTORNEY?” has not been modified in
any perceptible way.
During the course of our consideration of this matter, the
inquirer provided us with a copy of a consent agreement entitled
“Assurance of Discontinuance” that one of the insurance companies
entered into with the Attorney General of the State of New York,
Bureau of Consumer Frauds and Protection. Pursuant to this
agreement, the insurance company agreed to discontinue the
following activities:
1. Representing, in any manner, expressly or by
implication, to third party claimants who have been
involved in an automobile accident with [the
company's] insured, that such claimants are
considered by [the company] as its customers.
However, [the company] may make representations as
to the level of service provided to such claimants,
such as “quality service” or like terms.
2. Representing, in any manner, expressly or by
implication, the amount and nature of plaintiffs'
attorneys' fees and expenses in actions for
personal injury in automobile accident cases unless
such representation accurately reflects New York's
legal limitations on attorney's contingent fees.
3. Representing, in any manner, expressly or by
implication, in those cases where [the company] is
in an adversarial position to a third party
claimant, that [the company] will assist in making
a determination of whether such claimant is
eligible to receive monetary compensation for any
injuries suffered in an accident. However, [the
company] may represent that it will make an
appropriate offer of compensation to such
claimants.
4. Representing in any manner, expressly or by
implication, that completion of an authorization to
furnish medical and/or employment information will
not affect an individual's right to pursue a claim.
The company also agreed to revise its communications used in New
York State as follows:
1. With respect to [letter signed by a claims
representative]:
a. [The company] will add the following sentence:
“The authorization is an important document. You
should read it carefully before you decide to sign
it.”
b. [The company] will delete the sentence that
currently reads: “It [the authorization] will not
affect your right to pursue a claim.”
c. [The company] will revise the first two
sentences to read: “Although we spoke on [date], I
want to reaffirm [the company's] policy that we
will provide quality service to anyone who has been
involved in an accident with one of our
policyholders. As your claim representative, my
role is to ensure that you receive this quality
service, outlined in the enclosed “Quality Service
Pledge.”
2. With respect to [the “Do I Need An Attorney?”
brochure]:
a. [The company] will amend the response to
question 3 (“How much are attorney's fees and who
pays for them?”) to read as follows: “Attorneys
often take up to one third of the settlement you
receive after deducting expenses incurred. If you
settle directly with [the company], however, the
total amount of the settlement is yours.”
b. [The company] will amend the second sentence in
response to question 4 (“If I don't get an attorney
now, can I still get one later?”) to read: “In each
state, there is a time limit (generally no less
than one year following the accident) for taking
legal action against our policyholder.”
c. [The company] will amend the response to
question 5 (“Should I seek the advice of an
attorney?”) to read as follows: “Whether you retain
an attorney is your decision. An attorney may be
able to provide valuable advice, and may be able to
help you advance your interests. However, keep in
mind that attorneys often take up to one third,
after deducting expenses incurred, of the
settlement you receive from an insurance company.
You may wish to seek an offer from [the company]
first, and when retaining an attorney, make a
condition that the contingent fee apply only to the
settlement amount in excess of what [the company]
offered you without the attorney's assistance.”
3. With respect to [the “Customer Service Pledge”]:
a. [The company] will amend the title to read:
“Quality Service Pledge.”
b. [The company] will amend the first two sentences
to read as follows: “Because you have been involved
in an accident with [the company's] policyholder,
we will provide you with quality service. In an
effort to provide you with this quality service, we
promise you the following... .”
c. [The company] will delete the sentence that
currently reads: “We will discuss fair payment for
your claim when you feel you are ready.” to read as
follows: “If you qualify, we will make an
appropriate offer of compensation for any injuries
you may have suffered.”
We believe that the consent agreement is good as far as it
goes. However, it does not go far enough or address certain issues
unique to this State in sufficient detail to fully resolve this
matter. We cannot and will not go so far as to require specific
language; we are but a committee of the Supreme Court, not the
Court itself. What we can do, however, is highlight the language
that we believe should be changed and, in some cases, make the
following specific recommendations:
Letter Sent by Company “A”
I recently received notice of your accident
involving our policyholder. We may have already spoken,
but if not, I well be trying to reach you very soon. In
either case, I want to emphasize [Company A's] policy
that we consider anyone who has been involved in an
accident with one of our policyholders a [Company A]
“customer,” who is entitled to quality customer service.
The highlighted language referring to claimants involved in
automobile accidents with the company's insureds as the company's
“customers” must be deleted. As agreed to in the Assurance of
Discontinuance, the claims representative may, for example,
“reaffirm [the company's] policy that we will
provide quality service to anyone who has been
involved in an accident with one of our
policyholders ... [and] ensure that you receive
this quality service, outlined in the enclosed
“Quality Service Pledge”
or use other language to that effect.
Brochure Enclosed with Letter sent by Company “A”
If you have been involved in an accident with a [Company
A] policyholder, we consider you our customer. In an
effort to provide you with the highest level of customer
service, we promise you the following:
1) We will fully explain the process, take the time
to answer all questions and concerns that you may
have, and keep you informed throughout the claim
process.
2) We will make a quick, fair, investigation of the
facts in your case.
3) To the extent that our policyholder was at fault
in the accident:
We will provide for repair of your
vehicle and arrange for a rental vehicle;
We will help you determine if you are
eligible to receive compensation over and
above your medical bills and wage loss;
and
We will discuss fair payment for your
claim when you feel you are ready.
Your claim representative is dedicated to carrying out
[this] pledge.
Clearly, the statement in the initial paragraph, “we consider you
our customer” must be deleted for the reasons set forth above. We
also believe that the statement in numbered paragraph 1 should be
modified to make it clear to the claimant that the claims
representative will only answer questions of a nonlegal nature. By
the same token, the paragraph advising the claimant that the
company will help determine if the claimant is eligible to receive
compensation over and above the claimant's medical bills and wage
loss must be modified or deleted. Such determinations are legal in
nature and must be made by an attorney. Similarly, the statement
that the company will discuss “fair payment” for the claim when the
claimant feels he or she is ready should be deleted, due to the
inherent adversity of the parties. As agreed to in the Assurance of
Discontinuance, the brochure may advise the recipient that if he or
she qualifies, the company will make “an appropriate offer of
compensation for any injuries” he or she may have suffered.
Brochure Entitled “Do I Need An Attorney?”
1) AM I REQUIRED TO HIRE AN ATTORNEY TO HANDLE MY
CLAIM?
No. In fact, each year [Company A] settles
claims directly with many accident victims
with no attorneys involved in the claim
settlement process.
2) WILL AN ATTORNEY MAKE THE CLAIM SETTLEMENT PROCESS
FASTER FOR ME?
A recent study by the Insurance Research Council
found that people who settle insurance claims
without an attorney generally settle their claims
more quickly than those who have hired attorneys.
3) HOW MUCH ARE ATTORNEYS' FEES AND WHO PAYS FOR THEM?
Attorneys often take up to one third of the total
settlement you receive from an insurance company,
plus expenses incurred. If you settle directly with
[Company A], however, the total amount of the
settlement is yours.
4) IF I DON'T GET AN ATTORNEY NOW, CAN I STILL GET ONE
LATER?
You may hire an attorney at any time in the
process. Under New Jersey law, you have up to two
years after your accident to file a court action
against the at-fault party. Before you decide to
see an attorney, you may wish to seek an offer with
[Company A] first. If an attorney believes he or
she can achieve a higher settlement, you can then
see whether the attorney is able to accomplish
that. And, you may wish to hire an attorney on the
condition that the contingent fee apply only to the
settlement amount in excess of what [Company A]
offered to you without the attorney's assistance.
5) SHOULD I SEEK THE ADVICE OF AN ATTORNEY?
Whether you should retain an attorney is your
decision. [Company A] will not penalize you in any
way for retaining an attorney. An attorney may be
able to provide valuable advice, and may be
important in complex or serious cases. Again,
however, you may wish to seek an offer from
[Company A], and when retaining an attorney, make a
condition that the contingent fee apply only to the
settlement amount in excess of what [Company A]
offered to you without the attorney's assistance.
Paragraph 2, answering the question “will an attorney make the
claim settlement process faster for me” should be amended to advise
the reader that the Insurance Research Council is a nonprofit
organization founded by and conducting public policy research for
the property-casualty insurance industry. Without such a
disclosure, claimants will be led to believe that not retaining the
services of an attorney is in their best interests, when that is
not necessarily the case.
Paragraph 3, answering the question “how much are attorneys'
fees and who pays for them?” does not fully or accurately explain
attorneys' fees in New Jersey. Pursuant to R. 1:21-7, the amount an
attorney may collect in a contingent fee matter is dependent upon
the amount ultimately recovered. In fact, an attorney may only
collect 33 1/3% on the first $500,000 collected. Additionally, the
permissible fee is computed on the net sum recovered after
deducting disbursements in connection with the institution and
prosecution of the claim. Consequently, this paragraph must be
modified to more accurately state the amount an attorney may
collect as a fee.
Brochure Enclose with Letter Sent by Company “B”
We're sorry to hear about your recent automobile
accident.
At [Company B], we are committed to resolving all claims
timely and fairly. We will conduct a prompt investigation
of the accident facts and will work with you to resolve
your claim as quickly as possible.
Our Direct Deal pledge to you!
* We will work directly with you to achieve a
timely resolution of your injury claim.
* We will meet with you and answer
questions you may have regarding the claim
process.
* We will continue to work with you until your
injury claim is concluded.
You do not need a lawyer to handle your claim but you
have the right to obtain one at any time. We will treat
you fairly whether or not you are represented by a
lawyer. However, if you choose to have a lawyer handle
your claim, we can no longer work directly with you.
Also, a recent industry study by the Insurance Research
Council found that, generally, most people settle their
claims more quickly without an attorney than those who
have hired an attorney.
No Fee. Most lawyers will take a sizable fee as part of
the settlement. When dealing directly with [Company B],
you do not pay a fee to anyone. Your [Company B] claims
professional is a salaried employee and does not receive
a bonus or commission for resolving your claim.
Your [Company B] Claims Professional is available to
answer questions regarding your injury claim. They can
work with you and your doctor to help speed your
recovery. An open line of communication between you and
your claims professional will make the claim process
quick and easy.
If you are the owner of the vehicle and the vehicle was
damaged in the accident, your claims professional can
work with you to arrange for an Auto Damage Appraiser to
inspect your vehicle. The Appraiser can complete an
estimate and may be able to issue you a check on the
spot!
Use this brochure as a tool to help keep track of any
expenses you incur as a result of your claim. If you are
in need of immediate financial assistance with out of
pocket expenses related to your claim, your claims
professional may be able to advance you money toward your
final settlement.
This brochure should be modified as agreed upon in the
“Assurance of Discontinuance” entered into with the New York
authorities and as discussed in our analysis of Company A's
brochure above.
Assuming the foregoing modifications are made, the insurance
companies' practice of sending these letters and brochures to
existing and prospective third party claimants will not constitute
the unauthorized practice of law.
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