PCI Seeks Changes to Proposed Neb. Rule Governing Unauthorized Practice of Law

May 11, 2004

In an effort to reportedly reign in the unauthorized practice of law, a proposed rule by the Nebraska Supreme Court could result in licensed attorneys employed by insurance companies being unable to represent an insured and the insurer in defense of a claim brought by a third party.

In part, the rule is intended to address concerns about the trend toward legal document processing services that offer “do-it-yourself” or “fill in the blank” legal forms, but sometimes cross the line and offer legal advice to their clients.

“The purpose of the rule is to protect the public from being harmed by individuals who are untrained and inexperienced in the law, however we are concerned that the definition of nonlawyer is too broad,” said Kathleen Jensen, insurance services counsel for the Property Casualty Insurers Association of America (PCI). “As currently drafted, licensed attorneys employed by insurance companies could fall within the definition of ‘nonlawyer.’ Simply because a licensed attorney is hired by an organization or entity to provide legal services to others such as an insurance company, they should not be relegated to the status of nonlawyer. These attorneys must meet the same ethical and professional requirements as any other Nebraska licensed attorney and they face the same disciplinary sanctions for violation of these standards. Clearly, these attorneys are not the untrained individuals for whom this rule is intended.”

In addition, the proposed rule could result in claims adjusters who negotiate settlements and provide explanations regarding coverage details of a claim as being considered to be practicing law without a license.

“We are urging that the exemption for insurance claims adjusters be expanded,” said Ann Weber, regional manager and counsel for PCI. “Without a broader exemption, insurers would be forced to hire outside counsel to adjust claims – even the most routine property damage claims. The current exemption essentially limits the claims adjuster to preparing documents and does not allow them to fully perform their job. The limitation on adjusters is also in conflict with current laws and regulations governing claims handling practices that require adjusters to provide services to the insured that include the opinion of the adjuster within the context of the claim,” added Weber.

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