Experience may be improving lawyer opinions of litigation finance

December 9, 2021

December 9, 2021

Experience may be improving lawyer opinions of litigation finance

In September 2021, Bloomberg Law conducted a limited survey of 38 litigation finance providers and 37 attorneys who had used or were interested in using litigation finance. Results from the small group of lawyer respondents indicated a positive shift in their attitudes toward the litigation finance industry as compared to the previous year’s survey. More of them disagreed that litigation finance enabled frivolous lawsuits (57% in 2020; 78% in 2021), agreed that litigation finance enables better access to justice (70% in 2020; 88% in 2021) and either agreed or were neutral as to whether the litigation finance industry had a positive ethical reputation (57% in 2020; 72% in 2021). Lawyers also reported being much more likely to seek funding now than they were five years ago.  

Bloomberg predicted that growing experience with litigation finance may be helping litigators to overcome their previous objections, an encouraging forecast for funders striving to educate attorneys about litigation finance as a legitimate tool enabling plaintiffs and their counsel to persist in the litigation of valid claims in the face of lengthy delays and growing expenses.

The combined responses from lawyers and funders showed that a vast majority—96%—of the litigation deals they financed were non-recourse, meaning no repayment is expected if the claim is unsuccessful. Non-recourse funding is attractive to plaintiffs, since they can decline lowball offers and receive capital to cover emergency or regular living expenses, like medical bills, rent and utilities, while they wait for their claim to resolve.  

Non-recourse funds can be controversial, however. The Bloomberg survey noted that attorneys worry about a cumbersome approval process to obtain funding, its effects on client privilege and control of the case, and possible high financing costs after an award. Lawyers and funders also don’t seem to agree on whether disclosure to courts of litigation financing agreements is required. Some states view non-recourse funding as loans and regulate the amount a lender can ultimately collect, which may cause funders to avoid those states altogether or limit the cases or amounts they choose to fund there, leaving certain plaintiffs at a disadvantage.  

Where there is a strong insurance lobby, a push for stricter regulation affecting available funding is likely, as insurers are used to leveraging financially hard-up plaintiffs into a settlement representing a fraction of a potential jury award. Funding that alleviates a plaintiff’s financial strain costs insurance companies’ real money.  

LevelEsq offers straightforward lawsuit financing and lawsuit cost insurance that won’t involve cumbersome approval processes or unreasonable rates and won’t trigger concerns about client privilege, case control or required disclosure of terms to courts and defendants. Learn how LevelEsq’s solutions avoid the controversies of non-recourse funding while still allowing plaintiffs and their representatives to withstand the predations of big defendants and their insurers at levelesq.com.  

Source material: The Insurance Industry and Litigation Funding: Leveling the Playing Field, ANALYSIS: Lawyers Who Know Are Warming Up to Litigation Finance, Litigation Finance Survey 2021

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