While investor-funded litigation can be tracked as far back as ancient times, the expansion into commercial automobile cases is new according to industry experts. Denise Johnson wrote a recent article touching on this exact subject that appeared on ClaimsJournal.com just a few months ago.
According to Johnson, panelists at the 2017 Risk Management Summit in Las Vegas addressed the growing trend of investor funded litigation regarding commercial auto claims throughout the 5 day event at that begin October 15th and ended October 19th.
In one specific session, “Investor Funded Litigation Update”, John Ferrante, the vice president of Litigation Management for eClaims Management, discussed the noticeable uptick in its use over the past decade or so.
Litigation funding was initially a way for smaller companies to remain a party in lawsuits with larger companies for the long haul. It has since evolved into an accounts receivable financing tool for law firms and a way to pay for living expenses for plaintiffs.
Varying Rules throughout the United States
Funding can be in the form of loans or assignments. And depending which state the lawsuit is filed, attorneys and plaintiffs may have different rules to abide by. In Florida, it is illegal for an attorney to front money to a client, but in California, Massachusetts and Louisiana, an attorney can provide an advance for a client’s living expenses.
In some states, like in Maryland and Colorado, all forms of litigation financing is currently barred while in other states like Nevada and California, it is legal to crowdfund to litigate one’s own case. But this leads an ethical dilemma: is there a duty to pay back the plaintiff first or should the investors be paid before the plaintiff?