How To Avoid Law Offices

Prepaid legal services not only help small companies stay out of court, they also minimize the need to visit a lawyer.

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Jim Milne, owner of a small electrical contracting firm in Bellevue, Wash., frequently encounters legal obstacles in his business. Whether his problem is personnel policy, collection notices, or contracts, Milne says, "I need questions answered -- and I don't like wasting my time."

Milne hired a lawyer for a while but dropped him in frustration after receiving a bill for $1,200 to bring a suit seeking $15,000.The suit was still far from being settled, Milne says, "and he treated me like I didn't know what was happening. I ended up doing a lot of his work, and I had to remind him of things all the time."

Instead of a new lawyer, Milne bought a service called "business protector," a prepaid legal program now just a year old. The service is offered by Don Caldwell Corp., an insurance company with headquarters in Sacramento, Calif.

An outgrowth of a similar policy for individuals, the "business protector" is a service that allows subscribers unlimited telephone consultations with attorneys. For $180 per year, businesses with 50 or fewer employees are permitted to seek advice from designated law firms as often as they wish. Problems that can't be handled over the phone or in a few hours are referred to lawyers with expertise in the appropriate field, who in return for the referrals have agreed to charge $40 per hour for work at their offices and $50 per hour for out-of-office work. For a small additional fee, the primary office -- called the legal service office -- will perform standard legal services such as preparing collection notices.

One of the first things the office did for Milne when he signed up was refer him to an attorney who could handle his claim. His suit, which sought payment from the owners of a building on which his company had worked, was similar to suits brought by other subcontractors who had worked at the site. Milne was given the choice of filing jointly with others who had claims or going to another attorney who was handling a similar case through arbitration. Milne opted for arbitration.

"The 'business protector' has saved me a lot of money, and I'm getting better service," Milne says. As for the free consultations, he adds, "A phone call is simple, easy, and time-efficient."

Don Caldwell, who since 1967 has been developing prepaid legal services for individuals, says nearly two-thirds of a business's legal problems can be handled with a single phone call. The remainder take additional research or must be referred to other attorneys.

"The great majority of a business's legal problems can be handled over the phone before they become big-ticket items," says John Whetzel, associate director of the American Prepaid Legal Services Institute at the American Bar Association in Chicago. Whetzel says that while the majority of prepaid services on the market are for individuals, he expects to see more attention paid to businesses seeking to limit their costs and legal risks. The greatest benefit of the service, he says, is in providing businesses access to a lawyer for routine business questions.

"I'm more apt now to do things in a businesslike manner," agrees Ken Peterson, president of New Air Inc., a Redmond, Wash., supplier to diesel filter manufacturers. A recent subscriber to Caldwell's plan, Peterson says he used to be inhibited by the high cost of his legal services and usually did without a lawyer until a problem arose. Now, however, he says he calls he legal service office frequently and gets answers to 60% to 70% of his questions on the first call.

David Sadick, who runs the legal services office for Caldwell in Seattle, reports that subscribers ask "a wide variety of business questions -- anything you can imagine." (For a list of the most commonly asked questions, see box.) Washington is the first state where marketers of the service have mounted an organized subscription campaign. By late April, after nearly a year of solicitation, about 600 businesses had signed on. "This service allows people access and lets them learn more to prevent future problems," Sadick says.

Not all people who sign up for the service intend to use it solely for telephone consultations. "I have no easy questions," says Steve Tyler, owner of Tyler Taping Co., a drywall contractor in Redmond. Tyler says he bought the service last August to "take advantage of all the freebies" -- the telephone consultations and referrals. "I took a handful of problems down there," Tyler recalls. "I had some things saved up."

Tyler says most of his problems required more work than the legal services office could readily provide and had to be referred. But even so, at the $40 per hour rate guaranteed in his policy, he was able to save $30 an hour over what he had been paying his lawyer, and he saw experts for his problems. "The results are yet to be seen," he cautions, because much of the work will take several months to complete.

Some other companies in the prepaid legal services business offer similar programs but with different emphasis. The Law Store Group in Santa Monica, Calif., for instance, offers its services for $294 to businesses with 15 or fewer employees. Stuart Baron, vice-president of the Law Store, says his office of 10 attorneys handles 85% of customer problems in the office and makes referrals only when the lawyers determine that litigation or other lengthy legal work is necessary.

The Consumer Services Organization of Chicago markets its services in a package that includes accounting work for $475 per year. The package can be broken into components, says Steven Blutza, president of CSO, with accounting available for $375 per year and legal services for $175. As with the Law Store and Don Caldwell, CSO offers personal plans for less.

For more information on prepaid legal services for companies and individuals, contact the American Prepaid Legal Services Institute, 1155 E. 60th St., Chicago, IL 60637.