August 9, 2007

Lawsuit Funding

Sponsored post: as many bloggers are, I was offered $30 to review someone else's site/product.  Ordinarily I pass, but this one caught my eye for reasons which will become clear. offers non-recourse cash advances for pending lawsuits.

Here's how it works.  Joe sues his doctor for, say, damages of $100,000.  Trials last anywhere from one to 30 years.  When might Joe get paid?

This firm will call your lawyer, determine how much you'll probably get, and give you that money  today, up front, no strings attached.  If you lose, you never pay it back.  If you win, you pay them back plus "fees," which I am guessing means a percentage of the award.

The reason this works is because most of the time the case is settled.  For example, this firm may give Joe $8000 up front, because they're lawyers, they've talked to your lawyer, and they know it will settle for about 10%. 

So such a service is great for people who are hurting for cash (for example, you get injured and lose your job); or who may need the money simply to keep the suit going.

But--  and here is the problem, at least for defendants (i.e. me)- it seems a very low risk way to get some money.

Take med mal.  There are plenty of times that a patient is injured, and plenty of times when the injury is the result of a doctor's negligence.  However, in the vast majority of cases (that's right, I said vast majority) no suit is ever filed.  The patient doesn't bother.  It's not worth the headache, the time, the meetings with lawyers-- for what?  The possibility of eventually settling for $5000 after 6 years? 

But now, it's that much easier for someone to file a suit, including a nuisance (frivolous) suit.  In essence, why not?  You get your money immediately.  Hell, once you get your money, you don't even have to be motivated to do a "good job" of "appearing" damaged, because you already have your money that you never have to pay back.  And as long as the numbers are small (<$10,000) my experience is that hospitals usually settle.