The Litigation Funding process can seem daunting for any claimant that does not have direct experience within this industry. Below are some questions and answers relating to some of the most common question.
What are the different categories of litigation funding?
There are two primary categories of litigation funding: commercial and consumer. Commercial or corporate disputes cover a wide range of business disputes and litigation requirements for both small and large businesses. The majority of consumer funding revolves around the personal injury claims industry where solicitors typically operate on a contingency (success fee) basis. In these circumstances funders are typically used to cover the costs of legal disbursements whilst some funders have the ability to provide non-recourse funding solutions which can be used to cover a claimants personal, living, medical and rehabilitation expenses during the process.
When is litigation finance not feasible for a case?
There are a diverse array of circumstances and factors that can render litigation finance unsuitable for a lawsuit. The most common occurrence is when the ratio of expected damages to the litigation costs is relatively low. This is because a third-party funder’s returns are customarily based either on a multiple of the capital funded or a pre-negotiated percentage of the settlement achieved. Moreover, claims requiring large monetary amounts to litigate but have a low probability of success will be unattractive to litigation financiers.
How does a litigation finance business decide whether or not to fund a case?
The framework by which a funder analyses a case differs from company to company. Typically, a financier will have a rudimentary set of criteria that a claim must meet before serious time is allocated to carry out an in-depth analysis of the case and the risks involved. The basic parameters include:
- The genesis of the dispute, and whether it is coherent with the kind of cases the funder is prepared to accept in its portfolio of cases.
- The jurisdiction, and whether it offers a provision for litigation finance.
- The minimum estimated settlement and whether it meets the funder’s minimum threshold.
If a claim passes these initial evaluation barriers then it will then be typically forwarded to the funder’s underwriting team. Some funders will undertake a subjective assessment of the case, with experienced lawyers on staff examining the merits of the case based on the available information. Other third-party funders deploy proprietary technology that takes a rational, scientific approach to case risk analysis. If the underwriting process confirms that the merits of the case are expected to result in a commercially viable recovery, the claim will then be presented to the funder’s investment committee.
The investment committee typically has the last word on whether funding is offered on a case. he funding viability of a case. However, irrespective of the end result, the advantage of having a funder conducting such a detailed and comprehensive review of a case is invaluable. It provides claimants with a detailed analysis of their case, it’s requirements and the projected probability of success prior to additional financial resources being deployed. This gives claimants a better understanding of their case and the process by which litigation financiers will assess it’s viability for funding.
Does the litigation finance company reserve the right to cease funding at any time?
Typically, litigation funders can discontinue funding “for cause” or “without cause.” If the client violates a material term of the funding contract (for example, failing to furnish the legal team with all the requisite information and assistance required in order for them to successfully litigate the case), this would could give the funder grounds to, at once, cease funding “for cause.” In this context, the funder may well retain its security interest, which means that it will still maintain it’s right to collect returns from any settlement in the case. When evaluating the particulars of a funding application it is advisable to comprehensively review all of the funders requirements with your legal team prior to making a decision on the funding.
Are there funding specialists that can assist in obtaining litigation funding?
Yes! Claims Funding provide these very services. To find out how we can assist you with your funding requirements please contact us for a free no obligation review of your case.