Most Americans Want Legal Reforms Against Practices Like Litigation Funding: Survey

By | March 6, 2024

A majority of Americans are unaware of third-party litigation funding but most believe state and federal laws should be changed to address abuses in the legal system.

According to the results of a recent survey of 2,000 people conducted by The Harris Poll and commissioned by the American Property Casualty Insurance Association (APCIA) and Munich Re, nearly 90% want legal reforms and 88% said there should be transparency of all parties involved in a civil lawsuit.

Legal system abuse is rampant and plaintiff lawyers’ use of predatory advertising tactics and third-party litigation funding have turned the U.S. legal system into an investment market, benefiting secret funders rather than the victim,” said Stef Zielezienski, executive vice president and chief legal officer at industry trade association APCIA, in a statement. “The survey results are clear – the majority of Americans agree state and federal lawmakers need to address these abuses of the legal system. Common-sense reforms, including full transparency and disclosure of all parties with an interest in the outcome of civil litigation, are needed to restore balance to the civil justice system.”

Nearly 60% of those surveyed do not know third parties are involved in financing litigation and 47% aren’t aware plaintiffs’ attorneys are likely to cut a significant cut of a settlement or jury award, according to survey results.

The survey, said Maura Freiwald, head of casualty at Munich Re US, “is an important step in raising awareness and educating the public about the tactics being used and the negative impacts of legal system abuse.”

“This is not going away anytime soon,” Freiwald continued. “If left unchecked, it will lead to higher insurance costs, financial strain on insurers, depletion of municipal resources, and disincentives for businesses to take risks.”

APCIA and Munich Re said 65% of respondents were not aware that every household is estimated to pay what’s called a “tort tax” of $3,621 every year. The term is used in a 2021 report by The Perryman Group, an economic and financial analysis firm. Excessive tort costs result in about $285 billion in annual direct costs to the US economy and the loss of more than 4 million jobs, accord to The Perry Group’s study.

Triple-I Paper

Legal system abuse was recently also addressed in a recent paper from the Insurance Information Institute (Triple-I). The insurance industry association said third-party litigation funders “can discourage prompt and reasonable settlements” and increase claims costs. Furthermore, the lack of transparency regarding litigation funding “makes it impossible to hold attorneys or their clients accountable to good-faith standards.”

Citing an analysis by Swiss Re, Triple-I the third-party litigation market continues to grow though plaintiffs are compensated less in cases involving the funding.

Triple-I said there are signs the federal government and some states have caught on. It has been asked to testify before state governments on the topics and Florida lawmakers recently passed a bill cracking down on the practice but the legislation stalled out before becoming law.

Priority for 2024

Triple-I and APCIA listed the topic of legal abuse high among priorities for 2024. “The abuses of our judicial system by the plaintiffs’ bar and their allies are wide-ranging, impacting insurance affordability and availability in many states, as well as the ability of businesses to remain viable,” Zielezienski said.

In an address last year at Riskworld, the Risk & Insurance Management Society’s annual conference, Chubb CEO Evan Greenberg said it was time to question the societal benefits of the growing practice in litigation.

The APCIA last September went before the House Committee on Oversight and Accountability to ask for them to consider disclosures in cases involving the “dark money lending practice.”

Topics Lawsuits Mergers & Acquisitions Trends

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