Lawsuit Loans In “No-Fault” States – An Analysis
Lawsuit loan companies receive applications for a wide variety of lawsuits. By far the most common lawsuit funding transactions involve automobile accidents. Since many of the most populated states have “no-fault” insurance laws, lawsuit loans in no-fault states represent a large amount of advances processed industry wide.
This post will discuss so called “no-fault” automobile insurance legislation and its effect on the lawsuit funding industry.
A Change In Personal Injury Law For Automobile Accidents
Decades ago, car accident lawsuits involving soft tissue injuries were plentiful. So plentiful in fact, that certain insurance interests sought tort reform because of alleged abuses.
In response, tort reform legislation was eventually passed in many jurisdictions. While specifics varied, so called “no-fault” insurance regulations mandated certain restrictions on suing negligent parties. The legislation limited the type of injuries compensable for negligence in auto accidents. In most cases, only permanent conditions as evidenced by imaging studies, fractured bones or loss of body parts, etc. could form the basis of a successful personal injury lawsuit. The trade off in most cases was that policy provisions would pay medical costs regardless of fault.
Liability in “No-Fault” States
Essentially, actions for personal injury for car accidents must meet a two pronged test in no-fault states.
- The injury must be permanent in nature and evidenced by objective medical evidence.
- The injury must have a significant negative impact on the plaintiff’s life.
First Prong -Objective Medical Evidence
The first prong of many no-fault provisions is that there must be objective medical evidence of injury.
Because many medical tests involve the testing of range of motion on patients, insurers believed the results were too easy to fake. For example, a doctor manipulates certain body parts on the patient who will then inform them when the movement is causing pain. As such, these tests are subjective in that the results are solely based on feedback from the patients themselves.
Objective tests, such as x-rays, MRI’s, CT Scans and the like do not depend on patient feedback. There is either an abnormality or there is not. There is no grey area and no room for the defense to claim the patient is faking injury. You simply cannot fake a herniated disc or broken bone. It either is or it isn’t.
Utilizing this filter removed a great deal of soft tissue lawsuits in no-fault states. Soft tissue injuries are defined as injuries in which there is an injury but there is no finding of abnormality on any objective medical tests.
For example, a plaintiff who was injured in a car accident, whose neck and back were sore because of whiplash would otherwise have a cause of action against the negligent party for damages. Without a positive finding of abnormality on an objective medical study, this plaintiff will be barred from recovery under certain no-fault tort laws.
Second Prong – Significant Impact On Plaintiff’s Life
In some jurisdictions (e.g. New Jersey), judicial decisions and/or statutes also mandate the resulting injury resulted a ‘significant’ impact on the plaintiff’s life. This issue is normally left for a jury to decide after hearing all of the evidence in the case. This includes how the accident and resulting injury negatively effects the plaintiff’s quality of life.
For example, a person who, prior to the accident, played a great deal of ‘pick-up’ basketball at the local gym, might pass this standard if after the accident was unable to play. Other examples might include a grandparent who was no longer able to play with his grandchildren or a weekend ballroom dancer being unable to dance because of the injury.
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Implication on Lawsuit Funding Applications
By design, the passing of no-fault auto insurance regulations severely limited the type of compensable injuries sustained as a result of a car accident.
As you might expect, the presence of no-fault insurance laws make injuries such as herniated discs, ligament sprains, disc bulges and soft tissue “whiplash” or similar injuries difficult to fund for lawsuit cash advance funding companies. Placing these restrictions on the negligence cases creates an additional barrier to recovery. If questions such as what is a “significant impact” on a litigant’s life is left to a jury, there is simply more risk than there would be in other “at-fault” jurisdictions. Nonetheless, many settlement loan businesses offer advances on “marginal” cases in states with no-fault insurance laws. Often, the amounts advanced or the contractual repayment provisions reflect this additional risk.
While lawsuit loans in “no-fault” states pose a unique set of challenges, lawsuit loans in no-fault states are still offered by lawsuit loan companies nationally. While no-fault statutes changed the personal injury litigation landscape, injured parties are still able to recover for damages. These statutes only changed the rules of the game, not the game itself.
Thank you for your interest in lawsuit loans in no-fault states and the lawsuit settlement funding business.