Unauthorized Practice of Law

  • When rendering legal advice to prospective customers, life insurance salesmen have a conflict of interests-they are interested in setting up an estate plan with the maximum amount of life insurance regardless of
    the best interests of their client.141

141 In Anderson v. Knox, 297 F.2d 702 (9th Cir. 1961), a life insurance agent sold a bank-financed insurance policy with a face amount of $100,000 to a 36-year-old purchaser whose income was around $10,000 a year,  representing that the plan was suitable for the needs of the purchaser and his family. To pay the first premium, the purchaser converted and pledged his existing life insurance policies. The purchaser soon found the plan to be disadvantageous and was forced to cancel his various insurance policies. He then sued the insurance agent for fraud and misrepresentation and was awarded compensatory damages of $13,000, punitive damages of $10,000, and $2,500 for mental distress.

1966 - The Unauthorized Practice of Law by Laymen and Lay Associations
Loyd P. Derby