Why Are Insurers So Worried About Consumer Legal Funding?

4 minute read

The insurance industry continues to complain loudly that third-party litigation financing (TPLF) drives up the cost of insurance.1

Insurers define TPLF to include consumer funding even though the two are not the same. TLPF pays for the costs incurred in connection with the litigation; by contrast, consumer legal funding provides funds to claimants to help them meet personal, medical, and household needs while they pursue their legal claims.

Nevertheless, as a strong partner with plaintiffs in personal injury cases, Cartiga is happy to acknowledge that its consumer legal funding can and does increase recoveries by claimants on their legal claims.2 Consumer funding is widely recognized to increase recoveries because claimants are financially able to reject “lowball” settlement offers from insurers and can litigate until a fair recovery is achieved.3 That seems like cause for commendation, not complaint.

The Top Three Insurance Company Misstatements Regarding Consumer Legal Funding

The insurance industry’s other complaints about TPLF are wrong to the extent that insurers include consumer legal funding in their complaints. Instead of voicing legitimate concerns, these complaints only underscore how powerful consumer legal funding has become for plaintiffs:

1. According to insurers, TPLF acts “at the expense of vulnerable individuals seeking justice” and charges “exorbitant interest rates” that leave victims with little to no award money.”4

In reality, Cartiga’s consumer legal funding provides a critical lifeline for consumers to pay their living and medical expenses while they are pursuing their legal claims.5 This funding often ensures that claimants receive the medical treatment they need and simultaneously establishes admissible evidence of their economic damages as well as pain and suffering.6 Rather than leaving consumers with “little or no award money,” the funding companies’ real share of recoveries is quite reasonable relative to the higher return created for claimants by the funding.7

2. According to insurers, the judicial system is being exploited as a “money-making machine” by investors in TPLF who “subvert[] the ‘truth-finding’ and ‘justice hallmarks’ of our judicial system.8

Consumer legal funding is a rational economic response to the insurers’ lowball settlement strategies, which exploit claimants, subvert justice, and make money for insurers. Funding provides plaintiffs and their counsel with access to capital that levels the playing field in personal injury litigation. That is a reassuring sign of capitalism identifying a historical imbalance between insurance companies and plaintiffs in this market and correcting that imbalance. Ironically, the capital raised by funding companies often comes from insurance companies themselves, which are some of the largest lenders in the consumer funding securitization markets.9

3. According to insurers, funding companies are secretly in control of legal strategy “to the detriment and ignorance of plaintiffs,” which creates the risk of “dark money dollars” being used by foreign investors to influence our judicial process and “increase[s] national security risks.10

In reality, Cartiga or other consumer legal funders do not control legal strategy or outcomes. The funding contracts expressly prohibit such control, and plaintiffs’ counsel would not permit such control regardless, just as defense counsel would not permit insurance companies to influence their independent professional judgment in defending their clients in a personal injury case.


It is undoubtedly challenging for insurers to adjust to a more financially level litigation playing field after occupying an advantageous position for so long at the expense of individual plaintiffs. But consumer legal funding will continue to be a needed balance that increases recoveries for plaintiffs and their counsel, at a cost that is outweighed by all the benefits, for so long as insurance companies are slow to settle cases for their actual value.11 That is a healthy capital market at work.

Let Cartiga help your firm navigate its way to greater legal success!

This article is for marketing purposes only, does not constitute legal advice, and should not be relied upon as legal advice.

  1. Erich Bublitz, Why Litigation Financing Should Be Driving the Industry Toward E&S Coverage to Buffer the Blows of Social Inflation (April 7, 2023), https://riskandinsurance.com/third-party-litigation-financing-impact-on-the-e-and-s-market/; https://www.propertycasualty360.com/2023/04/20/litigation-funding-blamed-for-spiking-insurance-settlements-but-is-that-really-true-414-237168/ Insurance News https://www.insurancebusinessmag.com/us/news/breaking-news/apcia-calls-for-regulation-of-thirdparty-litigation-financing-in-florida-480541.aspx; See also https://www.lexisnexis.com/community/insights/legal/capitol-journal/b/state-net/posts/state-lawmakers-wade-into-third-party-litigation-funding; https://www.theclm.org/Magazine/articles/addressing-legal-system-abuse-tops-apcia-2024-priority-list/2799; https://content.naic.org/cipr-topics/social inflation#:~:text=Disclosure%20and%20regulation%20of%20third, TPLF%20agreements%20in%20civil%20cases; https://www.burnsandwilcox.com/insights/pc-report-2024-forecast/; Jim Lynch, Dave Moore, and Dale Porfilio, Impact of Increasing Inflation on Personal and Commercial Auto Liability Insurance, https://www.iii.org/sites/default/files/docs/pdf/triple-i_auto_inflation_trends_2023.pdf
  2. https://cartiga.com/articles/consumer-funding-increases-claimants-recoveries-in-personal-injury-cases/; https://cartiga.com/articles/winning-case-for-consumer-legal-funding/
  3. Id.
  4. Insurance News https://www.insurancebusinessmag.com/us/news/breaking-news/apcia-calls-for-regulation-of-thirdparty-litigation-financing-in-florida-480541.aspx
  5. https://cartiga.com/articles/the-benefits-of-cartigas-consumer-legal-funding-fully-explained; https://cartiga.com/articles/winning-case-for-consumer-legal-funding/
  6. See https://cartiga.com/articles/benefits-of-using-consumer-legal-funding-to-pay-medical-expenses/; https://cartiga.com/articles/medical-funding-solution-for-the-florida-tort-reform-law.
  7. https://cartiga.com/articles/how-to-calculate-cartigas-real-share-of-any-settlement/; https://cartiga.com/articles/winning-case-for-consumer-legal-funding/
  8. Insurance News https://www.insurancebusinessmag.com/us/news/breaking-news/apcia-calls-for-regulation-of-thirdparty-litigation-financing-in-florida-480541.aspx
  9. See, e.g.,https://news.bloomberglaw.com/business-and-practice/insurers-invade-litigation-finance-boosting-law-firm-options.
  10. https://www.lexisnexis.com/community/insights/legal/capitol-journal/b/state-net/posts/state-lawmakers-wade-into-third-party-litigation-funding; https://www.iii.org/press-release/legal-system-abuse-adding-to-increasing-auto-insurance-costs-creating-a-new-asset-class-of-investors-betting-on-litigation-022724.
  11. https://cartiga.com/articles/why-the-benefits-of-cartigas-consumer-legal-funding-outweigh-the-costs/; https://cartiga.com/articles/winning-case-for-consumer-legal-funding/

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