Third-Party Litigation Funding (TPLF), or litigation loans, has become an increasing challenge to liability claim resolution. TPLF can provide financing for the injured individual who is unable to work and/or pay medical bills during the years-long course of litigation. If that individual lacks savings or collateral, there are few, if any, options to fund the gap.
First appearing in the 1990s, TPLF has become a $5b industry. Its largest player recently reporting an 83% increase in loans and a 75% increase in profitability. While the impact of COVID-19 is still unknown, the sharp and simultaneous rise in unemployment rates and court delays should only increase the pressures that give rise to these loans. Some lenders report a 100% rise in requests for TPLF funding in April of this year alone.
The TPLF Challenge in Claims Resolution
Because there is no obligation to repay the funder of the claim is unsuccessful, TPLF is technically an advance rather than a formal loan. As a result, litigation loans are typically outside the scope of any state or federal banking laws with respect to rates, fees, or terms. Advances can range between $500 and $100k, with an interest rate between 27% and 60%, capped at about 20% of the expected recovery for the injured individual.
With that in mind, TPLF becomes a complicating factor in claims resolution. First, as time and interest accrue, the payout to the injured individual—and, therefore, the appetite for a negotiated compromise—diminishes. Second, there are fears that the presence of TPLF could motivate the plaintiff to treat excessively and aggrandize the extent of injuries. Third, while most TPLF agreements explicitly exclude the influence of the lender in the litigation, a third-party lender’s investment in the outcome can impact the timing and cost of resolution, “putting the investor in the driver’s seat while hurting the primary parties in the case.” In fact, the 11th Circuit Court of Appeals has ruled that a TPLF arrangement is admissible to demonstrate a doctor’s bias arising from a possible financial stake in the outcome of a claim.
Addressing the Shortcomings
Many insurance carriers, third-party administrators and self-insured organizations have pursued a variety of strategies to curb the downsides of TPLF. Chief among these strategies is leveraging TPLF discovery strategies (which varies greatly depending on court and jurisdiction) and experimenting with judiciously advancing the cost of necessary medical expenses while the claim is pending—without any interest rates.
The legal wrangling on TPLF admissibility, efficacy and fairness will shake out over the coming years. However, one critical fact will remain: plaintiffs face significant expenses while their claims are pending.
Introducing a Valuable Antidote: ChronovoCareTM
Our new medical savings program can have a tremendous impact on one of the primary drivers of TPLF in liability litigation: medical expenses. ChronovoCare is the first 3-in-1 medical savings card that harnesses industry discounts for the average consumer, injured or not. What we call SmartSavings3 can dramatically decrease the costs of three major kinds of major medical expenses before and after a liability claim is resolved and provide:
- As much as 80% off prescription drug prices at 35,000 pharmacies nationwide
- Up to 60% off surgeries, procedures and rehab services with any doctor, hospital or facility
- An average of 49% off medical equipment, supplies, tests, treatments and therapies
ChronovoCare combines significant savings on the widest range of healthcare services with unfettered choice for the injured individual. It is entirely free. There are no membership fees, no minimums, no requirements. There are also no hidden costs, conflicts of interest, mark-ups, high interest rates, or requirements.
We designed ChronovoCare to be simple to use, entirely secure and completely confidential. It can be provided with advance by the carrier to reduce medical costs for the benefit of all parties to avoid the need for a TPLF in the first place. ChronovoCare can also be included with a TPLF to maximize the value of every dollar—borrowed or otherwise. In addition, ChronovoCare can be a free, goodwill gesture from the defense or an assist from plaintiff counsel at the outset of the claim as a practical way to pay for medical expenses while the claim is pending. In any case, it can help lower the cost of just about any kind of medical need without costing anyone a penny.
So, whether you are an injured individual, a plaintiff’s counsel concerned about your client’s medical expenses, or a claims professional or defense counsel seeking a way to assist a plaintiff with medical expenses while a claim is pending or afterward, ChronovoCare can help.
Learn more at Chronovo.care
1 Oxman, Matthew and Yancy, Allen. “How COVID-19 Will Shape Litigation Funding: The Short-Term Effects.” Law.com: April 24, 2020.
2 Rickard, Lisa. “Why are Hedge Funds Allowed to Invest in Litigation.” The Atlantic: July 3, 2012.
3 ML Healthcare Services LLC v. Publix Supermarkets, Inc., 881 F3d 1293 (11th Cir, 2018) (applying federal rules on the admissibility of TPLF at a trial).
4 Miemiec, Norris, Pappalardo, and Schwartz. “Litigation Funding Agreements—Legality, Admissibility & Evidentiary Concerns.” Themis Annual Meeting Presentation: February 26, 2020.
