Maybe you have been trying to secure a lawsuit loan approval for your case but have been unable to do so. Your attorney tells you he is confident in the case and that you are going to receive a sizable award. Yet your attempts fail and you cannot understand why lawsuit funding companies are taking a pass. In this article, we examine the difference between an excellent lawsuit and an excellent lawsuit for purposes of a lawsuit loan approval. In some instances, the two are not the same thing.
Underwriting with Limited Information
Lawsuit loan approvals depend on information. We’ve written about evaluating lawsuits and the challenges lawsuit funding underwriters face. Problems are normally due to the lack of sufficient information from which to approve or deny a lawsuit loan. Of course, if all the information were available, the case would perhaps already be settled.
The point however, is that lawsuit loan underwriters deal with limited information every day and must make decisions accordingly. That is their job. The more information that is available, the easier it is for lawsuit loan underwriters to approve cases for funding.
Car Accident, Medical Malpractice and Other Cases
The underwriter must determine negligence in all personal injury lawsuit funding files. By far the most lawsuit loan approvals involve injuries sustained in motor vehicle accidents. Car accident lawsuit loans are relatively easy to underwrite because everyone on the road owes a duty of care to other drivers. With police reports and photographs, determining liability in an auto accident is relatively straight forward. Damages can be determined by the extent of the injuries and the ability to pay is discovered by uncovering available insurance policies.
Other types of lawsuits are also considered. Yet most are not as easy to underwrite as a “rear end” car accident case.
For example, medical malpractice cases can involve extensive damages and result in large verdicts. However, these cases can be very difficult to underwrite. Med Mal lawsuit loans are difficult to come by because medical malpractice cases are difficult to win. In fact, data shows that well over 50% of medical malpractice cases brought to trial are lost. Consider also many plaintiff attorneys decline to offer expert reports to lawsuit loan companies and you can see how these cases get tricky to assess. So while the case may ultimately have a settlement value in the millions, from the lawsuit funder’s perspective, the case may be just a little too risky for a lawsuit loan approval.
Likewise are cases such as wrongful termination, civil rights cases, and others. These are not as difficult to get approved as medical malpractice funding. Yet the facts still must be clear and certain. Also, there is still the problem with the access to pertinent information when the client applies for lawsuit funding. So although the premise of the cases are strong, they may not be suitable candidates for funding when the lawsuit loan approval is sought.
Liens and Their Effect on Underwriting Lawsuit Loans
Significant injuries require significant treatment. Extensive treatment usually results in massive medical bills in cases where there is no available medical coverage to pay for surgeries and other procedures. Of course, the treatment normally adds to the value of the case, but the amount of the medical bills will have to be repaid at some point (although normally at a lesser amount).
Nonetheless, the presence of medical and other lawsuit liens are considered when underwriting lawsuit loans. For example, a “million dollar injury”, but $500,000 in medical bills will not yield the plaintiff anywhere near a million dollars when all is said and done. Under these circumstances, a request for a $100,000 advance will probably not be approved for that amount. Instead, a calculation will include a lesser ratio to the Plaintiff’s ultimate recovery than would otherwise be used. So while the presence of liens may not keep a plaintiff from lawsuit funding, the approval amount may be less.
It Often Comes Down to Timing
In addition to the type of case and/or the presence of liens, underwriting lawsuit loans often comes down to the amount of information available. And that often comes down to how far along in the litigation process the case currently sits. A lawsuit that occurred years ago will likely have already complied extensive discovery including deposition testimony of key witnesses. Conversely, a claim that is only 6 months old, will rarely have enough information to make underwriting an easy endeavor for all but the most mundane, straight forward cases.
Discovery is not the only variable. In cases involving personal injury, the client may still be treating. Because the extent of medical treatment can have a significant impact on the settlement value of the case, most attorneys will wait until the client’s treatment is finished before making a demand. For purposes of funding certain large amounts, this can also be a burden.
So when clients insist they have a million dollar case, they may not be far from the truth. But the underwriting issues remain and lawsuit funding approvals and amounts are contingent on lawsuit loan professionals assessing the risk appropriately.
Thank you for your interest in lawsuit loans.