Personal Injury -- Plaintiff Law

What is Litigation Funding?

Key Takeaways:

  • In a standard personal injury contingency agreement, the attorney pays the upfront costs of litigation in exchange for a percentage of the damages if they win your case.
  • Private litigation groups may offer to fund your personal injury litigation and take a portion of your award if you win.
  • Before you agree to litigation funding, understand your legal rights and what may be at risk.

Legal costs are expensive in the United States. Even if you are on the right side of the law, you may be responsible for paying your legal fees. Most people don’t have enough savings to fund a personal injury lawsuit. Lawsuits can take years to go to trial. Some injury victims may turn to litigation funding to pay for legal fees until they recover compensation.

Litigation funding can seem like a great opportunity. However, you need to understand how much it may cost you in the end. A personal injury lawyer has ethical responsibilities, including being upfront about fee agreements. Legal financing may be less regulated and doesn’t have to follow the same ethical rules as lawyers. Before making an agreement with a legal funding group, talk to an experienced personal injury lawyer.

What Is Litigation Funding?

Litigation funding can have different meanings. Generally, a personal injury lawyer pays for the upfront costs of filing a personal injury claim. The attorney funds the litigation as part of the contingency fee agreement. However, a standard personal injury attorney fee arrangement differs from lawsuit funding.

Litigation funding can also refer to investment groups that pay for litigation costs in exchange for taking a share of the jury award. Legal funding groups are not the same as lawyers. They are investors that may take a more significant percentage of your reward than an attorney could receive.

Why Is Litigation So Expensive?

Going through the legal system can be expensive. The more complex the dispute, the more expensive it can be to resolve. Cases like medical malpractice claims can take years to get to trial. The litigation process includes more than just the attorney fees. Litigation expenses can consist of:

  • Expert witness fees
  • Court costs
  • Administrative support fees
  • Copying records
  • Record requests

What Is a Contingency Fee Agreement?

A contingency fee agreement is an attorney payment agreement where the client pays nothing upfront. The client does not owe the attorney anything if they don’t win their case. If the attorney does recover money, the attorney takes their fee as a percentage of the award. Generally, state law limits how much an attorney can receive in a contingency fee agreement. Depending on the jurisdiction, this amount is generally around 30% to 40%.

In a standard personal injury accident, the attorney is fronting the litigation costs. Unfortunately, you won’t get anything until the case is resolved. It can take months or years to finally get an award or settlement offer. Only after the case settles or a jury awards you compensation will you get a check.

The good part about a contingency fee agreement is that you can have an experienced lawyer on your side, even if you can’t afford to pay them upfront. Unfortunately, you may also still face medical bills, lost income, and struggle to pay your bills until your case is resolved.

Can You Get Money Upfront With Litigation Funding?

One of the draws of third-party litigation funding is that they may offer some money upfront to fund your claim. You may need the money for living expenses. However, in exchange for a small amount upfront, the litigation funding company may take a large portion of your compensation.

For example, litigation funders could give you $25,000 upfront to invest in your case. After your lawyer recovers $100,000 in damages, the litigation financing company may take $50,000 or more. The litigation financing group could get more from your personal injury case than you receive.

Before signing any legal agreement as part of your personal injury claim, make sure you understand the funding agreement. Ask for a lawyer to review the agreement if you are not sure about your legal options.

Do You Need Financial Support for a Personal Injury Claim?

There may be alternative funding arrangements if you need money while you wait for your personal injury lawsuit to settle. You may be able to take a traditional loan to pay for your expenses after a car accident or other injury. Repayment may be much lower than the amounts charged by litigation funding groups.

If you are worried about paying for your living expenses while going through a personal injury case, talk to your lawyer. Your lawyer may have legal advice for ways to get through the lawsuit without having to sell out your compensation to a litigation funding group. Talk to an experienced personal injury lawyer about your legal options after an injury accident.

Was this helpful?

At LawInfo, we know legal issues can be stressful and confusing. We are committed to providing you with reliable legal information in a way that is easy to understand. Our pages are written by legal writers and reviewed by legal experts. We strive to present information in a neutral and unbiased way, so that you can make informed decisions based on your legal circumstances.