What is the Max Amount of Lawsuit Funding Available?
We are often asked, “what is the max amount of lawsuit funding available for my case?” In this post, we answer this question to the best of our ability, understanding full well that the answer always “depends” upon a variety of variables.
Rules about the Max Amount of Settlement Loans
There are no written rules regarding the max amount of lawsuit funding. The max amount of lawsuit funding depends on each case and expected recovery. Fair Rate Funding funds clients from $500-$500,000.
There are some factors that determine the maximum amount of a particular lawsuit loan approval. These might include:
- Type of lawsuit
- Severity of injuries or amount of damages
- Lost wage amounts
- State laws limiting amount of compensation for particular claims
Generally, the higher the projected recovery, the more lawsuit funding is available. More on this below.
The 10% Rule – Max Amount Lawsuit Funding
Lawsuit funding underwriters are employed to assess risk of loss and project the likely settlement amount of a particular lawsuit. Potential settlement values are determined by weighing certain factors including those mentioned above. When an underwriter estimates the likely settlement amount, the lawsuit funding company will then make an offer based upon that estimation.
As a general rule, lawsuit funders will limit the amount of lawsuit funding to 10% of the underwriter’s estimation on each case. For example, if a lawsuit loan underwriter estimates a case’s settlement value at $100,000, the max amount of lawsuit funding available under the 10% rule is $10,000.
The idea of the 10% ratio is to leave enough money in the case so the plaintiff will continue to pursue the matter. 10% max amount of lawsuit funding also leaves enough value in a reasonable settlement offer that a plaintiff will agree to settle prior to trial. Trials are costly for attorneys and risky for lawsuit lenders. For sure, settlement is in everyone’s best interests.
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In addition to the type of case, estimated damages and applicable laws, other factors come into play in determining the max amount of lawsuit funding available. One such factor is the strength of liability.
Consider a car wreck which occurs at an intersection where both parties claim they had a green light. Obviously, someone is mistaken and without witnesses, the lawsuit’s success depends upon which party is the most believable to a jury. In these situations, settlement value is reduced since the plaintiff’s percentage fault will reduce any jury award. Worse, if a jury finds the plaintiff had the red light, there will be no recovery at all.
In this scenario, the settlement offer will likely be lower than if there was no liability issue to resolve. Accordingly, the max amount of lawsuit funding available would be reduced as well.
Consider also a comparison between a cause of action arising 3 years ago vs. one which arose last month. In the former, the lawsuit is mature, discovery well underway and likely in the court system. In the latter, the plaintiff is still treating (personal injury case) or damages being calculated. The more recent case will likely last much longer than the older lawsuit.
Lawsuit lenders are interested in how much time will transpire between funding and recovery. Often, the company desires a quick return of and on their capital. In others instances, longer investments are sought to even out a yield curve. Thus, a lawsuit’s maturity can affect the max amount of lawsuit funding available.
There is an Easier Way
By far the easiest way to find out the max amount of lawsuit funding available for a particular case is to give us a call. While the 10% is a good rule of thumb, the max amount can vary from this number. Give us a call or contact us online to find out more. We are here to help and are at your service.
Thank you for your interest in lawsuit funding.