A litigation loan occurs when a lawsuit funding company offers a cash advance against the future proceeds of the case. In other words, a plaintiff receives cash now in return for money if and when the case is successful. In this post we examine the preference among lawsuit funding companies for cases involving personal injuries resulting from auto accidents.
By far, the majority of cases considered by lawsuit funding companies are personal injury actions. Examples of these cases are slip and fall accidents, pharmaceuticals, products liability, workers compensation, and automobile accidents. Preference for auto accident lawsuit funding is usually due to the following reasons:
Clear Liability Standards
Because drivers owe all other drivers a duty of care when operating their automobile, any breach of this duty results in a potential claim for negligence. Lawsuit funding companies prefer automobile cases because a breach of this duty is very easy to prove.
Analyzing liability in automobile accidents is fairly easy for lawsuit funding underwriters. Usually the party causing the accident is ascertained through the police report or pictures of the damaged vehicles. Funders frequently consider other evidence, such as depositions, answers to interrogatories, witness statements, and admissions.
Most jurisdictions have traffic laws and the violation of those laws can be offered as proof for negligence purposes. For example, most states have a statute which places the burden on drivers to maintain a safe distance while following vehicles traveling ahead. It stands to reason if the front of a vehicle collides with the rear of another vehicle, the first vehicle did not maintain a safe enough distance. These cases are often referred to as “rear end auto’s”. In these instances, liability is usually very clear.
The same reasoning can be applied to most car accidents where the collision occurred while a traffic infraction was in progress. Other examples include: speeding, left hand turns, failure to yield the right of way, stop sign cases, and traffic signal cases.
Ease in Assessing Damages
In most personal injury cases, damages are easily calculated. Pain and suffering and bodily injury is compensable under standard negligence law and under most insurance contracts. Specific damages such as lost wages and/or medical bills are also recoverable. Because most medical conditions can be proven through diagnostic tests, the ability of lawsuit funding underwriters to accurately assess the extent of a personal injury plaintiff’s damages is greatly increased.
One of the most often seen tests performed in connection with automobile accidents is the MRI (Magnetic Resonance Imaging). MRI’s are used to view injuries that are otherwise unseen through other diagnostic tests like x-rays. MRI’s often show neck/back injuries such as disc herniations and/or nerve root compression, shoulder tears, and knee injuries.
Lawsuit funding underwriters and lawyers alike use these tests to assess the extent of personal injury damages in the case. Other proof of damages include lost wage claims, out of pocket expenditures, loss of earning capacity, expert reports, and operative reports for surgery.
As a whole, physical and specific damages in the routine automobile case are much less complicated than in many other types of lawsuits. For this reason, lawsuit funding of these cases is “bread and butter” for pre-settlement loan companies.
Documented Ability to Pay
Most jurisdictions require automobile insurance policies on all vehicles using the roadways. One principal provision in these contracts is coverage for Bodily Injury (“BI”).
BI coverage is afforded for persons who were injured as a result of the insured’s negligence. What this means for attorneys and lawsuit funding specialists is there is available money to compensate the plaintiff for his/her injury. This is important because without available money there is usually no recovery unless the defendant has some net worth. Having a wealthy defendant without insurance is a rarity so the general rule in the personal injury game is: no insurance = no case.
Essentially these cases are based on a contractual relationship between the insurance company and the insured. The policy provisions exist to protect the policy owner and are consideration for the yearly premium paid. What is important for purposes of auto accident lawsuit funding is the readily available coverage and the ease in which the case’s probable outcome can be determined.
For example, imagine a plaintiff who suffers a broken leg as a result of a rear end collision. The defendant has an insurance policy with $25,000 in BI coverage. Depending on the venue and how the injury heals, a broken leg would normally demand larger than $25,000 to adequately compensate the plaintiff for his pain and suffering. However, since there is only $25,000 in coverage, that will likely be the extent of the recovery. The lawsuit funding company will make an offer based upon that number as the maximum settlement amount for the case.
The lawsuit funding business exists primarily to help people with legitimate claims who simply need financial help while their claim is processed. Because of the insurer/insured relationship discussed above, most motor vehicle accident cases are essentially insurance claims which have not yet been paid. For this reason, auto accident lawsuit funding is an excellent choice for plaintiffs who need cash now. Auto accident lawsuit funding is the most popular because of the large likelihood a favorable outcome will result.
Thank you for your interest in the lawsuit funding business.