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Monday, February 17, 2020

Group calls third-party litigation funding a threat to 'entire civil justice system'

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By Kayla Elder | Aug 19, 2019


Third-party funding of civil litigation is taking fire from the American Property Casualty Insurance Association, which raised concerns about the lack of transparency.

“This has a very real potential of undermining the entire civil justice system,” said James Whittle, associate general counsel and chief claims counsel to the American Property Casualty Insurance Association on a call with APCIA Senior Vice President of Public Affairs Jessica Hanson Hannah and the Florida Record.

The litigation funding industry includes third parties that finance civil litigation, such as a class-action lawsuit, in return for a percentage of the jury award. 

“The natural effect of this is to drive up the costs of claims, to drive up the value of cases,” Whittle said. “On top of that, if they want to satisfy their own interests – and their interest, of course, is investors; they are trying to make money – then they are going to have an interest in seeing the expenses go up, seeing the treatments go up for people who have personal injury claims.” 

Whittle said one major third-party litigation financing company indicated it has foreign governments investing in its endeavors.

“We have foreign markets investing in American civil litigation for profit,” he said. “It seems mind-boggling that we would permit this to occur as a country. We have the view that that should not be permitted under any circumstance.”

Whittle said third parties should have to disclose their financing – where capital is coming from, who is helping to spread advertising, how much they’re investing and what return on investment they are seeing.

“We think that disclosure is very important,” Whittle said. “Why aren’t we considering things that require full disclosure to the claimants about their agreement related to third-party litigation financing? And their rights under those kinds of claims? This is like a consumer contract. When you think about financing other things, there are rights that consumers have. The same should apply here.” 

Much like Wisconsin, Tennessee and West Virginia, Whittle said, Florida needs to require transparency so that claimants are entitled to view fully executed copies of the contracts they are entering.

“They should have a right to rescind these agreements within a reasonable amount of time,” he said. “We think the opposing parties certainly should know that this is going on. We want to know who the real party and interest is – who is driving this and driving settlement efforts and driving values and litigation values.”   

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