Supreme Court of Indiana: Insurance Agency Engaged in the Unauthorized Practice of Law

In State of Indiana Ex Rel. Indiana State Bar Association v. United Financial Systems Corporation, the Supreme Court of Indiana held that United Financial Systems Corporation (UFSC), an insurance marketing agency, engaged in the unauthorized practice of law by marketing and selling estate planning services, including wills and trusts.

The opinion states UFSC’s business practices were as follows:

UFSC targeted and then mailed prospective clients (generally retirees) information on how to avoid probate. For those who responded, as well as some existing UFSC clients, a UFSC sales representative (either an Estate Planning Assistant or a Health Planning Assistant) met with the client and gained access to his or her financial information, which the company seperatedly used later in an effort by its Financial Planning Assistants to sell insurance products. The presentation made by the Estate Planning Assistant or Health Planning Assistant to the prosective client touted UFSC’s team of tax strategists, financial consultants, independent atttorneys, and Medicaid and estate planning assistants. In reality, UFSC had no tax strategists.

The Estate Planning Assistant or Health Planning Assistant received a commission on the sale of estate planning products. However, the Estate Planning Assistant or Health Planning Assistant were not licensed attorneys and were not directly supervised by an attorney.

Once a sale was made and partial payment secured, the forms containing the client’s information were sent to UFSC’s in-house counsel who then provided the information to a panel attorney that UFSC had contracted with. UFSC argued that its business model was structured in a manner that sufficiently involved the exercise of independent professional judgment of attorneys. However the Court was persuaded by a number of factors that, in its opinion, called into question the attorneys’ ability and motivation to provided independent professional judgment in counseling clients regarding their estate planning needs. The factors included: The disparity of fees earned between the Estate Planning Assistants and Health Planning Assistants ($750 – $900) and the panel attorneys ($225); the estate plan was sold to the client prior to attorney involvement; emphasis of sales and revenue over objective, disinterested legal advice; minimal independent consultation with clients and heavy reliance on communications between the client and company’s salesperson; use of standardized estate planning documents and forms that had been prepared in advance and provided by UFSC; and explanation to the client of the relevance and purposes of the documents being executed was typically delegated to the Financial Planning Assistants. The Court stated that none of these factors was dispositive.

The Court granted an injunction prohibiting such conduct as wells as granted certain statutory attorneys fees to the Indiana Bar Association. Further, the Court granted disgorgement of fees.

Tagged as: Estate Planning, Health Planning, Indiana State Bar Association v. United Financial Systems Corporation, insurance, Probate, Supreme Court of Indiana, tax, Unauthorized Practice of Law, United Financial Systems Corporation