In a report published recently by the National Association of Mutual Insurance Companies, the lawsuit funding industry was blamed for rising insurance premiums.  As absurd as this may seem, never underestimate the lengths insurers will go to excuse premium increases.  For example, read the excerpt below,

“It stands to reason that third-party funding will increase the volume of litigation, and will especially encourage the filing of frivolous and ‘nuisance’ lawsuits,” said Robert Detlefsen, Ph.D., NAMIC’s vice president of public policy. “This will increase insurers’ litigation defense costs, which will ultimately cause premiums to rise.”

In his report, Dr. Detlefsen accomplishes little more than simply offering opinion as fact.  The original report can be viewed here.

It is difficult to envision a scenario where an attorney would be more likely to litigate a case because of lawsuit funding.  The business’ mission is to allow plaintiffs the ability to endure a long and drawn out litigation process.  Can these transactions somehow increase litigation and worse, frivolous lawsuits?

Much of the author’s reasoning is unsound and is based on very weak assumptions.  For example, an argument is made that plaintiff attorneys would intentionally prolong litigation so more interest can accrue on pre settlement funding transactions.  A similar argument suggests plaintiffs would be more willing to go to trial because of lawsuit financing.  These examples are not based in reality.

Addressing the first example is simply not necessary.  To suggest that lawsuit funding companies and attorneys would conspire together in this fashion is ludicrous.  More often than not, plaintiff attorneys resist the funding process frequently urging their clients to “hang in there” while the case progresses.  Even more absurd is idea that such arrangements would be so widespread as to necessitate an increase in premium.

The second “hypothetical” explains that plaintiffs and their attorneys are more likely to go to trial because of lawsuit funding.  This flies in the face of reason.  What the author fails to realize is that all parties involved in litigation, including plaintiffs and their counsel, want a settlement.

For plaintiffs, going to trial is indeed an expensive proposition.  And even if victorious, the wait for compensation is hardly over.  For plaintiff attorneys, much more time, energy and resources must be expended at trial.  Even after an award, the work is hardly over.  If you ask 100 attorneys if they would rather a fair settlement over a trial verdict, I would guess almost all of them would prefer a pre-trial settlement.

This report seeks to make a villain out of an industry which helps plaintiffs level an uneven playing field against insurers who hold a obvious financial advantage.

If potential plaintiffs would be more likely to sue if they thought they could get some money quickly rather than having to wait out the litigation process, then the author is in essence,  conceding that the delay in obtaining monetary relief from negligence cases precludes many potential plaintiffs from pursuing claims.  I am sure no insurer would want to admit that otherwise entitled claimants do not receive just compensation.  Keep in mind, the very purpose of the lawsuit funding industry is to allow legitimate claimants to hold on while all of the legal proceedings occur.

As far as frivolous and/or nuisance lawsuits are concerned, plaintiffs without injuries are virtually never advanced money on their cases.  Further,  I know of no attorney who will willingly waste time on a frivolous lawsuit so that their client can obtain a lawsuit cash advance.  Arguments such as these are simply without merit.

Much of the negative publicity presented against the lawsuit loan industry simply lacks the experiential foundation needed to open the issue to intelligent debate.  Moreover, these attacks fail to address the simple truth that many plaintiffs encounter financial difficulty while the case is litigated.  Pre settlement loans offer relief to those individuals who want to take advantage of the opportunity.

It is true, the lawsuit funding industry impacts insurers because it neutralizes, to some degree, their financial advantage.  That is its mission.  Attacks against the industry by insurance groups only illustrates their fear the mission is being accomplished – one case at a time.

Thank you for your interest in the pre settlement loan business.