The impact of third-party litigation funding on businesses

Third-party lawsuit funding (TPLF) is changing how business litigation works worldwide. This way of paying for lawsuits, where someone else gives money to a person suing in exchange for part of the possible win, is becoming more common. Here’s how TPLF affects businesses in Florida.

Financial impacts on businesses

TPLF can significantly affect a business’s financial plans and risk mitigation strategies:

• More legal risks: With easier access to money, more people may sue, leading to more lawsuits for businesses.

• Higher legal costs: Businesses might need to spend more to defend against well-funded people suing them.

• Insurance costs: More lawsuits can lead to higher insurance costs as insurers adjust to cover added risks.

These financial implications need a proactive approach to risk management and legal preparedness.

Strategic concerns

Businesses must also think about changes in response to TPLF:

• Settlement dynamics: Having a funder can affect negotiations, as people suing may ask for more money, knowing they have financial backing.

• Lawsuit approach: Companies might need more substantial litigation strategies against well-funded opponents.

• Contractual protections: Businesses should update contracts to include rules about TPLF, such as required arbitration or limits on lawsuit funding.

Understanding these strategic considerations can help businesses better oversee the challenges introduced by TPLF.

Rules and laws

Florida has made rules to regulate TPLF, aiming for transparency and public protection:

• Registration and disclosure: Lawsuit funders must register with the Florida Department of State and disclose funding agreements.

• Prohibitions: Funders cannot direct the lawsuit or receive more money than the plaintiffs.

These rules help keep things fair, but businesses must stay informed about what to do.

Legal preparedness

TPLF presents businesses with challenges and opportunities. By understanding its financial, strategic and legal impacts, companies can better prepare for this growing trend.

Please contact us if you want more insights into the litigation funding market. We are here to help you understand your options and make good choices.