Supporting Justice with Financial Assistance
Why Should Having Time and Money Be as Important as
Having the Facts and Law On Your Side?
Written by Thomas G. Brown – President, Necessity Funding Partners, LLC
Is it fair that the financial circumstances of personal injury victims can often cause them to settle for peanuts instead of receiving the compensation they deserve? For most trial attorneys, this question is a familiar one. Non-recourse personal injury legal funding companies are facing the same criticisms that were leveled against trial attorneys when they sought to take on contingency fee arrangements. Protectors of the status quo claim that non-recourse injury personal injury legal funding companies profit from the misfortunes of the downtrodden.
Contingency fees remove some of the financial inequities in the legal system, but affording solid legal advice is only one of the challenges personal injury victims face. Injured victims must also have the ability to sustain themselves and their families during their lawsuits. Justice is not served when injured victims have to choose between low-ball settlements or forgoing life’s essentials such a food, rent, and clothing. Non-recourse personal injury Lawsuit Cash Advances provide a solution that levels the playing field by taking the financial advantage away from the insurers.
So why do some attorneys and paralegals express concern with non-recourse legal funding companies? There is no denying that some injured victims need interim financial assistance. Some legal experts believe that approximately 30% of all injured victims need interim financial assistance. This statistic is substantiated by hundreds of millions of dollars in funding requests from injured victims over the past five years.
The two most common criticisms cited by attorneys and paralegals of non-recourse Lawsuit Cash Advances are the cost and administration of these advances. These transactions are more expensive than bank lending rates. Legal funding companies claim the higher rates result from the high cost of borrowing money and the uncertainty of timing and cash flow (repayment typically occurs two years later or more, if at all). Legal funding companies typically turn to private and hedge fund capital firms which demand returns of 10 to 25% per annum.
The benefits of financial assistance to plaintiffs are numerous. Injured victims need money to alleviate financial pressure. Both trial attorneys and injured victims benefit from an increased likelihood of fair and just settlements. It is common for injured victims to receive settlements of 200 to 300% more than the initial settlement offers made by insurers by simply withstanding the insurers’ delays. When all of these benefits are considered, the costs of Lawsuit Cash Advances are relatively inexpensive.
Many attorneys and paralegals have the perception that there is nothing in it for them, outside of more administration. Despite this perception, attorneys and paralegals are forging relationships with personal injury legal funding companies, like Necessity Funding. Why would this be? These attorney and paralegals appreciate the difficulties of negotiating for a client under financial duress. Attorneys and paralegals also realize that the small amount of administration required up front greatly enhances the attorney/client relationship as well as file retention. It is commonplace that these clients require constant handholding, updating, and guidance separate from legal advice on their cases. These attorneys and paralegals recognize that assisting their clients in times of financial crisis can eliminate much of the burden clients place on them.
In the past, many attorneys assisted clients by paying their rent or helping them with their bills, etc. While primarily done for compassionate reasons, attorneys recognized that the client goodwill they established directly correlated to an increased likelihood of retaining the file. Professional conduct rules restrict the practice of attorneys providing financial assistance to their clients. Consequently many attorneys and paralegals have sought a relationship with non-recourse legal funding companies to assist their clients and to increase file retention.
There are and always will be unscrupulous financiers associated with legal funding companies, just like there are unscrupulous attorneys. For this reason, it is important that attorneys and paralegals work with their clients to identify trustworthy and professional legal funding companies. These legal funding companies must underwrite conservatively (do not over lend), not interfere in any way with the lawsuit, must disclose clear and concise terms and conditions, and provide convenient service.