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Triple-I Blog | The group of lawyers approves best practices for guiding litigation financing



The American Bar Association (ABA)'s decision-making arm recently approved a set of best practices for financing disputes for disputes.

Litigation financing is an increasingly popular technology where investors finance lawsuits where they are not a party to companies ̵

1; often insurance companies – in return for a share in the settlement. It contributes to “social inflation” – rising legal costs that affect insurers' claims deductions, loss ratios and ultimately how much policyholders pay for coverage.

The resolution – adopted by the ABA Delegated House by a vote of 366 to 10 – lists the issues lawyers should consider before entering into agreements with external financiers. Although it avoids taking a position on the use of such funding, it recommends that attorneys account for all arrangements in writing and recommend that they ensure that the client retains control.

"Disputes should be handled and controlled by the party and the party's lawyer," the report said. Restrictions on the involvement of a third party financier in, or direct or indirect control of or input into (or notification of), either the day-to-day or broader litigation and on all important issues (such as strategy and settlement) should be addressed in the financing agreement.

It also warns lawyers against advising financiers on the benefits of a case, warns that this may raise concerns about the waiver of lawyer-client privilege, and exposes lawyers to claims that they have an obligation to update this guidance as the dispute develops .

Opponents of litigation have pushed for rules requiring mandatory disclosure of financing arrangements during disputes. The resolution does not take a position on whether information to judges or opponents should be required, but it urges lawyers to be prepared for the possibility of reviewing funding arrangements.

The launch of a new $ 200 million fund by Pravati Capital this week gives legal finance companies over $ 1 billion in funds raised by 2020, according to Bloomberg Law.

Further reading:

SOCIAL INFLATION AND COVID-19

IRC STUDY: SOCIAL INFLATION IS REAL, AND IT HURTS CONSUMERS, BUSINESSES

FLORIDA & # 39; S AOB CRISIS: A SOCIALRO-INFLATION


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