Third-Party Litigation Funding
What this clause says
The claimant has entered into a funding agreement under which a third party advances the cost of prosecuting the claim in exchange for a share of any recovery, on a non-recourse basis.
What this actually means
Litigation funding is outside capital advanced to a plaintiff or a plaintiff firm to carry a case, repaid from the recovery. The funder takes the risk of losing, which removes the cash flow pressure that historically pushed plaintiff firms toward early settlement.
What it means for an operator
It changes the defense calculus in two ways. A funded case can refuse a reasonable early settlement and run longer, which raises both the eventual settlement value and the defense cost of the cases that do resolve. And it makes the strategy of outlasting a plaintiff firm ineffective, which was never a good strategy but was sometimes a real one. Both effects are worse on a policy where defense erodes the limit, since the money spent outlasting a funded opponent is money removed from what is available to settle. Disclosure of funding arrangements varies by jurisdiction and by court, and where it can be obtained it is worth knowing early because it tells you what kind of negotiation you are in.
Why the Policy Checker does not score this
This term is worth understanding and cannot be checked from a declarations page. There is no single field that would answer it, and scoring it from an assumption would produce a confident wrong finding, which is the one thing a tool like this must never do. It is defined here and left out of the check.
See this in your policy
Check this term against your own program.
Run the Policy CheckerRelated clauses
Common questions about this clause
- Do defense costs count against the limit on a senior care liability policy?
- What is a hammer clause and why does it matter in senior care?
- Should we switch from claims-made to occurrence coverage?
- How do we choose the right retention on a senior care program?
- Do defense costs erode my self-insured retention?