Legal Insurance and Its Limits

Nora Freeman Engstrom* October, 2025

Courts are buckling under the weight of a staggering access-to-justice crisis. In three-quarters of cases, at least one side lacks a lawyer, default judgments are on the rise, and most Americans with valid claims never take legal action. The situation is dire, and it understandably has policymakers casting about for a fix. On the menu are a range of uncontroversial reform ideas, such as expanding legal aid, supporting system simplification, and promoting pro bono. But it is increasingly clear that those measures—even if accomplished—would not make a dent in the problem. Attention is thus turning to other reform ideas, such as relaxing unauthorized practice of law (UPL) rules and scrapping Model Rule 5.4(d), the provision that prevents nonlawyers from even partially owning entities that deliver legal services. Both reforms are promising. But both would dilute the longstanding lawyers’ monopoly. Perhaps not surprisingly, the bar is fighting these reforms tooth-and-nail.

Into this roiling landscape, some now have a new idea: legal insurance. They suggest that legal insurance is the way to expand access to justice for middle- and working-class Americans. Reformers are also quick to point out that—unlike a relaxation of UPL restrictions or the abolition of Rule 5.4(d)—legal insurance stands to benefit lawyers.

We have seen this play before. In the 1970s, the bar seized on legal insurance as a solution to what was then seen as an urgent access-to-justice crisis afflicting the middle-class. The movement garnered enthusiastic support, not just from the bar, but also from unions, states, Congress, private insurers, and consumer groups. For a time, legal insurance even took off. By the mid-1970s, there were reportedly 5,000 distinct plans in operation, and experts predicted that, by the mid-1980s, half of practicing lawyers would be participating.

Of course, it didn’t come to pass—and remarkably, it seems the entire episode has been forgotten.

This Article recovers the lost history of the country’s first experiment with legal insurance. In so doing, it seeks to forestall another false start. In addition, by drawing on a range of disciplines—including insurance law (particularly insights concerning moral hazard and adverse selection), behavioral economics, legal ethics, and the legal profession—this Article explains why the legal insurance idea floundered, and seems destined to flounder, going forward.

It is undeniably seductive to think the access-to-justice crisis can be addressed in a way that benefits lawyers. It was seductive half-a-century ago. It is seductive now. But those who actually want to address the access-to-justice crisis need to look somewhere else.

Introduction

On an unseasonably warm morning in January 1971, a van pulled to a stop in front of Washington Emerson’s home in Shreveport, Louisiana.¹ The van’s driver trundled to the door, knocked, and informed Mr. Emerson that he was there to take Mr. Emerson’s furniture. As the driver pulled out a contract and spouted legalese, Mr. Emerson recalled with dismay that six months earlier, his daughter, then a newlywed, had asked him to cosign a loan. She and her new husband wanted to buy furniture, and, to do so, they needed his help. In the ensuing months, they had fallen behind on payments, and on that January morning, the finance company had arrived to repossess his daughter’s furniture—and to take Mr. Emerson’s as well.²

It was a common occurrence then, as it is now.³ But, that January morning, something unusual happened. A member of Local 229 of the International Laborers Union, Washington Emerson possessed legal insurance. He had, in fact, gotten it just a few weeks before.⁴ Accordingly, Mr. Emerson called the union hall where a union officer referred him to a lawyer who could help.⁵ The attorney had Mr. Emerson put the repo man on the phone—and, in the course of a brief conversation, convinced the man to stand down. The lawyer then called the finance company and reached a compromise settlement. Mr. Emerson and his son-in-law managed to work off the debt. His and his daughter’s furniture stayed put.⁶

A construction worker, Washington Emerson had legal insurance because his union furnished policies for two cents per hour worked, roughly $32 annually ($253.75 in present-day dollars).⁷ Nor, in offering this coverage, was Local 229 alone. Throughout the 1970s, legal insurance was much in the news.⁸ It was the subject of repeated congressional hearings. And it was the focus of myriad articles in bar journals and law reviews.⁹

Legal insurance received this tidal wave of attention because it was widely (almost universally) viewed as a solution to that era’s justice gap. Legal insurance was viewed as so promising, in fact, that even the hidebound American Bar Association (A.B.A.) relaxed its rules to permit (and even encourage) its adoption, while numerous states and Congress amended various laws—including to the Internal Revenue Code and the Labor Management Relations Act—to facilitate its spread.¹⁰

Given this attention, a raft of academics and commentators throughout the 1970s confidently predicted: “The day for prepaid legal service plans”—just another name for legal insurance—“has arrived.”¹¹ In 1972, Representative Frank Thompson, Chair of the House Subcommittee on Labor, gaveled hearings on prepaid legal services to order, declaring that these plans would “assure equal access to our legal system for all of our citizens, whether they are rich or poor or in between.”¹² By 1974, a report predicted that, within the next few years, 70% of the American public would be covered by legal insurance and 50% of American lawyers would use those plans to acquire business.¹³ In 1977, the A.B.A.’s Committee on Prepaid Legal Services reported that there were an estimated 5,000 plans already in operation.¹⁴ And, by 1978, an A.B.A. leader asserted that, with legal insurance, “[i]nevitably,” most middle-class Americans would obtain “meaningful access to lawyers and the legal system.”¹⁵

Yet of course, that didn’t come to pass. These days, as we will see, legal insurance has not entirely faded away. More than two-dozen providers continue to putter on, offering limited services to ordinary Americans.¹⁶ But, contrary to the predictions of so many experts, legal insurance never reshaped the legal services industry. Nor did it ever make a significant dent in the access-to-justice crisis. Now, in fact, it appears that the justice gap is substantially wider than it was half-a-century ago when legal insurance got its initial push.

Today, the civil justice gap is staggering and scandalous. In roughly three-quarters of state court cases, at least one side lacks a lawyer—a sharp increase from 1992 (the only prior year with good data available).¹⁷ The rate of default judgments, typically issued when the defendant never appears in court, is spiraling upward.¹⁸ And the composition of state courts has undergone a quiet metamorphosis. We tend to cling to the conception of courts as places where individuals act—places where people challenge authority, seek relief, and vindicate rights. Today, that conception is mostly fairy tale. Contract actions, typically brought by repeat-play institutional plaintiffs (think: debt buyers and institutional landlords), have quietly eclipsed tort suits, which are in sharp decline.¹⁹ As the Pew Charitable Trusts explains, state courts are now “dominated . . . by cases in which a company represented by an attorney sues an individual, usually without the benefit of legal counsel, for money owed.”²⁰

The trouble is not just that more big institutions are suing regular people (although they are). It is also that many regular people with genuine claims—those who are entitled to become plaintiffs—never make it into court. By all accounts, tens of millions of Americans who have a valid entitlement to relief under the governing law—who have, perhaps, been consigned to uninhabitable housing by a landlord, sustained a cognizable injury at the hands of a tortfeasor, or been wrongfully denied overtime by their employer—take no legal action to protect their interests.²¹

As all of this has come into focus, in an eerie 1970s replay, scholars, courts, journalists, Congress, and the A.B.A. are, once again, taking note. Further, just as the literature is again awash in discussion of the contemporary access-to-justice problem, it is again awash in proposals for how to address it.

This time, many point to obvious fixes. These include additional legal aid funding, a deeper commitment to pro bono work, expanded self-help services, and efforts to simplify court systems so litigants without lawyers can more effectively press or defend claims.²² There is little opposition to these ideas. Yet it is also increasingly clear that, as the Conference of Chief Justices acknowledged in 2020, these incremental measures are bound to be woefully insufficient.²³

As the insufficiency of these measures has become clear, attention has turned to more ambitious (and more controversial) reforms.²⁴ One idea is to relax unauthorized practice of law (UPL) rules to admit licensed nonlawyers into the system, akin to the nurse practitioners common in medicine.²⁵ No longer merely theoretical, a number of states, including Alaska, Arizona, Colorado, Hawaii, Minnesota, New Hampshire, Oregon, Utah, and Washington have taken precisely this step.²⁶ Others champion a relaxation of Model Rule 5.4(d), the longstanding prohibition on nonlawyer ownership of law firms.²⁷ The thought is that the elimination of this prohibition will promote investment, encourage cross-disciplinary collaboration, spur innovation, and expand firm capacity—which will, in turn, generate efficiencies to improve service and reduce cost.²⁸ Again, the idea has made the jump from the law review literature to the real world. In an effort to “bridge the access-to-justice gap,” Arizona and Utah have recently scrapped Rule 5.4(d);²⁹ Washington is soon to launch a pilot project to relax the Rule;³⁰ and in Indiana, the idea is under consideration.³¹

Yet, as is likely clear, the above two reforms—the relaxation of UPL restrictions and the elimination of Rule 5.4(d)—challenge the lawyer monopoly. They welcome nonlawyers into the sacred arena that lawyers have long controlled. Perhaps not coincidentally, many in the organized bar are fighting these reforms tooth-and-nail.³² Indeed, in 2022, the A.B.A. House of Delegates passed a resolution in a “landslide vote” doubling down on its commitment to Rule 5.4(d).³³ And, in recent years, in the face of fierce opposition from organized attorney coalitions, efforts to relax these rules in Florida and California have sputtered.³⁴

In this turbulent environment, some are now pointing to the possibility of legal insurance, proclaiming that this insurance is an “ideal solution” to the access-to-justice crisis.³⁵ Insurance, some observe, is particularly promising because, unlike a relaxation of UPL laws or the scrapping of Rule 5.4(d)—both of which threaten lawyers’ stranglehold over the delivery of legal services—legal insurance stands to benefit lawyers.³⁶ It “works to increase access to attorneys—not replace them.”³⁷ Insurance, some thus predict, is “on track to have groundbreaking effects on how legal services are delivered and procured in the future.”³⁸

This Article interrogates those claims. It asks, simply: Is legal insurance really a promising solution to the country’s crushing access-to-justice crisis? It tackles the question by excavating tens of thousands of pages of historical material documenting the profession’s first—and now remarkably forgotten—experiment with legal insurance.³⁹ Ultimately, after sifting through this mountain of evidence, the Article concludes that those looking for a solution to the country’s crisis need to look somewhere else. This Article reaches that dismal answer in four Parts.

Parts I and II turn the clock back half a century. These Parts seek to ensure that the reformers of today can benefit from the lessons learned (the hard way) from the reformers of the past. In particular, Part I traces the rise of what were then called “prepaid legal services.” (The A.B.A. used that euphemism not because of any actual difference between prepaid legal services and legal insurance but because, in its words: “Labeling the activity as ‘insurance’ . . . invites regulation and the additional burdens incident thereto.”⁴⁰) This Part outlines the advantages legal insurance was supposed to confer; traces the “frenzied” support they garnered; and compiles experts’ sunny predictions that legal insurance would remake the legal services industry and facilitate the provision of high-quality counsel to tens of millions of working- and middle-class Americans.⁴¹

Part II continues the scene-setting by zeroing in on three early exemplars. First, Part II analyzes the Shreveport Plan. An “open-panel” plan akin to a modern medical insurance PPO (i.e., a plan that did not restrict the insured’s choice of counsel), this plan supplied coverage to Washington Emerson and many of his colleagues in Local 229. Second, it considers a “closed-panel” plan adopted in 1972 by Laborers’ Local 423 in Columbus, Ohio. (As the name suggests, a closed-panel plan resembles a modern HMO; members are restricted in their selection of counsel.) Finally, it explores a third plan launched by the Amalgamated Clothing Workers (ACW) of Chicago. Funded by a charge of only 50 cents per month, the ACW’s plan offered limited benefits to 6,000 members of that predominantly female union, “over 95%” of whom had “never used the services of an attorney before.”⁴²

Part III traces legal insurance’s unraveling. It considers early signs of trouble and then canvasses the legal insurance status quo. Part III shows that, today, more than half-a-century after legal insurance got its initial push, relatively few Americans have stand-alone legal insurance, and the insurance plans that exist furnish limited benefits.

The analytical heart of this paper, Part IV conducts a post-mortem. By 1979, studies had begun to explore why legal insurance had “not met expectations.”⁴³ This Part essentially continues—but greatly enriches—that inquiry. It asks why legal insurance, adopted in the 1970s amidst such optimism and with such fanfare, has mostly fizzled. In light of current claims that legal insurance offers a promising reform pathway, it particularly considers whether the problems that previously plagued legal insurance markets can realistically be overcome. Yes, Part IV observes, the last experiment with legal insurance was mostly a bust. But are the troubles that stymied legal insurance idiosyncratic? Can they be chalked up to bad timing or bad luck? Or are problems deeper and more intractable?

Drawing insights from a range of disciplines—including history, insurance law (particularly concerning moral hazard and adverse selection), behavioral economics, legal ethics, and the legal profession—Part IV concludes that part of the blame is properly placed on fortuity and path dependencies. Legal insurance started to take off around the time that unions (the most muscular backers of legal insurance) began their long decline. If the story of organized labor had unfolded differently in the United States, perhaps the story of legal insurance would have unfolded differently, too.

Yet, Part IV also suggests that it isn’t all happenstance. Given a mix of factors, consumer demand for legal insurance (and particularly the voluntary, open-panel plans that the bar has long favored) is inherently limited.⁴⁴ And given the challenges would-be legal insurers confront—including adverse selection, moral hazard, and a complex and fractured regulatory environment—the supply of legal insurance is also apt to be thin.⁴⁵ In the end, Part IV argues, those who really want to address the current access-to-justice crisis ought to look elsewhere.

Finally, a brief Part V confronts the actions of the A.B.A. It shows that, between 1930 and 1970, the A.B.A. fiercely opposed any kind of group legal service and—under the banner of UPL rules—repeatedly penalized any entity (including banks, unions, and auto clubs) that dared furnish legal assistance to members. But then, the organization abruptly pivoted. In light of its recent activities, which again put the A.B.A.’s motivations under the microscope, this Part asks why. Ultimately, Part V comes down on the side of the A.B.A.’s then-President Chesterfield Smith, who, in 1974, publicly conceded that, although the organization cloaked its actions in the veneer of the public interest, it instead acted out of self-interest, motivated by members’ desire to “spread the economics around.”⁴⁶ Some, of course, may reasonably conclude that the A.B.A.’s 1970s-era motivations surrounding legal insurance are too old and attenuated to be relevant to contemporary debates. But others may decide that they bear at least some consideration when assessing the organization’s strikingly similar present-day activity.⁴⁷

I. The Ascendence of Legal Insurance

A. Scene-Setting: A Reckoning with Unmet Need

The 1960s and 1970s marked a time when a number of substantive legal rights were minted. It also marked a time of sustained attention to the vindication of those rights—how to make counsel more readily available.⁴⁸ A watershed moment came in 1963, when the Supreme Court extended a right to counsel to indigent criminal defendants in Gideon v. Wainwright.⁴⁹ Then, in 1966, Congress amended Rule 23 to make the class action device more readily available.⁵⁰ In 1972, the Court extended the Gideon rule to all facing incarceration.⁵¹ And, in 1974, Congress formed the Legal Services Corporation (LSC), a group charged with providing “high quality legal assistance to those who would be otherwise unable to afford adequate legal counsel.”⁵²

As a result of the Court’s opinions and the LSC’s formation, some commentators of the era suggested (rightly or wrongly) that the legal needs of the poor were, at least momentarily, satisfied.⁵³ Concern thus shifted to the needs of the middle class.⁵⁴ Capturing then-prevailing sentiment, one New York bar leader explained: “Although legal services for the poor have been expanded in recent years, sufficient attention has not been devoted to the problems of citizens of average means—wage earners, small businessmen, civil servants, teachers, and some professionals.”⁵⁵

The focus was fueled by research of the day. In 1971, the A.B.A. House of Delegates commissioned a survey “to ascertain the extent to which the public recognizes the need for and uses legal services.”⁵⁶ Barbara Curran led the ensuing effort, and her results, published in 1977, painted a grim picture. Lawyers were consulted for less than a third of legal problems that respondents experienced.⁵⁷ She found people tended to be stymied by a pair of problems: high cost and limited information.⁵⁸ As A.B.A. President James Fellers summarized, middle-income Americans “don’t know how to find a lawyer; they’re afraid of lawyers [and] they think they cost too much.”⁵⁹

As concern swelled, the A.B.A., which had long opposed any form of group legal services, came around.⁶⁰ Through a series of actions, the organization seized on legal insurance as a way to deliver legal services to all those previously priced out of the marketplace.⁶¹

B. The Advent of Legal Insurance

In 1966, the A.B.A. retained Professor Preble Stolz of the University of California School of Law to study the feasibility of legal insurance. Soon thereafter, Professor Stolz, together with a team of consulting actuaries, published their findings. The results were mostly positive: “Legal insurance,” Stolz concluded, “is a possible way of financing legal service for individuals of modest means” and could offer “low cost, preventive law services that the public is not now buying.”⁶²

Encouraged, in 1970, the A.B.A. appointed a new body—the Special Committee on Prepaid Legal Cost Insurance—to further examine the idea.⁶³ After that Committee offered a favorable analysis, the A.B.A. urged interested bar associations to foster and promote “plans based upon insurance principles.”⁶⁴ Bar associations should move “swiftly,” the A.B.A. advised, “to cut through the myriad problems involved in setting up such programs.”⁶⁵ Putting its money where its mouth was, the A.B.A. also spearheaded the Shreveport Plan for Washington Emerson and his colleagues in Local 229, described in greater detail below. The following year, in 1972, the A.B.A.’s House of Delegates adopted a resolution that “strongly urge[d] all state and local bar associations [to] immediately inform themselves of developments in the field of prepaid legal services, to assist others in the creation and implementation of qualified . . . plans and to consider initiating and sponsoring plans for providing prepaid legal services to citizens.”⁶⁶

The A.B.A. was not alone in its support. Unions, which had long fought to offer their members legal services (and, for decades, had been penalized for so doing), enthusiastically embraced the insurance idea.⁶⁷ On May 2, 1972, the AFL-CIO’s executive council announced that, “[l]egal services for union members and their families can best be provided through union or community sponsored prepaid legal service plans.”⁶⁸ In 1972, the United Auto Workers endorsed prepaid plans.⁶⁹ And, in 1973, the American Federation of Labor and Congress of Industrial Organizations added its heft to the burgeoning movement.⁷⁰

Congress, too, got in the act—and cut through the red tape that threatened to restrict the plans’ growth. In 1973, Congress amended § 302(c) of the Labor Management Relations Act to make legal insurance plans a benefit subject to collective bargaining.⁷¹ The move, a sponsor of the amendment explained, was born of a recognition that existing methods of legal service delivery were “inadequate”—and the amendment’s goal was to make legal service programs available “in a manner similar to the way health benefit programs were established.”⁷² The following year, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA), which included a provision to ease the plans’ implementation,⁷³ and in 1976, Congress amended the Internal Revenue Code to afford employer-provided plans more favorable tax treatment.⁷⁴ Meanwhile, various states also tweaked their laws to facilitate the plans’ provision.⁷⁵

Not surprisingly, in this fertile environment, legal insurance began to take off.

C. Advantages of Insurance

Fueling the rise of legal insurance was a sense that these plans would overcome the many barriers that had, for so long, stunted working- and middle-class Americans’ ability to obtain assistance. The notion was that insurance would not just help people pay for legal services (though it would). It would also educate people to recognize their legal problems, facilitate lawyer selection, promote efficient legal service delivery, facilitate “preventative law,” and address problems at their root by deterring third parties from engaging in “sharp practices” in the first instance.

First, it was thought that many individuals failed to seek legal advice because of difficulties regarding attribution. “[T]he average person,” it was said, “fails to realize when he is encountering a problem that requires legal assistance.”⁷⁶ Legal insurance, it was believed, would help people overcome the attribution problem; it would help people see that certain problems were legal in nature and would benefit from a lawyer’s engagement.⁷⁷

Second, many believed that another significant impediment to lawyer use was another kind of informational asymmetry: high search costs. Particularly before the advent of legal advertising (which only became legal in 1977 via Bates v. State Bar of Arizona⁷⁸), people in need of assistance didn’t know where to go or who to ask.⁷⁹ Here again, it was thought that legal insurance (and particularly closed-panel plans, where the plan administrator would select and supervise qualified counsel) would help individuals overcome this barrier.⁸⁰

Third, many argued that particularly closed-panel plans (where lawyers were obligated to meet a certain population’s needs) would generate efficiencies and ultimately reduce costs.⁸¹ In part, these savings stemmed from the fact that the plan administrator (with bargaining leverage) could demand that participating lawyers reduce their rates. And in part, it stemmed from the fact that, unlike typical lawyers (paid by the hour, with an incentive to run the meter), those in closed-panel plans would be obligated to fulfill all subscribers’ needs.⁸² As such, there would be no incentive to drag one’s feet, and there would be a powerful new incentive to specialize; streamline operations; and harness economies of scale, including by relying on standardized procedures, paraprofessionals, and technology.⁸³

Fourth, it was broadly believed that legal insurance—and (again) particularly closed-panel plans—would facilitate “preventative law.” An insured individual, many surmised, would attend to her legal troubles proactively, and this proactive engagement (much like preventative care in medicine) would keep legal problems from metastasizing.⁸⁴ Some, in fact, predicted that “by the application of preventative law,” legal insurance would reduce members’ litigation activity “by as much as 50 percent.”⁸⁵

Fifth and finally, many believed that individuals with insurance were less apt to be abused by third parties such as merchants, credit card companies, and repair persons. In this way, simply having insurance would thus benefit the insured (plus perhaps others in her orbit). Not merely theoretical, soon after insurance plans got off the ground, encouraging evidence on this score started to accumulate.⁸⁶

D. “Prepaid Legal Services Have Arrived.” ⁸⁷

Legal insurance kicked off on New Year’s Day 1971 with the creation of the Shreveport Plan, described in more detail below.⁸⁸ From there, it quickly spread. By the end of 1971, there were reportedly 500 plans in existence.⁸⁹ By 1972, an A.B.A. official claimed that 3,000 plans had been formed.⁹⁰ By 1976, it was reported that “[a]lmost all of the top ten insurance companies have their product development people working on a group legal program to offer to American business.”⁹¹ By 1977, the A.B.A.’s Committee on Prepaid Legal Services reported that in California alone, there were 1,150 group plans already on file.⁹² And, by 1979, a commentator boasted that “there are approximately 5,000 plans operating throughout the nation.”⁹³

The activity was dizzying. In 1971, the 65,000-member Consumer Cooperative of Berkeley, California, launched Consumers’ Group Legal Services, available to all Co-op members for a $25 annual fee.⁹⁴ In 1972, the Birmingham Laborers Local 559 created a plan financed through a check-off of three cents an hour,⁹⁵ while in Pennsylvania, the 65,000-strong Steel Workers union followed suit.⁹⁶ In 1973, the Utah State Bar launched the first state bar plan, extending service throughout the Beehive State.⁹⁷ By 1974, numerous private insurers—including the Mission Equities Corp. and St. Paul Insurance Cos.—were offering coverage.⁹⁸ Numerous colleges even launched plans for their students.⁹⁹

This flurry of activity was accompanied by tremendous optimism. In 1976, one commentator predicted: “[I]t seems likely that within three to five years we’ll see the majority” of union members “gain access to the American legal system—with white-collar workers following close behind.”¹⁰⁰ In 1978, Philip Murphy, the former staff director of the A.B.A. Special Committee on Prepaid Legal Services offered a similar forecast: “Within the next decade twenty-five percent of the population will have access to a lawyer via a prepaid plan, and fifty percent of the lawyers in active practice will be participating in such plans.”¹⁰¹ “[T]he potential for prepaid legal plans,” a commentator summarized in 1979, “is unlimited.”¹⁰²

II. Legal Insurance Plans: Three Examples

This Part offers further perspective by describing three union-backed plans that got their start during the movement’s 1971–72 inception. The first, the Shreveport Plan, to which Washington Emerson belonged, featured an open-panel, meaning that subscribers were entitled to see any lawyer without restraint. The other two, launched by Laborers Local 423 of Columbus, Ohio and the Amalgamated Clothing Workers (ACW) of Chicago, were closed-panel. Both severely restricted the roster of lawyers available.

A. The Shreveport Plan

Sponsored by the A.B.A. with support from the Ford Foundation, the Shreveport Plan opened for business on January 1, 1971.¹⁰³ The plan was available to all members of Local 229 of the International Laborers Union—a group of individuals who had, prior to the plan’s inception, found themselves priced out of the market for legal services.¹⁰⁴ Mostly “common laborers in the construction field,”¹⁰⁵ members of Local 229 had annual family incomes of approximately $4,500 (roughly $35,700 in today’s dollars) and were overwhelmingly Black, with a median educational attainment of the sixth grade.¹⁰⁶ As of January 1971, only 54% of the Plan’s subscribers had “ever in their lives taken a problem to a lawyer.”¹⁰⁷ Of those who had sought a lawyer’s services, the majority “had done so only once.”¹⁰⁸

Enrollment in the Shreveport Plan was optional. To join, a member needed to sign up and contribute two cents per hour worked.¹⁰⁹ Union members worked roughly 1,600 hours annually, which meant that, for Plan coverage, each subscriber paid approximately $32 per year ($254 in inflation-adjusted dollars).¹¹⁰ In return, subscribers and their families were entitled to a range of benefits. These included (in 1971 dollars):

“advice and consultation” for “any legal problem” up to $25 per visit or $100 annually;
$250 annually for “office work” (subject to a $10 deductible);
$325 per year to bring a lawsuit (subject to a $25 deductible); and
$800 if sued civilly, charged criminally or named as a respondent in an administrative action.¹¹¹

The Plan did not help with: (1) controversies between Plan members or with Local 229, (2) “tax returns (although advice on tax problems [was] covered),” (3) class actions and personal injury claims, and (4) interventions and amicus curiae filings, “where the immediate and direct interests of the member are not involved.”¹¹²

As noted, the Plan was “open,” such that each subscriber had no restriction on attorney selection. Indeed, the only constraint was that the lawyer had to be licensed, and he was obligated to submit bills on prescribed forms.¹¹³ These attorneys charged the Plan full freight, even though Plan architects recognized that, without caps or discounts, it was possible that outputs would eclipse inputs—and the Plan would collapse.¹¹⁴ In other respects, too, the Plan’s touch was light. The information given to subscribers specified: “The plan does not govern or alter in any way the usual and customary attorney-client relationship.”¹¹⁵

The Plan was extensively studied, so a great deal of information about its operation is available. This information paints a mixed portrait of the Plan’s success. On some dimensions, the Shreveport Plan met or surpassed expectations. For instance, the Plan was associated with an uptick in lawyer use. In the twelve months prior to the Plan’s rollout, 10.3% of the members of Local 229 used a lawyer.¹¹⁶ During the Plan’s first twelve months, that increased to 16.3%, and the number of problems taken to lawyers also jumped.¹¹⁷ There was also some evidence of higher satisfaction: “Of those members who had seen lawyers both before and under the plan, half thought that they had been given better service and the rest detected no decline.”¹¹⁸ Researchers “found no evidence of use of lawyers for trivial or unimportant problems.”¹¹⁹ There was some evidence that the Plan’s existence had (as hoped) deterred area merchants and service providers from overreach. For instance, one union leader reported to Congress that, after the Plan had been in operation for two years, “a certain kind of case involving very, very sharp practices in the consumer area has all of a sudden seemed to dry up.”¹²⁰ Last but not least, researchers reported: “The lawyers’ reactions to the plan ran from favorable to enthusiastic.” One Shreveport lawyer declared: “I think it’s the greatest thing since popcorn.”¹²¹

Yet, there were some surprises. One involved lawyer selection: Although subscribers were free to seek the services of any lawyer in Louisiana (or even lawyers outside Louisiana), most sought the services of just two lawyers with offices in Shreveport.¹²² Further, lawyers were utilized less than anticipated. During the first three years of operation, 45% of subscribers’ families (total) made use of the Plan, and between 14% and 20% of subscribers utilized the Plan each year.¹²³

There were also disappointments. One sore spot involved enrollment and, in particular, the low rate at which members chose to sign up. In 1971, the first year of operation, 583 union members were eligible to subscribe, but only 108 actually did. In 1972 and 1973, enrollment declined; fewer than 80 participated. Then, in 1974, there was a modest rebound: The number rose to 105 participants.¹²⁴

A second sore spot involved preventative law. One early A.B.A. Report observed: “It had . . . been hoped that the plan would encourage preventive use of a lawyer, but only two cases thus far could be classified as drawing upon the counseling and advisory skills of the lawyer to avoid legal difficulty in the future.”¹²⁵ Concurring, another explained: “Little use was made of the benefits for preventive consultation, and a substantial proportion of those who used the plan’s benefits were those who had consulted a lawyer before the plan came into existence.”¹²⁶

A third sore spot involved lawyer utilization. While it is true (as noted above) that lawyer use did tick upward after the Plan went into effect, the change (from 10.3% to 16.3%) was modest, and it was only about one-quarter of what researchers had anticipated.¹²⁷

Reflecting the Shreveport Plan as a mixed bag, one bar leader of the era put it: “We presume to suggest that the Shreveport Plan has proven successful. The best interest of the citizenry comprising the participating group has been served.”¹²⁸ The leader’s next sentence was perhaps telling, however: “Necessarily, the interest of the legal profession has likewise been served . . . .”¹²⁹

B. Laborers’ Local 423 in Columbus, Ohio

A second exemplar comes from Columbus, Ohio. There, on March 10, 1972, Laborers’ Local 423 launched a Plan to furnish legal services to active and retired members, alongside their families.¹³⁰ As above, enrollment was voluntary; approximately one in four eligible employees opted to participate.¹³¹ Fees, initially seven cents per hour worked, were extracted from union dues.¹³² Similar to those in Local 229, the majority of union members were Black, with annual earnings ranging between $2,000 and $20,000 per year ($15,300 to $152,800 in today’s dollars).¹³³ Prior to the Plan’s launch, approximately 90% of the union’s members had never before sought a lawyer’s services.¹³⁴

Unlike the Shreveport Plan, the Columbus Plan was closed in nature, and, in fact, lawyers were in-house: The Plan was staffed by three full-time attorneys, two secretaries, and a director of legal services, all of whom worked in the union hall.¹³⁵ According to one union lawyer, this physical proximity and continuity bred familiarity—and this familiarity paid dividends. Subscribers, who knew the lawyers personally, became more willing to ask questions and developed confidence in the lawyers’ advice, while the lawyers, who were fully devoted to the particular cohort of clients, gradually developed an expertise addressing the kinds of problems union members tended to confront.¹³⁶

The Plan’s benefits were strikingly generous. For the seven cents per hour worked, each subscriber was entitled to virtually unlimited legal assistance, including court costs—with the principal exclusion being plaintiff-side personal injury.¹³⁷ As the Plan’s Administrator explained:

We prepare wills, take care of real estate transactions, administer decedent estates in probate court as well as getting involved in guardianships and trusts where necessary, defend against creditors and many other kinds of claims, represent the workers as plaintiff and defendant [and] on charges of misdemeanor and felony from beginning to end. We represent these people not only in the trial courts but in the appellate court if necessary, not only in criminal cases but in civil cases as well.¹³⁸

Each spring, the Plan even supplied accountants, free of charge, to help prepare members’ tax returns.¹³⁹

In the first three years of operation, the Plan’s three attorneys opened 3,254 case files.¹⁴⁰ Of those, 49% involved civil matters, 40% involved criminal matters, and 11% involved workers’ compensation claims.¹⁴¹ By the end of the Plan’s second year, 672 union members—22% of Local 423’s total membership—had obtained some form of help.¹⁴²

C. Amalgamated Clothing Workers in Chicago

A third example comes from the Land of Lincoln. There, on April 1, 1972, the ACW of Chicago launched a limited closed-panel plan funded by a 50 cent per month deduction on payroll.¹⁴³ Covering 6,000 union members via voluntary enrollment (roughly 40% of those eligible to participate), the closed-panel plan was staffed by a five-person (outside) law firm.¹⁴⁴ The union selected the firm believing that the firm’s lawyers were “understanding of the nature of the people who would be their clients”—individuals who were predominantly female, approximately one-third persons of color, and tended to earn between $5,000 to $12,000 annually ($38,200 to $91,600 when adjusted for inflation).¹⁴⁵ Further, the union’s leaders believed that the closed-panel model was superior to the open-panel alternative because it facilitated oversight and quality control: “We are in a position to judge if [subscribers] are getting decent representation or not, and if they are not, we can change it.”¹⁴⁶ Over 95% of the plan’s subscribers had “never used the services of an attorney before.”¹⁴⁷

The ACW’s Plan differed from those above in part because its coverage was quite circumscribed—perhaps not surprising, given the $6 annual charge ($45 when adjusted for inflation). Unlike the plans above, the ACW Plan did not cover dependents, and the disputes covered were similarly restricted.¹⁴⁸ The Plan’s five lawyers would write wills; file bankruptcies; and assist with consumer disputes, the full panoply of family matters (think: divorces and adoptions), and all issues involving noncommercial real estate (including evictions and foreclosures).¹⁴⁹ But the Plan excluded coverage for criminal defense, as well as personal injuries and other plaintiff-side claims.¹⁵⁰

In an interesting spin on what today we might call multidisciplinary practice, the union combined the provision of counsel with assistance from an in-house social worker to “hold costs down”—before seeing a lawyer, each subscriber had to see, and essentially get a referral from, said social worker.¹⁵¹ The social worker would try to solve the subscriber’s problem on her own, and frequently (in approximately two-thirds of cases), she would be able to do so (sometimes after guiding the subscriber to the “proper community agency” and sometimes after getting advice from one of the Plan’s attorneys).¹⁵² But, even if she couldn’t—and if a referral to a lawyer was necessary—the social worker would work to prepare the subscriber for that meeting, including by helping to gather pertinent documents and other materials.¹⁵³

III. Insurance’s Unraveling

The above discussion paints a bright portrait. It shows that, by the late 1970s, prepaid legal service plans (the era’s euphemism for legal insurance) were taking off. The A.B.A. and unions were both on board, Congress had amended various laws to facilitate the services’ adoption, and providers were experimenting with a broad range of systems keyed to the perceived needs of prospective clients.

But, if Parts I and II trace the rise of legal insurance, this Part traces its fall. Section A compiles early evidence of legal insurance’s unraveling, while Section B catalogs the legal insurance status quo.

A. Early Signs of Trouble

From the beginning, even as legal insurance was seemingly taking off, there were signs—often buried in the fine print—of dark clouds on the horizon.

One trouble spot involved tepid demand. An early indication was Barbara Curran’s 1977 study. In the course of her research, Curran asked respondents whether they would join a prepaid legal service plan.¹⁵⁴ Only a measly 6.2% of respondents indicated they would be willing to pay $12 a month for such coverage; 23.6% said they would be game, if the plan was $3 a month ($36 per year, or $245 in today’s dollars); and 47.6% indicated they would not have interest, even if the plan were only $3 per month.¹⁵⁵ A 1972 survey conducted by Fireman’s Fund also contained seeds of concern: Only 25% of the population agreed that legal insurance would serve a “valuable economic function.”¹⁵⁶ Apparently, the remainder of the respondents thought otherwise.

Meanwhile, in 1979, one researcher reported that, in mandatory plans (those with automatic enrollment), lawyer utilization rates were alarmingly low: 10% during the first year of operation, 12% to 15% during the second year, and 18% to 25% during the third and subsequent years.¹⁵⁷ This would suggest that, during many years, the vast majority of subscribers would be compelled to pay for a plan out of which they would derive no benefit. Those numbers also, if one looked carefully, tended to undercut the “preventative law” idea.¹⁵⁸

Likewise, when voluntary plans were launched (those where subscription was optional), enrollment consistently lagged behind expectations. For instance, when the ACW launched its 50-cent-per-month plan in 1972, the union had projected that between 8,000 and 9,000 members would sign up, out of the 15,000 eligible. In fact, only 6,000 did.¹⁵⁹ Another example: In 1974, CUMIS, a private insurer, contracted with a Colorado credit union to underwrite a legal expense program. As of 1978, it was reported that, out of 330,000 eligible credit union members, only 460 families had subscribed.¹⁶⁰ Likewise, for years, the New York County Lawyers Association battled various bureaucracies to obtain approval for its prepaid plan. But then, once it finally got the go-ahead, only 100 families signed on—“too few to make it feasible.”¹⁶¹ Around the same time, in a now-familiar refrain, the Texas Classroom Teachers Association launched a plan—but that plan, too, was shuttered when the teachers declined to sign up.¹⁶²

Private insurers’ willingness to enter the legal service market was also disappointing. The first bad news came as early as 1964. That year, the California Bar asked a working group to study the potential legal insurance marketplace.¹⁶³ Among other things, the working group reached out to various experts to assess whether those in the insurance field would consider offering legal insurance. The response the working group received was resoundingly negative: “No insurance company has been found which was interested in either the development or sale of such a plan.”¹⁶⁴ Apparently, the surveyed insurers believed that one’s need for legal services fell “within the control of a reasonably prudent man”—a dynamic that “does not seem to have the basic ingredients for a good insurance plan.”¹⁶⁵

Insurers’ actual experience was little better. Several insurance companies of the era did try to sell policies.¹⁶⁶ But few succeeded. After selling two group policies, California-based Financial Indemnity Co. pulled its legal insurance staff and put them back into selling auto insurance.¹⁶⁷ Another company, the Insurance Company of North America, invested significant time and money into developing and marketing a legal insurance program but ultimately gave up after failing to sell any policies.¹⁶⁸ Another insurer, Stuyvesant, invested more than $250,000 gearing up to roll out a legal insurance offering but then “withdrew entirely from the market” after becoming “discouraged by resistance from state insurance departments.”¹⁶⁹ In 1978, Philip Murphy, former staff director of the A.B.A. Special Committee on Prepaid Legal Services, reported that the first insurer to enter the legal insurance market, Stonewall Insurance Co., was poised to “phase out of the prepaid legal field” because of “slowness of sales and other reasons.”¹⁷⁰ The following year, the Vice President and General Counsel of Midwest Mutual Insurance Co. offered a chilling update: “[O]f the half dozen or so insurance companies who began marketing legal expense insurance five years or so ago, only Midwest Mutual, probably the smallest and least experienced in group benefit coverages, is still active in the prepaid legal market today.”¹⁷¹ And, it turns out, Midwest Mutual wasn’t long for the marketplace. In 1988, Oregon Prepaid Legal Insurance Inc. shuttered its operation when Midwest Mutual terminated a fourteen-year joint venture agreement and the bar-sponsored nonprofit corporation was “unable to find another underwriter” to take Midwest’s place.¹⁷²

The experience of another provider, Bankers Multiple Line Insurance Company, is similarly revealing. A 1984 study by Harvard’s Program on the Legal Profession explained:

In the spring of 1980, Bankers began test marketing the new concept in Wisconsin, Iowa, Missouri, and Texas. The product offered was fairly comprehensive (it included divorce and bankruptcy, for example) and expensive ($240 per year) [which translates to $970 in 2024 dollars]. Policyholders could select the attorney of their choice for a broad variety of legal needs and receive reimbursement for all or a large proportion of their legal costs.¹⁷³

Ultimately, however, “the sales test failed badly,” and Bankers went back to the drawing board.¹⁷⁴

A 1989 article in the Wisconsin Bar Journal captured the prevailing sentiment. Describing the tepid interest, the article quoted one lawyer as stating: “At one point . . . I was absolutely convinced that this new service was going to take hold and spread like fire—but that’s not happening.”¹⁷⁵ Added another: “People who don’t have a current legal problem see no need for group legal services—at any cost.”¹⁷⁶

B. Current Snapshot

It is surprisingly difficult to get a clear handle on just how much legal insurance exists or the parameters of existing coverage.¹⁷⁷ But a fair conclusion is that the market is thin—both when it comes to the proportion of Americans insured and the protection plans’ supply.¹⁷⁸ Legal insurance plans certainly exist.¹⁷⁹ Some are seemingly profitable. And some appear to provide an array of “preventative law” services that help insureds avoid legal entanglements.¹⁸⁰ But any notion that legal insurance would revolutionize the legal service market has, quite simply, not materialized.

One sore spot involves market penetration. In 1974, it was predicted that “within the next few years,” approximately 70% of all clients who consulted lawyers would be insured.¹⁸¹ Yet, when the A.B.A. conducted a massive legal needs survey of the American public in the 1990s and explored, among other things, how people located and compensated lawyers, legal insurance barely registered.¹⁸² Nor is there evidence that, since the 1990s, there has been any discernable shift.

Meanwhile, when people have legal insurance, the coverage tends to be extraordinarily limited.¹⁸³ Some contemporary plans just supply what is essentially a lawyer help desk (sometimes called a “simple access plan”), staffed by “hotline” attorneys.¹⁸⁴ Given that many lawyers generally provide free consultations, the benefit of this service is not entirely clear.¹⁸⁵

When more comprehensive coverage is on offer, it sometimes comes with curious restrictions. An example is a plan offered by LegalShield—a prominent contemporary insurer that actually operates as a multi-level marketing program, meaning that it appears that a significant portion of the company’s revenue comes, not from the sale of policies, but the sale of the right to sell its policies.¹⁸⁶ LegalShield offers trial coverage, and a subscriber who purchases the “Trial Defense Supplement” is entitled to 132.5 hours of attorney trial time—but they are also only entitled to 5 hours of research support and 27.5 hours of pretrial preparation.¹⁸⁷ As of 2010, the company’s trial benefit was similarly restrictive. At the time, it only permitted a maximum of 2.5 hours of pretrial preparation, and it excluded coverage for “domestic matters, bankruptcy, deliberate criminal acts, alcohol or drug-related matters, business matters, and pre-existing conditions.”¹⁸⁸

A prior offering by LegalShield (back when it went by the name Pre-Paid Legal Services) was described this way by Forbes:

For an average annual cost of $140, Pre-Paid covers legal defense costs for everything from speeding tickets to vehicular manslaughter to IRS audits. Members can even select their own attorneys.
But members are reimbursed for only one half-hour’s worth of consultations with an attorney on any given subject during any three-month period. Facing a tax audit? Unless it goes to trial . . . Pre-Paid pays only $250 per case.¹⁸⁹

Another prominent insurer, ARAG, offers a basic plan: Legal Protection. It covers a range of matters, including “wills and trusts, civil damages litigation defense, home improvement and contractor issues, adoptions and guardianships, landlord/tenant matters, real estate matters, IRS tax collections, juvenile crime, misdemeanors, and more.”¹⁹⁰ If a subscriber wants to see a lawyer for these matters, they are covered—subject to a $250 deductible.¹⁹¹ Excluded, however, are divorce, child custody or support, bankruptcy filings, insurance disputes, DUI defense, and wage garnishments.¹⁹²

It is noteworthy that several of the matters excluded from both PrePaid’s 2010 trial plan and ARAG’s basic plan are precisely those legal problems most likely to confront ordinary Americans.¹⁹³

IV. Explanations for Legal Insurance’s Unraveling

Why was legal insurance in the United States mostly a bust?¹⁹⁴ It is a puzzle, both because so many people expressed such confidence in its success and because legal insurance has taken off elsewhere. In Sweden, for instance, more than 90% of the population is covered.¹⁹⁵ In Germany, legal insurance is also broadly available.¹⁹⁶ Why has the United States been different?

Section A surfaces two culprits that backstop on bad luck. The insurance experiment of the 1970s ran into two challenges that experts could not have foreseen and that do not speak to the offering’s value or utility: the sharp decline of unions and the country’s failure to adopt nationalized healthcare. Neither development was expected, and both, no doubt, hurt legal insurance’s prospects for success. With those historical contingencies accounted for, Sections B and C address more durable complications: the inherently limited demand for legal insurance and persistent challenges insurers face. Taken together, Sections B and C paint a dim portrait of the future prospects for legal insurance in the United States.¹⁹⁷

A. Historical Accidents: The Decline of Unions and the Defeat of Nationalized Healthcare

The first complication, as Part II indicates, is that throughout the 1970s, unions and legal insurance were deeply intertwined: The majority of plans were created and sponsored by unions—and unions were the idea’s most muscular backers.¹⁹⁸ As the A.B.A. Special Committee on Prepaid Legal Services put it: “The greatest—though not the only—force today behind the development of more adequate systems to make legal services available is the trade union movement.”¹⁹⁹

Throughout the 1970s, when unions were ascendant, it seemed likely that legal insurance would be one more fringe benefit added to the collective bargaining table.²⁰⁰ Yet, events unfolded differently. In 1979, union membership (on a numbers basis) peaked.²⁰¹ And, whereas approximately one in five workers belonged to a union in 1983, now it is one in ten.²⁰² Further, where it was once thought that unions would be well-positioned to demand additional entitlements, unions have, in recent decades, had to devote their energy to the retention of existing benefits.²⁰³ Putting a punctuation mark on all the above, Congress let Internal Revenue Code § 120—the 1976 provision that had afforded legal insurance plans more favorable tax treatment—quietly expire in 1992.²⁰⁴

Second, during the 1970s, it was also thought that Congress was on the cusp of enacting nationalized healthcare and that, once it did, private legal insurance could fill the ensuing gap.²⁰⁵ Employers could channel the money they had been spending on health insurance into legal insurance, while insurers, deprived of health insurance revenue, would naturally flock to the legal insurance marketplace.²⁰⁶ Yet, as we know all too well, nationalized healthcare never materialized, and so that substitution never came to pass.

B. Limited Demand

The above explanations for the decline of legal insurance rest on bad timing and bad luck. They argue that legal insurance fizzled, in part, because of historical contingencies—the result of a particular convergence and sequencing of events.²⁰⁷ If, in the early 1980s, the labor movement had gained, not lost, momentum, or if nationalized healthcare had been adopted, rather than shelved, perhaps the trajectory of legal insurance would have been sharply different. As it was, unions lost their grip, legal insurance started to falter, and other forces came in and made legal insurance ever harder to supply.²⁰⁸

Other explanations are more functional in nature. They look, not to a mix of fortuity and sequencing, but to durable economic forces and incentives.²⁰⁹ Through this lens, legal insurance was a bust because it was destined to be bust, given inexorably limited demand (addressed here) and limited supply (addressed in Section C below).

As Section III.A explained, throughout the 1970s, demand for legal insurance consistently fell short of expectations. As a scholar wryly summarized in 1979: “The major barrier to the future development of prepaid legal services is an unreceptive public attitude.”²¹⁰ This Section asks: Why did Americans, unlike, say, Germans or Swedes, mostly turn their backs on the legal insurance idea?²¹¹

1. Legal Insurance by Other Names

A first answer is that Americans already have legal insurance. It just goes by other names. Here, of course, I am referring to five cross-cutting arrangements that sit at the center of the American justice system: (1) automobile insurance, (2) homeowners’ insurance, (3) the contingency fee, (4) fee-shifting statutes, and (5) the right to counsel in criminal matters, secured by Gideon.

First, consider auto insurance. Mandatory since the 1970s, auto insurance covers the costs of hiring an attorney to defend against lawsuits stemming from use of one’s vehicle.²¹² Currently, compliance with this insurance mandate is imperfect but still substantial; roughly 86% of American motorists are insured.²¹³

Second, some 66% of American families own a home, and nearly all homeowners have homeowners’ insurance.²¹⁴ Standard versions of these policies entitle the homeowner to a lawyer to defend against a range of liability actions, including many that occur off the premises.²¹⁵ In addition, many contemporary policies include some identity theft protection, either as a component of the policy or as an optional rider or endorsement.²¹⁶ Unlike auto insurance, the state does not compel individuals to purchase this protection. But it is virtually impossible to get a mortgage without it, meaning that, in practice, most homeowners (some 94%) are covered.²¹⁷

What if one wants to bring suit? Here, two additional mechanisms fill the gap: contingency fees and fee-shifting statutes.²¹⁸

Nearly all personal injury (PI) plaintiffs proceed using contingency fees,²¹⁹ which cover not just the cost of professional services, but also the costs and expenses of litigation.²²⁰ And, while the contingency fee is most commonly associated with PI litigation, it is used in non-PI realms too, including to pursue intellectual property claims, antitrust actions, and tax appeals. The contingency fee is even used by some civil defendants (in the form of “reverse” contingency fees).²²¹ There are certainly deficiencies in the contingency fee model.²²² But the mechanism nevertheless fills a substantial gap that legal insurance might otherwise fill and, probably not coincidentally, that legal insurance fills in some other industrialized nations that prohibit this particular form of financing.²²³

Then, complementing the contingency fee, Congress has enacted over 150 fee-shifting statutes that facilitate a wide range of civil litigation, including suits brought pursuant to the Freedom of Information Act, the Endangered Species Act, the Rehabilitation Act, the Voting Rights Act, and the Civil Rights Act of 1964.²²⁴ States, too, have enacted scores of these provisions.²²⁵ In California for instance, a person may be entitled to legal fees if they vindicate “an important right affecting the public interest.”²²⁶ Thanks to these laws, when a person is discriminated against, say, they can retain a lawyer, no insurance required.

Finally, per Gideon, as extended by Argersinger v. Hamlin, those facing incarceration are entitled to counsel, at least for trial and direct appeal. Continuing the refrain: While this right to counsel is far from absolute, and while deep concerns exist about both coverage and quality, these safeguards protect most contemporary criminal defendants from a forced choice between paying out-of-pocket for counsel or proceeding pro se.²²⁷ In addition, a number of cities and states have recently enacted “civil Gideon” legislation, entitling tenants facing eviction to counsel in at least some circumstances.²²⁸

This patchwork—which encompasses both criminal and civil cases, and which, on the civil side, covers both sides of the proverbial “v.”—puts legal insurers in a bind. Legal insurers cannot cover the services that auto insurance, homeowners’ insurance, contingency fees, fee-shifting statutes, and Gideon already cover because there will be scant demand for such a product.²²⁹ But if legal insurance excludes those big-ticket items, a policy encompassing only residual matters is of only modest value to a prospective consumer.²³⁰

2. The Cost Mismatch

A second problem with legal insurance is a basic cost mismatch: Those who can easily afford it tend not to need it, and those who may need it cannot easily afford it.

Consider: According to a recent survey, 57% of Americans report that they cannot weather even a $1,000 shock to their income.²³¹ Most Americans simply don’t have much money to spend on anything, and legal insurance is hardly the first priority for those who are already pinched.

Then, there is a misalignment. Those in the 57% (i.e., those who are “poverty-eligible”) are simultaneously more likely to benefit from legal insurance and less likely to afford it. ²³² There is some evidence that low-income individuals are especially prone to encounter legal problems,²³³ and this propensity is concentrated among certain types of legal problems, including debt collection actions, evictions, foreclosures, creditor harassment, and unsafe working conditions.²³⁴ As Stephen Wexler famously put it: “[P]oor people are always bumping into sharp legal things.”²³⁵ These individuals could probably use comprehensive legal insurance, but (as explained above) they can’t realistically afford it.

Wealthier individuals, by contrast, tend to have fewer legal problems. And they are, in a word, wealthy. As compared to their impecunious counterparts, they are more likely to already be insured (including that they are far more likely to own a home and have the protection of homeowners’ insurance).²³⁶ Then, when small legal needs crop up (such as the need to change one’s name or write a will), they can pay for those out-of-pocket without particular difficulty.²³⁷

3. Cognitive Biases

A third reason consumers tend not to buy legal insurance is that, even assuming arguendo that the purchase would make rational sense (which may or may not be the case), two well-known cognitive biases—present bias and optimism bias—conspire to reduce demand.²³⁸ Influenced by present bias, people tend to overvalue short-term as against long-term results, discounting future events by more than they reasonably should.²³⁹ Meanwhile, swayed by “optimism bias,” people tend to underestimate their susceptibility to risk.²⁴⁰

Driven by present bias, people tend to overvalue money now as against savings later. As scholars explain: “‘[N]ow’ is a very special point of reference for people. . . . [O]wning money now seems more valuable than owning more money in the future, far beyond the ‘normal’ discounting effect.”²⁴¹ This, when it comes to insurance, is a problem, as insurance requires one to pay a premium now in order (possibly) to save later.²⁴²

Then, affected by optimism bias, people tend to underestimate the likelihood that they will suffer an adverse outcome even when they accurately gauge or even exaggerate others’ chance of suffering that same outcome.²⁴³ There is a common sense that, while bad things happen to other people, I will be spared. For instance, respondents in one relevant study correctly estimated that roughly half of American marriages end in divorce, but they almost uniformly believed that their own marriage would be enduring.²⁴⁴ In another, when “[a]sked to envision their future, students typically say that they are far less likely than their classmates to . . . have a heart attack or get cancer.”²⁴⁵ Smokers tend to think that their own risks of smoking are lower than average.²⁴⁶ And, perhaps most relevant here, people tend to think that they are less likely than the average person to be sued.²⁴⁷ Given that one hardly ever hires a lawyer to help navigate a happy situation, this warped perspective undoubtedly dampens legal insurance demand.

4. Betwixt and Between:
Neither Everyday Problems nor Catastrophic Losses

Fourth and finally, insurance lies betwixt and between. Legal problems aren’t typically big enough to be catastrophic, and they aren’t common enough to be regular. On the former, the vast majority of Americans will never need anything more than routine legal services. As Preble Stolz noted in his initial 1968 study: “[T]here are very few legal problems which individuals are likely to have that cannot be solved in the course of one or, at the most, two or three office visits.”²⁴⁸ Furthermore, in the legal domains most apt to generate catastrophic cost (i.e., criminal prosecution or serious accidents involving cars, one’s body, or one’s property), as explained above, most Americans are already at least partially covered.²⁴⁹ Then, given the contemporary cost of legal services, if a legal insurance plan really sought to provide comprehensive coverage to encompass these rare-but-conceivable catastrophes, the premiums for any ensuing policy would be prohibitively expensive.²⁵⁰

These realities shunt legal insurance into covering just a hodgepodge of “routine” legal services. But the problem here is that even these “routine” legal services are not needed routinely. Most people see a lawyer one or two times per lifetime.²⁵¹ Even when covered by the Shreveport Plan, only about 17% of subscribers sought legal assistance in any given year.²⁵² Or recall a 1979 study, which found that in mandatory plans (those with automatic enrollment), lawyer utilization rates tended to hover between 10% and 25% per year.²⁵³ That suggests that a subscriber could easily go between four and ten years, dutifully paying the monthly premium, without ever seeing any benefit. Indeed, if you crunch the numbers, people tend to see health professionals more per year than they see lawyers per lifetime.²⁵⁴

These use patterns are a problem because evidence suggests that, to keep voluntarily paying insurance premiums, people need to feel like they are getting some tangible benefit.²⁵⁵ Without a tangible benefit, it is hard to pony up for another year. And indeed, there is some evidence in the legal insurance realm that “people who purchased pre-paid insurance very seldom continued to subscribe once they did not use it.”²⁵⁶

C. Limited Supply

Section IV.B uncovered four realities that conspire to reduce the demand for legal insurance: (1) Americans have significant legal insurance, it just goes by other names; (2) those most apt to benefit from legal insurance are the least apt to afford it; (3) present and optimism bias artificially depress individuals’ perceived need for coverage; and (4) legal insurance lies betwixt and between, as it covers neither catastrophes nor routine misfortunes—and if an insurer tried to craft a policy to cover catastrophes, the cost of such a policy would be astronomical, which would further dampen demand.

This Section addresses the other side of the coin: Why so many insurers stayed on the sidelines. Of course, the prime reason that so many insurers likely got or stayed out of the legal insurance marketplace is limited demand. (No one gets rich selling a product people won’t buy.) But, beyond thin demand, there are two additional problems that legal insurers faced and continue to confront.

1. Moral Hazard and Adverse Selection

First, when it comes to legal insurance, the familiar impediments of moral hazard and adverse selection loom particularly large. Moral hazard refers to the fact that peoples’ behavior changes if they are insulated from the downside risk of their behavior.²⁵⁷ For example, a motorist with comprehensive property loss coverage might be more likely to leave her purse in her car, as compared to a person without such coverage. Adverse selection, meanwhile, refers to the tendency for low-risk individuals to opt out of insurance markets (and the countervailing tendency for high-risk individuals to opt into insurance markets).²⁵⁸ Take health insurance as an example: Young and healthy folks are more likely to forego coverage than older, sickly ones. As they do, absent countervailing actions, the cost of coverage will go up over time (to account for the now higher-risk population). Then, as policies get pricier, ever more young and healthy people will forego coverage.²⁵⁹

Moral hazard and adverse selection particularly bedevil legal insurance.²⁶⁰ It is insurance law 101, as Professor Tom Baker explains, that “[t]he more that a particular risk lays within the control of the insured, the less confidently insurance institutions can insure that risk.”²⁶¹ When behavior is almost entirely within the realm of human control, moral hazard and adverse selection have an outsized influence.

This is a problem because unlike medical events (the heart attack, cancer diagnosis, or broken leg, say), which tend to strike like lightning, many kinds of legal problems are in the person’s control: It is largely in a person’s control if and also when she files for divorce, writes a will, sues her landlord, or changes her name.²⁶² It is also, to at least some extent, in a person’s control whether she pays her bills (and thus avoids a debt collection action) or pays her rent (and thus avoids eviction).²⁶³ This means, too, that many routine legal problems, unlike many medical problems, can be “saved up.” A person generally cannot wait to get a cast on her broken arm, but she could theoretically wait until she has secured legal insurance before she takes legal action—and then, after she has taken legal action, she can let that insurance lapse.²⁶⁴

This disjunction was not lost on certain early insurers. To prepare its 1964 Report to the California Bar, a working group tasked with exploring the possibility of legal insurance reached out to various insurers—and, as noted in Section III.A, the reception it received was decidedly cool. Explaining this chill, one insurance company representative explained:

As we see it, the fundamental difference [between medical insurance and the proposed legal insurance] would lie in the proximate cause of loss. Under medical insurance, the policyholder becomes ill or meets with an accident. Illness is reckoned to be outside the insured’s control and the injury sustained in an accident must not be deliberately self-inflicted. On legal services, inadequacy might come about from a variety of causes, all well within the control of a reasonably prudent man.²⁶⁵

Not merely theoretical, recall, the Shreveport Plan saw a jump in lawyer use during the first year the Plan was in effect. Some applauded this increase; some even lamented that it wasn’t sharper.²⁶⁶ But some contemporary researchers saw it differently: “The increased use of lawyers during the plan’s first year may have been influenced by the phenomenon of ‘backlogging,’—that is, the postponement of visits to lawyers about problems arising before the start of the program . . . .”²⁶⁷

In addition, precisely because engaging in the legal system is, to some degree, volitional, the individual (the insured or prospective insured) is apt to know much more about her appetite for it than the insurer. This sharp information asymmetry also differs from other contexts. In some contexts (such as when it comes to flood insurance), the insurer, privy to sophisticated geological information and climate data, probably knows more about a particular property’s risk profile than does the homeowner.²⁶⁸ In other contexts (such as life insurance), the prospective insured initially knows more. But, by conducting a comprehensive physical exam, the insurer can reduce or eliminate the information asymmetry during the underwriting process.²⁶⁹ There is, by contrast, no reliable test a prospective insured can take, nor any exam a prospective insurer can realistically administer, to gauge a person’s propensity to adopt, divorce, write a will, or file for bankruptcy.²⁷⁰

Early scholars also recognized this problem. In the footnote of one article, otherwise bullish on the movement, the author included a note of caution regarding “voluntary” enrollment plans (where enrollment was not automatic): All such plans, the author admitted, “have experienced adverse selection problems.”²⁷¹

More recent reports lend credence to these concerns. One 1989 report explained:

Under a voluntary enrollment model, experience has shown that use will be two to four times higher than in a true group situation in the first few years. This is because most people who join a prepaid legal service plan voluntarily either have immediate need for legal services or contemplate such a need in the near future.²⁷²

Validating this claim: In the 1980s, insurer Hyatt Legal Services reported that the annual usage of voluntary enrollment plans was 130%, which meant that, for every 100 people enrolled, 130 matters would be handled.²⁷³ Similarly, Pre-Paid Legal Services reported in 2010 that, each year, each plan subscriber sought assistance for an average of 1.6 “specific” legal matters.²⁷⁴

Another early scholar recognized the adverse selection problem in 1979 and suggested that a solution might be to “limit or deny coverage for services connected with causes of action that arise before the individual joins the plan.”²⁷⁵ But what early scholars perhaps did not fully grasp is that, when it comes to law, operationalizing these denials is nearly impossible. Picture, for instance, a divorce. When did the need for the divorce arise? At the couple’s first fight—or maybe the fourth? The infidelity, or when the now-divorcing spouse learned of the infidelity? Even if the insurer could know every nitty gritty detail of the couple’s history, pinpointing a marital breaking point is nigh impossible.²⁷⁶ Other forms of routine legal assistance—such as adoptions, debt collection actions, evictions, or bankruptcies—have a similar creeping quality. There is a drip, drip, drip of recognition that, for instance, one’s fertility is limited (and adoption might be on the horizon) or one’s finances are suffering (and so a debt collection action, eviction, home foreclosure, or bankruptcy might be in the cards). As a consequence, it is very difficult to identify when such problems “arise.”

True, not all legal needs are in the hands of the prospective insured. Nor can all legal needs be “saved up.” The car crash, speeding ticket, and arrest strike suddenly.²⁷⁷ But, as explained above in Section IV.A, Americans already have substantial protection for problems of this type. Meanwhile, it is also true that some moral hazard can be mitigated via co-pays, deductibles, and benefit caps.²⁷⁸ Legal insurers take, and have long taken, this tack.²⁷⁹ Yet, these are merely half-measures. And, of course, the more restricted legal insurance is, the less attractive legal insurance is, further chilling demand.²⁸⁰

2. Uncertain Regulatory Framework

The second impediment legal insurance faced and continues to face is a fractured and uncertain regulatory landscape—ensnaring policies in the sharp tangle of rules that govern both insurance and legal services. First, familiar ethical issues that bedevil all “triangular” insurer/insured/lawyer relationships come to the fore, arguably with greater force, in the legal insurance marketplace.²⁸¹ It is unclear, for instance, exactly how much can be disclosed within the bounds of Model Rule 1.6 (the rule that governs confidentiality) in order to facilitate the administration of the legal insurance plan.²⁸² Nor is it always clear whether—or how—an insurer can appropriately curtail the time a lawyer may spend preparing the client’s case.²⁸³

Insurance regulations posed—and still pose—an independent barrier. When legal insurance got its start, it was not authorized under most state insurance laws.²⁸⁴ Insurers either had to persuade the legislature to pass enabling legislation (which some states did)²⁸⁵ or masquerade as “miscellaneous casualty” insurance providers.²⁸⁶ In time, one way or another, most states ultimately authorized the offering.²⁸⁷ Yet, in some states, regulators imposed crushing restrictions. For instance, in at least one state, the insurance department ruled that plans could only cover “fortuitous events.”²⁸⁸ In numerous other states, insurers were prohibited from operating closed-panel plans—channeling supply to the potentially more uncertain open-panel marketplace.²⁸⁹ In other states, insurance regulators did not offer any definitive guidance, creating protracted uncertainty.²⁹⁰

Even today, companies seeking to offer services in multiple states must expend significant resources to navigate a thicket of registration requirements and ongoing compliance obligations. As LegalZoom complained in a recent SEC filing:

Regulation of our legal plans varies considerably among the insurance departments, bar associations and attorneys general of the particular states in which we offer, or plan to offer, our legal plans. In addition, some states may seek to regulate our legal plans as insurance or specialized legal service products.²⁹¹

In sum, a prospective legal insurer is consigned to sell a product many people do not want, in the face of formidable challenges posed by moral hazard and adverse selection, amidst a complex, fluid, and fractured regulatory environment. It is little wonder that so many opted—and continue to opt—against.

V. Interrogating the A.B.A.

Part IV confronted the puzzle of why legal insurance fizzled and argued that certain demand- and supply-side problems that plagued legal insurance in the 1970s are destined to plague it going forward. This final Part confronts a final puzzle. It asks why the A.B.A., the group that had for so long fiercely opposed any form of group legal services, threw its weight behind legal insurance in the first place.

This inquiry is timely because, as noted at the outset, the access-to-justice crisis is again capturing public attention—and, in a replay of the 1970s, many are vigorously debating how best to address it. Currently, the A.B.A. is resisting certain reforms that would erode the lawyer monopoly.²⁹² It is also insisting that its resistance to any reform that does not feature “lawyers providing . . . legal services” stems not from parochial concerns but, rather, from its desire to promote the public interest—to “protect[] the public from profiteers.”²⁹³

It is fair to ask: Does the A.B.A.’s past behavior cast doubt on—or lend support to—that assertion? The inquiry is not academic. The DOJ’s Antitrust Division has recently warned that, in order to withstand scrutiny, “justifications for restraints on the delivery of legal services must be rooted in the protection of the public and not in the protection of lawyers from competition.”²⁹⁴ And, in currently pending federal court challenges to UPL restrictions in New York and North Carolina, the A.B.A.’s motivations are also under the microscope.²⁹⁵ To be sure, even if the A.B.A. was motivated chiefly by self-interest in the 1970s, that does not necessarily mean it is self-interested now. But if the A.B.A. has a consistent track record of supporting antisocial policies in furtherance of its own self-interest, that supplies extra reason for skepticism.²⁹⁶

A. The First Puzzle: After Opposing Group Legal Plans for Decades, Why Did the A.B.A. Support Legal Insurance?

Why did the A.B.A., long resistant to group legal services, abruptly pivot to support these services starting in the early 1970s? Evaluating the evidence, I believe the bar came on board, not because of an epiphany regarding its social responsibilities, but because it was on a losing streak before the Supreme Court, and, as a consequence, it sensed that change was inevitable.

From the late 1920s through the early 1970s, the bar was vehemently opposed to any flavor of group or “corporate” legal service, and, during these years, the bar crafted various ethics rules that outlawed the arrangement.²⁹⁷ Accordingly, during that fifty-year span, whenever lawyers employed by an entity (whether a bank, union, or auto club) furnished legal services to the entity’s members, UPL charges almost inevitably followed.²⁹⁸ Yet, in a quartet of cases that started with NAACP v. Button in 1963 and culminated with United Transportation Union v. State Bar of Michigan in 1971, the Supreme Court, with increasing impatience, put the kibosh on the bar’s prohibition. In United Transportation Union, the Court clarified that any bar rule that denied “associations of workers or others the means of enabling their members to meet the costs of legal representation” violated the First Amendment.²⁹⁹ With that holding, the Court once-and-for-all rejected the A.B.A.’s long-held position that all forms of “corporate” or group legal services constituted UPL.³⁰⁰ The opinion, quite simply, forced the A.B.A. to change tack. Beyond that, I believe, three factors played a role.

First, I believe the A.B.A. changed its tune because it sensed that continued resistance would invite not just more stinging defeats in the Court, but also federal regulation. On this score, in the course of hearings on prepaid legal services, Senator John Tunney of California issued a thinly veiled threat: If the profession did not “start providing adequate legal services to people with middle and low incomes[, it] will find that [the] profession is going to be regulated from outside.”³⁰¹ A.B.A. President-Elect Robert Meserve, likewise, bluntly acknowledged: If the A.B.A. did not undertake “intense and immediate efforts” to address the justice gap, “fundamental changes in the mode of practicing law will be determined to our disadvantage . . . by forces outside of the profession.”³⁰² Earl Warren added his voice to the chorus: “What we must do is determine just how rapidly we can change our ways in order to get more efficient and economical delivery of legal services to every American. We are going to have to make these changes ourselves or they will be made for us.”³⁰³

The second outside influence which, I believe, fueled the A.B.A.’s abrupt pivot and support of legal insurance was the specter of no-fault automobile insurance. Throughout the 1970s, it appeared that the system for auto accident compensation was on the cusp of fundamental change.³⁰⁴ It also appeared that these new laws would (much to the A.B.A.’s dismay) eliminate many attorneys’ primary source of income.³⁰⁵

The prospect of auto no-fault influenced the legal insurance movement in two ways. First, some who opposed auto no-fault thought if lawyers were more freely available, that might take some wind out of no-fault reformers’ sails. As a contemporary observer explained: “If the expense of paying a lawyer can be made less burdensome, it is hoped that the consumer-clients’ perception of the need for no-fault insurance will be undermined.”³⁰⁶ Second, some thought that, if no-fault could not be defeated, lawyers needed to find new mechanisms to expand existing markets—and they needed to find these new mechanisms without delay.³⁰⁷ Open-panel plans, some believed, would provide that necessary boost.³⁰⁸

Third and crucially, I believe that the A.B.A. threw its weight behind legal insurance because it recognized change was inevitable. With the writing on the wall concerning whether to accept group legal services, attention turned to the subsidiary question of what those services would look like and, more concretely, whether open- or closed-panel plans would take hold.³⁰⁹

Here, the bar came down hard in favor of open-panel plans, insisting that the public was best served by the preservation of attorney independence and free client choice.³¹⁰ The bar also fretted that “a real possibility exists under a closed panel plan for the attorney to develop assembly-line techniques,” which would generate “shoddy work in an impersonal environment.”³¹¹ By the bar’s lights, open-panel plans were vastly superior.

In February 1974, at a meeting in Houston, the A.B.A.’s House of Delegates adopted various rules, including Ethical Consideration 2-33, which temporarily cemented this position. It was probable, the A.B.A. declared,

that attorneys employed by groups [in closed-panel plans] will be directed as to what cases they may handle and in the manner in which they handle the cases referred to them. It is also possible that the standards of the profession and quality of legal service to the public will suffer because consideration for economy rather than experience and competence will determine the attorneys to be employed by the group. An attorney interested in maintaining the historic traditions of the profession and preserving the function of a lawyer as a trusted and independent advisor to individual members of society should carefully consider the risks involved before accepting employment by groups under plans which do not provide their members with a free choice of counsel.³¹²

The Ethical Consideration and other accompanying amendments were confusingly phrased, but they were—and they were seen—as a threat: Lawyers who participated in closed-panel plans could face dire consequences.³¹³ The position generated swift and blistering criticism, including from Senator Tunney, who held hearings; the DOJ’s Antitrust Division, which vowed to investigate; and Public Citizen, which initiated a constitutional challenge.³¹⁴

In the face of this backlash, the A.B.A. backpedaled.³¹⁵ (As a New York Times reporter quipped: “[T]he legal profession is beginning to see the light, perhaps because it feels the heat.”³¹⁶) In March 1975—just a year after its adoption—the A.B.A. rescinded Ethical Consideration 2-33 and settled instead for the tepid warning that an attorney participating in a closed-panel plan had a duty to “make certain that his relationship with a qualified legal assistance organization in no way interferes with his independent, professional representation of the interests of the individual client.”³¹⁷

B. The Second Puzzle: Why Was the A.B.A. So Set on Open-Panel Plans?

But why was the A.B.A. so resolute in its support of open- rather than closed-panel plans? The position is particularly puzzling because, as Section I.C made clear, closed-panel plans were objectively superior to their open-panel counterparts on several metrics. Compared to open-panel plans, closed-panel plans were much cheaper. Indeed, as Table 1 indicates, there was good evidence that, in a closed-panel plan, a subscriber’s legal need (e.g., a divorce or a bankruptcy filing) could be satisfied at a fraction of the cost.

Table 1: Cost of Routine Legal Services: Open- Versus Closed-Panel Plans (1974 Dollars)³¹⁸

	Cost Per Bankruptcy	Cost Per Divorce
Shreveport Plan (Open)	$330.57	$258.47
Wisconsin Judicare (Open)	$266.70	$182.89
Maine (Closed)	$35.43	$27.49
Michigan (Closed)	$45.92	$38.59
Colorado (Closed)	$181.89	$58.50

Closed-panel plans had other advantages. They were better equipped to help the public overcome persistent lawyer-selection problems. Open-panel plans offered little to no help in that regard.³¹⁹ Closed-panel plans were also far more likely to promote preventative law. A closed-panel plan lawyer had skin in the game; if she failed to solve a subscriber’s problem now, she would have to solve it later once it metastasized, and she would generally not be paid a penny extra for doing so. In contrast, a lawyer in an open-panel plan —paid full freight whenever the insured had a problem—had no reason to help the insured limit his future need for legal assistance. Financial incentives cut the other way.

Beyond that, the bar repeatedly justified its preference for open-panel plans as preserving client choice. Choice was essential, the bar insisted, for clients to have confidence in the ensuing attorney-client relationship.³²⁰ But for three reasons, this explanation rings hollow. First, if choice was really so crucial, shouldn’t clients have the choice between open- and closed-panel plans?³²¹ Second, the Shreveport Plan indicated that choice wasn’t necessarily so high on clients’ list of concerns. Recall, in that Plan, the members of Local 229 were free to seek the assistance of any lawyer, including lawyers out-of-state. Yet Plan subscribers flocked to two lawyers with offices in Shreveport.³²² Third, the bar’s views in this regard were curiously selective. By the 1970s, many lawyers—including public defenders, legal aid lawyers, and lawyers employed by liability insurers—worked for an entity and supplied representation to individuals via that entity. It was very strange to say that those lawyers could maintain their professional independence but lawyers who worked for closed-panel plans would be inevitably compromised.³²³

Moreover, although the bar repeatedly emphasized that, in supporting open-panel plans, it was standing on the side of clients, that, too, is perplexing, particularly since union leaders—who were duty-bound to protect their members’ interests—consistently supported plans of the closed-panel variety.³²⁴

Lastly, although the bar fretted that closed-panel plans would lead to corner-cutting and a diminution in quality, that, also, was doubtful.³²⁵ There was no good evidence that these troubles actually afflicted the era’s closed-panel plans. Nor did the assertion make intuitive sense. Like the lawyers who worked in Laborers’ Local 423, lawyers who worked in closed-panel plans would necessarily become specialists; fully devoted to a particular cohort of clients, they would gradually develop an expertise in the constellation of problems their particular clients tended to confront.³²⁶ This is noteworthy because there is—and there was—good evidence that, on balance, specialists tend to provide higher-quality services than their generalist counterparts.³²⁷ Furthermore, a closed-panel plan’s organizer has some incentive—and presumably, some capacity—to vet and also supervise its lawyers to ensure that the lawyers are providing faithful, high-quality representation.³²⁸ In an open-panel plan, by contrast, such oversight is more limited (or possibly nil).³²⁹

Still, when it comes to the A.B.A.’s support for open-panel plans, there is an innocent explanation. Perhaps A.B.A. leaders genuinely believed that clients really would receive better treatment from, and would have more confidence in, attorneys operating within open-panel systems. Yet, the A.B.A.’s preference for open-panel plans certainly smacks of lawyer protectionism—and a desire to avoid any reform that would promote competition, imperil lawyers’ livelihoods, or place any downward pressure on fees.³³⁰

Right from the start, it was seen that closed-panel plans could pose problems for the profession. Even Stolz’s initial study had explained that closed-panel plans would “channel[]” a large volume of work to only a handful of lawyers—and that this channeling would be “devastating” for those practicing in “individual or small firm practice.”³³¹ Another contemporary commentator explained that closed-panel plans would redistribute “duties and income within the legal profession.”³³² This redistribution, he continued, would not affect large firms with a corporate clientele but would seriously and adversely affect the “general practitioner operating by himself or with one or two partners.”³³³ And, it seems, bar leaders took these dire predictions to heart. For instance, Alfred Pabst, President of the Iowa State Bar, warned against closed-panel plans, suggesting they would cause the general practitioner to “follow[] the hairy mammoth . . . into oblivion.”³³⁴

Not coincidentally, when the A.B.A. House of Delegates voted to restrict closed-panel plans in 1974, it was the A.B.A.’s Section on General Practice—composed overwhelmingly of small-firm general practitioners—who led the charge.³³⁵ Indeed, in the pitched floor battle that ensued, Chesterfield Smith, President of the A.B.A., actually opposed the restrictions.³³⁶ In so doing, Smith argued that his colleagues’ resistance to closed-panel plans did “not relate to professional values but in my own personal judgment, is designed to spread the economics around.”³³⁷

Further, contemporary observers took it mostly as gospel that certain A.B.A. members’ opposition to closed-panel plans was not rooted in public-interest but rather sprang from a belief that these plans posed “a grave risk to small firms and solo practitioners.”³³⁸ In 1973, Earl Warren explained that the antagonism to closed-panel plans was coming because “many attorneys fear[ed] . . . that some other attorney or group of attorneys [would] cut into their action.”³³⁹ The following year, the Chair of the A.B.A.’s House of Delegates chalked his colleagues’ resistance to closed-panel plans up to their “fear of economic loss.”³⁴⁰

Conclusion

Not so long ago, legal insurance and health insurance seemed to be on parallel tracks. As early as 1952, an article explained: “People get legally sick as well as medically sick. If insurance to cover doctors’ fees and hospital bills is a good idea, insurance for attorneys’ fees and costs ought to be just as good—good for insurance companies, good for the insured and good for the legal profession.”³⁴¹

Throughout the 1970s, many continued to collapse the two concepts. As Senator John Tunney gaveled to order two days of hearings to explore legal insurance, he explained: “Prepaid can be to legal care what Blue Cross and health maintenance are to medical care.”³⁴² Likewise, in the course of amending the Taft Hartley Act, Senator Jacob Javits of New York asserted: “Just as prepaid medical plans now permit the majority of all workers to have access to decent medical care, prepaid legal services may prove to be the mechanism to accomplish the same result for legal services.”³⁴³ Indeed, in its 1977 report, the A.B.A. Committee on Prepaid Legal Services reported that, thanks to this innovation, “there are many who predict that the time is not far off when half the population of this country, or at least as many as are now covered by group medical plans, will be enjoying the benefits of qualified legal services.”³⁴⁴

Yet, with the benefit of contemporary understanding—including insights from the behavioral economics movement, which, of course, did not emerge until later—it is clear that legal insurance and health insurance are much more different than alike. Putting a damper on the resurgent notion that “legal insurance” offers an “ideal solution” to the contemporary access-to-justice crisis, this Article shows that, barring some fundamental change in the structure of legal services, the demand for legal insurance and its supply are, and are destined to be, limited.³⁴⁵

More than that, by recovering an important but remarkably forgotten chapter in American law, this Article casts a new and unflattering light on the actions of the A.B.A., the organization that does not formally regulate the profession (state supreme courts do that) but that certainly possesses an outsized influence on the rules that govern lawyers and restrict the supply of legal services.

In 1971, the A.B.A. lost the bigger battle via United Transportation Union—a Supreme Court decision that held, once and for all, that the bar’s prohibition on group legal services violated the First Amendment. But then, instead of gamely accepting defeat, the organization regrouped—and set about trying to bend the new rules to its members’ benefit. Employing the soothing language of client protection and independent professional judgment, the A.B.A. sought to crush closed-panel plans in favor of the (far more lucrative) open-plan alternative. It did so, A.B.A. President Chesterfield Smith explained, in a cynical effort to “spread the economics around.”³⁴⁶

Now, as repeatedly emphasized, the A.B.A.’s past actions do not necessarily explain its current ones. Beyond that: Like all organizations, the A.B.A., at bottom, is a “they,” not an “it.” The people who compose the A.B.A. are—and were—in no way homogenous, and they have, and they will continue, to change.³⁴⁷

Yet, at this moment—when the organization’s actions and motivations are under the microscope, and when many believe that the A.B.A.’s rules are constricting the supply of legal services to millions of Americans—the A.B.A.’s past actions are at least relevant. As noted, currently, a burning question is whether (as the Antitrust Division has recently put it) the “justifications for restraints on the delivery of legal services” are “rooted in the protection of the public and not in the protection of lawyers from competition.”³⁴⁸ This Article supplies one more piece of evidence to inform that crucial debate.

* Ernest W. McFarland Professor of Law and Co-Director of the Deborah L. Rhode Center on the Legal Profession, Stanford Law School. I am immensely grateful to Catherina Yue Xu for her invaluable help conceptualizing this Article, and I am also grateful to Kenneth Abraham, Daniel Schwarcz, and Tom Baker for early conversations and correspondence which sharpened my thinking and to Owen Foulkes, Mark Geistfeld, Wayne Hassay, Helen Hierschbiel, Kyle Logue, Kathryn Spier, James Stone, John Fabian Witt, and the remarkable Rhode Center Civil Justice Fellows for helpful comments on prior drafts. I’m additionally grateful for Justin Rodriguez and Brianne Holland-Stergar for their significant assistance, as well as the participants at the Washington University in St. Louis Law School Faculty Workshop and the Harvard Law and Economics Seminar.