Rutgers School of Law, OAL case opin32

Link to original WordPerfect Document

                                        7 N.J.L. 952
                                        April 27, 1998

                                        152 N.J.L.J. 374
                                        April 27, 1998

COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW

Appointed by the New Jersey Supreme Court

OPINION 32

Letters Sent to Third Party Claimants
by Insurance Companies
(Supersedes Opinion 31)

    Following the publication of Opinion 31, 151 N.J.L.J. 1430, 7 N.J.L. 708 (March 30, 1998), Petitioners, the two insurance companies referred to in the opinion, requested that this Committee reconsider the same on two separate grounds. Both insurance companies sought relief from the Committee's conclusion that they had "engaged in the unauthorized practice of law," asserting that the conclusion was based upon their use of long-standing language now, for the first time, being found to "discourage claimants from, if not coerce them into deciding against, retaining counsel." "Company B" also sought reconsideration based upon its belief that its letter and brochure did not contain the same language found to be problematic in Company "A's" documents.
    Opinion 31, Ibid., addressed an inquiry and a grievance the Committee had received 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 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 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 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 Company “A” sends these documents 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 company's insureds and, therefore, with the company itself.
Despite this antithetical relationship, Company “A” represents that it considers these accident victims to be its customers. Since the victims are customers, the message conveyed is that they do not need representation and can be assured that the company 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 asserted that both 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, it is said, 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 Company “A's” documents and the insurance company's practice of sending them to accident victims. In fact, the grievant initially filed such a complaint against the company 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 Company “A's” 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 inquiries 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 reach claimants 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.
    Normally, the interpretation and application of a statute of limitations by one other than an attorney will 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 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. Some of 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. Nevertheless, 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 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.
    It is against this background that we have re-examined the brochure distributed to claimants by Company “B.” After careful review and comparison with the documents utilized by the other insurance company, we agree with Company “B” that the language in its brochure is not as problematic. Although the brochure does contain some objectionable language, it is of relatively minor significance and will be addressed during our discussion of Company “A's” brochure, infra. Therefore, given the fact that this opinion will be binding upon all insurance companies licensed to do business in this State, and that Company “B” will be obligated to comply with its provisions to the extent that it does not already do so, we agree that it was improvidently joined with Company “A” in our overall discussion of the issues presented.
    In our view, there is little question that Company “A's” brochure is, 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 company informs third party claimants or potential claimants involved in accidents with its policyholders that it considers them to be it's “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 often take as their fee 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 company makes reference to a study issued by the Insurance Research Counsel, a nonprofit organization that was founded by and conducts public policy research primarily 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 primarily for the insurance industry.
    Based upon the foregoing, we are convinced that Company “A” has attempted to discourage claimants from retaining counsel. Such conduct would ordinarily constitute the unauthorized practice of law. Cf. In re Opinion No. 26 of the Committee on the Unauth. Pract., supra, 139 N.J. 323. However, it is the Committee's understanding that, to one extent or another, this has been a long- standing industry-wide practice, not only in New Jersey, but throughout the country. Consequently, we are not finding that Company “A” has engaged in the unauthorized practice of law. Rather, we are making this opinion prospective and placing all insurance companies on notice that henceforward such conduct will constitute the unauthorized practice of law.
    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 “[a]ttorneys often take up to one third of the total

settlement [the claimant] receive[s] from an insurance company, plus expenses incurred.” 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 rendered.
    We have been advised that Company “A” 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.” Additionally, the brochure entitled “DO I NEED AN ATTORNEY?” has not been modified in any perceptible way.
    Although insurance companies have been acting under the apparent authority of N.J.A.C. 11:2-17.1 et seq., a line must be drawn between conduct which is authorized by law and that which is otherwise prohibited. Specifically, there must be a distinction between the conduct mandated by administrative code regulations and that which goes beyond the regulatory requirements and is designed to discourage claimants from, if not coerce them into deciding against, retaining counsel.
    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 Company “A” 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, to the extent it is not in conflict with N.J.A.C. 11:2-17.1 et seq., R. 1:21-7, or the substantive law of this State, is quite comprehensive and we therefore incorporate and adopt its provisions in this opinion. However, it does not 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 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 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 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” that may have been 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.

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.
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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