Litigation Settlement Funding Benefits to Litigants and LawyersMarch 14, 2013
A relative newcomer to the legal services industry, lawsuit settlement funding is gaining acceptance among plaintiffs’ lawyers, who are discovering that settlement financing benefits not only their clients, but themselves. Perhaps the most valuable asset that settlement advances provide to personal injury lawyers and other attorneys is time.
A Settlement Funding Primer
As plaintiffs’ lawyers well know, resolution of a catastrophic personal injury, class action, mass tort, qui tam or Federal Employers Liability Act (FELA) matter often takes several years to achieve. Many clients, particularly those bringing personal injury claims, find themselves unable to meet their financial obligations as they await settlement with their typically well-heeled adversaries. Paying for basic necessities, such as housing, meals, clothing and medical care, becomes an impossible burden, particularly for those claimants who are unable to work. Defendants’ insurers are all too aware of this inequity and seek to take advantage of plaintiffs’ tenuous financial footing by offering settlements that are far below a case’s actual worth. Meanwhile, most states – including Pennsylvania and New Jersey – prohibit lawyers from making loans to their clients for personal expenses. Enter settlement loan funding.
Settlement funding provides no-risk, non-recourse financial assistance for litigants. Typically, the settlement financing company will purchase an interest in the proceeds of the client’s case and immediately pay the client in cash for that interest. The client is free to spend the funds on whatever they wish, from mortgage payments to college tuition to a new business venture. The financing company will recoup its investment if and only if the client’s case concludes with a recovery. In the absence of a recovery, the financing company loses its investment: it cannot seek repayment from either the client or the client’s attorney.