How Lawyers Use Lawsuit Funding in Their Practices
The lawsuit funding business offers clients the ability to financially withstand a long, drawn out litigation process. This post explores the ways in which attorneys benefit from lawsuit funding.
Attorneys Benefit from Lawsuit Funding by Helping Clients
Personal injuries are often serious. Many personal injury plaintiffs are simply unable to work. This creates financial pressure on individuals since their expenses still must be paid. Disability and/or workers compensation benefits might not be available for these victims and are therefore of little help to plaintiffs. When available, they are often woefully insufficient to cover all of plaintiff’s obligations.
Most personal injury lawyers, in any jurisdiction, have clients ask for money as an advance on a future settlement. Yet most state ethical rules prohibit attorneys from loaning/advancing clients money in anticipation of a favorable outcome in their cases. Some states allow attorneys to do so, but the money must be advanced without interest. Until the pre-settlement loan business, plaintiffs simply had to hold on or worse, had to accept a lower settlement simply because of the financial pressure.
The purpose of lawsuit funding is to help plaintiffs meet their obligations while their cases are litigated. Clients, and by extension their counsel, are relieved of immediate financial pressure. The case can then be litigated properly, thoroughly, and to maximum value.
Cost Analysis
Now an argument can be made that the cost of lawsuit funding can outweigh any available increase in settlement value. However, this analysis must be done in hindsight since only after a settlement can the true cost be ascertained and compared to a declined settlement offer.
While it is true that lawsuit loans carry higher interest rates than car loans or other traditional forms of financing, traditional loans are different products. So this comparison is also inadequate. Further, analyzing only interest rates is a narrow way of looking at what lawsuit funding actually achieves for clients and their attorneys. The best way to determine lawsuit loan cost is by examining the benefits these specialty financial products provide.
Simply put, whatever the situation the client is in, he is in that situation. So the question then becomes how to help lessen the burden or otherwise better the client’s situation?
When it comes to a cost/benefit analysis, what is the value of a plaintiff keeping a roof over his head?
What would be the fees/penalties if he was forced to default on his mortgage, rent or any other obligation?
Further, since there are no restrictions on the use of lawsuit loan cash, plaintiffs are free to use the money as they see fit – including getting additional medical treatment which usually adds to potential settlement value. Unrestricted use of the funds also means plaintiffs can utilize lawsuit loan proceeds to make more money. Frequently, clients use lawsuit funding for other business/investment opportunities.
The point is – true cost cannot be measured in general terms. Each set of circumstances is unique. Thus, obtaining cash against a lawsuit can be more or less costly than any other means of securing funds especially when all other liquidity sources are exhausted.
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Maximum Settlement Value and More Business
On the list of valuable things lawyers should know about lawsuit funding, using lawsuit loans to increase case value is high on the list. When clients use lawsuit loans for surgeries, an increase in settlement value naturally results.
Yet, attorneys benefit from lawsuit funding also when clients refuse low-ball settlement offers simply because they need immediate funds. Common insurance company settlement tactics include offering less than fair compensation to test a plaintiff’s immediate need for cash. By refusing these offers, attorneys can litigate the case thoroughly and procure the maximum amount available – even if it includes going to trial to let a jury decide. Since attorneys fees are a percentage of the ultimate award for damages, attorneys benefit from lawsuit funding with an increase in fees.
Perhaps more importantly, a client is more likely to be satisfied by the final result. This enhances the attorney’s reputation and often assists in the settlement of future cases.
Further, in the personal injury game, word of mouth is the most effective form of legal marketing. Repeat business is derived from successful outcomes in cases. Life long clients are the life blood of any business. Law practices are no different. Clients are likely to retain counsel who is attentive to their wants, needs, and necessities. Likewise, clients are more likely to refer their friends and family not to the attorney who refuses to cooperate with lawsuit funding companies, but to the lawyer who will go the extra mile to help.
Attorneys Benefit from Lawsuit Funding
The bottom line is the lawsuit funding industry helps clients who want and need help. And by helping clients, attorneys benefit from lawsuit funding through increased settlement value and more client referrals.
Thank you for your interest in the lawsuit funding business.
