Attorneys Lawsuit Funding

March 1, 2024 by Paul Coppola

Why Attorneys are Concerned About Lawsuit Loans

Plaintiff attorneys have legitimate concerns with lawsuit funding since their clients and cases are involved in these financial transactions. In this post, we examine why plaintiff lawyers are concerned with their clients entering into legal loan contracts and how these legitimate concerns are addressed.

Attorney Concerns with Lawsuit Funding Begin with Origination

Origination of new legal funding business usually comes in two forms. Either the client contacts the lawsuit loan company or a lawyer refers a client who needs immediate cash against his/her case.

Attorney referrals are the ideal way to secure funding because the referring attorney usually understands the funding business and can secure the best terms. We discuss the benefits of a lawyer/funder relationship in other posts.

New business initiated by the client is an entirely different animal. Although lawsuit funding requires attorney cooperation, sometimes attorneys are unfamiliar with lawsuit “loans” or otherwise reluctant to participate in the lawsuit loan process.

When attorneys are reluctant to cooperate with their clients’ wishes, the reasons usually fall within the same few themes. Below, we examine some common issues.

Oppressive Terms

To some critics, lawsuit loans are the equivalent of payday lending only with a lawsuit instead of a paycheck backing the transaction. Critics maintain lawsuit loans are predatory lending and exploit plaintiffs when they are vulnerable. Many articles have been written about the costs associated with lawsuit loans. We will not get into that topic in too much detail herein.

Yet, lawsuit loans are not traditional loans, so criticisms regarding cost are perhaps misplaced. Legal funding contracts are non-recourse since repayment is contingent upon a successful outcome. This means the recovery itself must be the source of the repayment, not the plaintiff personally. Lawsuit loans are risky in that any loss is a total loss of the funding company’s investment. This additional risk must be factored into the pricing.

Nevertheless, many plaintiff lawyers have legitimate concerns regarding lawsuit funding costs, since in some instances, the transactions can hinder settlement negotiations. More on this issue below.

It is also important to understand that while the costs are higher than traditional financing options, pricing for cash advances on pending lawsuits has drastically declined in recent years. Moreover, by working with funders directly, the client can save as much as 50% off the cost of the advance since some administrative fees (origination, underwriting and broker fees) can be avoided.

Scope of Representation

Another common attorney concern with lawsuit funding involves the scope of representation. Attorneys are understandably leery of representing clients outside the scope of their retainer agreements. When a client applies for funding, the attorney must balance his client’s interests with his own.

For example, a lawyer agrees to represent a plaintiff who is injured in an automobile accident. As far as the attorney is concerned, his representation begins and ends with the personal injury action. Representing a client as to the nuances of contract law and lawsuit funding contracts may be beyond his level of expertise. Or perhaps the attorney simply does not want to spend his valuable time researching these topics without payment for his services. These are legitimate concerns.

In the vast majority of cases, this potential conflict is remedied because the attorney is normally willing to help his client, and more often than not, discussions about the funding process between the attorney and the funding company will put the attorney at ease.

Funding companies simply want to be repaid if there is a successful resolution to the case. They do not want to hang an attorney “out to dry” if something unforeseen should occur. After all, a lawsuit funding company wants to be a resource for an attorney, not an adversary.

If You Have Any Questions, Call 888-964-2224

WE ARE HERE TO HELP YOU!

Attorney Concerns with Lawsuit Funding in Settlement Negotiations

One of the most common attorney concerns with lawsuit funding is the idea that more liens on a file will result in difficulty settling the case. The thinking is that the client will not want to settle the case if most of the award goes to attorney’s fees, medical or other liens, and repaying the lawsuit loan. This is also a legitimate concern. For example, one can easily foresee a client wanting to “roll the dice” and go to trial if he feels his portion of the award is less than adequate. Trying cases costs money and time so attorneys are likely to resist anything which would increase this possibility.

What is important to realize however is that pre-settlement finance companies do not want a case to go to trial either because almost anything can happen in a courtroom, and often does. Settlements make sense for all parties so funders mitigate the risk of trial by limiting how much lawsuit funding is available on any particular case. More often than not, a conversation with the attorney will quell concerns about this issue. Since the advance amounts are designed to gain a return, they are usually low enough to avoid this problem.

When a case does not yield the expected settlement offer, other tactics can be used to ensure a positive outcome for all parties involved. Professional settlement funding companies will rarely stand in the way of a reasonable settlement especially when something unforeseen (like when plaintiffs die during lawsuits) occurs.

Balancing Plaintiff and Attorney Concerns with Lawsuit Funding

Of course, more attorney concerns with lawsuit funding possibly exist than explored in this post. And attorneys may have a multitude of reasons to discourage their clients from obtaining lawsuit funding. Yet, the above issues repeatedly come up when dealing with these concerns and are routinely resolved through communication and mutual understanding.

If you have any questions regarding lawsuit loans, do not hesitate to give us a call. You will reach a live representative who will be happy to field your questions. Or you can contact us online. We are here to help and are at your service.

Thank you for your interest in pre-settlement funding.

Apply Now

February 27, 2024 by Paul Coppola

Attorneys Use Lawsuit Funding to Benefit Their Practices

Attorneys use lawsuit funding properly by fostering working relationships with reputable lawsuit lenders. These relationships are a valuable asset for your firm.

Since each lawsuit is unique, attorneys sometimes require flexibility from lawsuit lenders to provide much needed liquidity for clients. These funds can be used for any purpose ranging from surgical procedures to daily living expenses.

In this post, we examine the best way to find the best lawsuit funding company, assure the terms of legal funding contracts are fair and transparent and explore how lawyers can best use lawsuit funding relationships.

Understanding Contract Structure and Costs

Almost all lawsuit funding agreements assign property rights in a portion of the future proceeds of pending litigation. The contracts are drafted in this way so the transactions are “non-recourse” and fall outside the realm of traditional loans for purposes of state usury laws.

According to the contract, the lawsuit cash advance is to be repaid from settlement or judgement proceeds and lenders cannot pursue plaintiffs personally for repayment. Thus, if there is no monetary recovery, the advance is not repaid. While percentages and time are factors which dictate repayment amounts, the contingent nature of a successful outcome makes these transactions unique.

While there is a wide range of lawsuit loan pricing methods used by different lawsuit funding companies, the vast majority of advances on pending lawsuits‘ repayment schedules are calculated in one of two ways.

The first way is through a compounding monthly rate. The normal range is 2.5% to 3.5% per month. The second way is by calculating a simple interest rate based on the contract amount. Clients can expect to see a range from 18% -50% every six-months until the case is settled and advance repaid.

All Rates Are Not Equal

You may be surprised to learn that a compounding monthly rate may not be as oppressive as it sounds. In fact, if a lawsuit were to settle within the first 6 months after an advance, the average compounding monthly rate is cheaper than a flat rate calculation. After that time frame, but before 24 months, both rate structures are remarkably similar. Only after 2 years is the compounding effect noticeable.

There are pros and cons to both lawsuit loan rate structures. And although the contractual language of lawsuit funding transactions is not complex, what personal injury attorney wants to spend the time becoming an expert in this field? As attorneys, we cannot be an expert in everything. Couldn’t your time be better spent elsewhere?

The nuances of lawsuit loan contracts are easily grasped when you have a “go to guy” in the lawsuit funding business. A good working relationship with a funder you can trust will save you a great deal of time in the long run.

If You Have Any Questions, Call 888-964-2224

WE ARE HERE TO HELP YOU!

Understanding How Attorneys Use Lawsuit Funding Properly

Lawsuit funding operations design contracts which protect their interests in the event a dispute arises. Obviously, lawsuit funding companies are concerned with repayment of capital. Intelligent lawsuit funding companies are also concerned with creating mutually beneficial relationships with attorneys and their clients. They understand the value of attorney referral business to the extent that it lowers the cost of lawsuit loan case origination.

Smart plaintiff attorneys use lawsuit funding properly when they understand funders’ business needs and balance them with the needs of their clients. For example, consider a personal injury case where the plaintiff was not forthcoming about prior injuries. Once deposed, plaintiff was forced to admit injuring the same body parts in a prior accident. One can expect any settlement offer to be well below what was projected by lawsuit funding underwriters relying on limited information.

The result might be difficulty in settling the case. After all, the lawsuit loan, if paid off in full, will yield virtually no recovery for the plaintiff personally. Meanwhile, the attorney cannot “sell” a reasonable settlement offer to his client who wants to go to trial to see what happens. Of course, the plaintiff is unaware of the costs associated with going to trial. He/she may have read an article online stating a particular injury type is worth over $1,000,000 in settlement.

Faced with the “throwing good money after bad” prospect of prepping for trial, hiring experts and actually picking a jury, attorneys who have existing relationships with lawsuit funders can approach these companies and explain the situation. Although many would not be pleased, professional funding operations understand the value of repeat business and will usually be reasonable if settlement negotiations break down. Having to take a reduction on a single case is far more palatable when that same firm routinely refers clients for funding.

What are the First Steps?

Contact a lawsuit funder about their programs and make sure you get at least a ballpark estimate of the costs. These should include process fees, underwriting fees, application fees, and origination fees, if any. Attorneys should ask questions about how the advance is amortized, when repayment is expected and what exactly are an attorney’s obligations under a typical agreement.

By beginning a dialogue, you will get a feel for whether the funding company is up front and honest with the information you request and a sense of what it will be like to do business with the company in the future. From there, it is just a matter of getting comfortable with the lawsuit loan process and the players.

Choose Fair Rate Funding

At Fair Rate Funding, we want to be a resource for your firm and your clients. We are plaintiff advocates in that we afford litigants the financial support they need to pursue their interests in the court system. We’ve been doing so since 2007.

If you have any questions of any kind about how lawsuit funding can help your practice, please contact us at 888-964-2224. We are here to help and are at your service.

Thank you for your interest in the lawsuit funding business.

Apply Now

March 3, 2022 by Paul Coppola Leave a Comment

Attorney Approval Not Required, But Strongly Recommended

Lawsuits take time to properly pursue. Many cases take years to settle. Fair Rate Funding can be an ally in the pursuit of justice on your behalf. We often provide better value to our customers when we have a good relationship with your legal counsel. In this post, we discuss whether your attorney needs to approve your lawsuit loan.

Fair Rate Funding has been in business since 2007 and has good relationships with hundreds of law firms throughout the country. We will work with your attorneys from the very beginning to get you the cash you need so you can get the best possible resolution to your case. The proper use of lawsuit funding will be an asset to your case and allow you to refuse low ball settlement offers.

Does your attorney have to participate and approve your taking lawsuit funding on your case? In almost all instances, the answer is yes. Read below to learn more about why lawyers need to approve lawsuit loans.

Initiating the Process: Beginning Your Application

Taking an application is the first step in this process. Fair Rate Funding then sends a request for information to lawyers’ office to gather the necessary documents.

Many clients call in and ask if their attorney needs to be involved. The answer is yes. This is important to a funding company the attorneys are charged with repaying the lawsuit advance once the case is resolved.

After the application is made, it is usually a good idea to contact your attorney and inform him/her of your plans, if you haven’t done so already. Most lawyers do not object to lawsuit loans, yet we still need attorney cooperation to proceed.

If You Have Any Questions, Call 888-964-2224

WE ARE HERE TO HELP YOU!

Attorney Communication and Lawsuit Loan Approvals

To gain an approval for funding, Fair Rate Funding will need to know the facts of your case and supporting documentation. We use this information to determine the likelihood you will be successful in your claim/lawsuit.

Your attorney(s) will likely ask for your consent in providing this information to us. Because there is an attorney-client relationship and lawyers in most jurisdictions have a duty to keep your personal information private, we ask that you give your attorney permission to discuss your case with us and our underwriters.

Be assured we will only use the information to pursue funding on your behalf. We will not divulge any information about you or your case without a court order directing us to do so. Your information will remain confidential under all but the narrowest of circumstances.

Case Evaluation and Underwriting

Your attorney-client relationship is actually a pre-requisite to most forms of lending on lawsuits. Because attorneys are generally paid on a contingency fee basis, they are the first screeners of the viability of your case. This is true because attorneys “invest” time and money into the pursuit of your claim. They want to make sure they will be paid at the end of the efforts. It is simply business and business drives the profession.

Likewise, Fair Rate Funding is a business seeking to make a profit. Our role is also to “invest” in the outcome of the case using money to bridge the gap between your accident/incident and the successful resolution of the claim.

Accordingly, we make our own determination regarding the likely outcome. We do this through underwriting processes and consultation with your counsel. This consultation is essentially communication between your lawyer(s) and our underwriting team either by phone or through email/text. We rely on this communication to assess the value of the case, time it may take to resolve and how confident your lawyer(s) are about the circumstances surrounding your claim.

Factors such as insurance coverage, medical treatment, medical and other experts, and other damages are major determinants not only in whether your case is approved but also the amount we are willing to advance. All or most of this information comes from the underwriting process.

There are no guarantees, but the fact you have an attorney spending time and money on YOUR case – at the very least – interests us as investors. When you are approved, you will know that in addition to your attorney, Fair Rate Funding has confidence in your case.

Having Your Back

Our return is based upon a successful recovery. However, we are not involved in the pursuit of your claim. Decisions that may affect the outcome of your case are made by you and your attorney. We will not make any decisions about how your case is handled nor will we try to influence you or your attorney on any matter regarding your clam.

Lawsuit loans can help your case in certain areas – namely providing financial backing necessary to pursue the matter as you see fit. It cannot get involved in the matter itself nor any of the decisions which need to be made. Those are left to you and your legal team.

Lawsuit Loan Lenders Work Directly with Your Lawyer Post Settlement

Once your case is successfully resolved, most likely a check will be deposited into your attorney’s trust account. Your attorney then is tasked with making sure all parties which are entitled to a part of the proceeds are paid. These amounts include lawsuit funding but also might include any of the following:

Expert fees
Medical records
Filing costs
Attorney’s fees
Court reporters
Medical liens
And a host of others.

When your lawyer signs our funding agreement, they promise they will repay our advance according to the terms of our agreement with you. You will not have to worry about repayment in almost all instances. When you receive your check, that money is usually unburdened by other claims, including ours.

And If My Attorney Won’t Cooperate?

Lawsuit loans have become a part of legal landscape and as such, most attorneys understand the need and benefit of these agreements. However, some attorneys still prefer not to work with lawsuit funding companies.

If a lawyer refuses to participate, we simply cannot offer you legal funding. As stated before, lawsuit funding is contingent upon your attorney’s cooperation and promise to repay. Fortunately, these situations are becoming more and more rare.

Remaining financing options can include finding an attorney who will participate, or you could also explore other, more traditional options such as personal loans or credit card advances. You should be aware some of these may be secured by collateral and likely must be repaid even if you lose your case.

Apply with Us for Lawsuit Funding Today

If you need cash now to pay for medical bills, living expenses or anything else, we can help you. Apply today by filling out the form on this website or by calling 888-964-2224. We are ready and willing to get you started immediately and are here to help.

We’ve been in business since 2007 and have provided tens of millions of dollars to our clients. You can be one of them. Use our resources so you can refuse low-ball settlement offers made by insurance companies and their clients. Call today. We can help.

Apply Now

June 19, 2018 by PMCESQ

Auto Accident Lawsuit Funding Analysis

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 to Underwrite Lawsuit Loan

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.

How Auto Accident Lawsuit Funding Can Help

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.