The Rise of Litigation Funding
Insurance, Art Kirkner

The Rise of Litigation Funding

The Litigation Funding Industry’s Rise and Impact on the Specialized Transportation Industry

By Art Kirkner, VP of Claims

People in the specialized transportation industry know that it is unfortunately becoming increasingly litigious. Nuclear verdicts are increasing in frequency, and new tactics like the reptile theory are forcing trucking companies of all types to shore up their safety and risk management programs. And, as investors find new ways to maximize their assets, they’ve turned to litigation funding—a low-risk, high-payoff endeavor that adds even more complexities to an already difficult environment.

Litigation funding is the act of loaning money to plaintiffs to pursue litigation against large companies. By providing plaintiffs with low-risk financing to cover legal fees and living expenses, investors hoping to cash in on large settlements and nuclear verdicts ultimately fund the very types of lawsuits causing news headlines in a variety of sectors.  

It’s important to stay informed on this booming industry that has major effects on the legal landscape. In this post, we’ll discuss the current state of litigation funding, what it means for specialized transportation companies, and how to prepare for the rare catastrophic lawsuit.

A Growing Industry—and Rising Trend

Since emerging in the 1990s, the litigation funding industry has grown into a multi-billion-dollar industry. Between 2013 and 2017, litigation funding expanded 414%, according to Burford Capital.

Third-party lenders make litigation more affordable for incident victims and encourage them to hold out for longer trials and larger settlements. Data compiled by the American Transportation Research Institute shows that lawsuits targeting trucking have increased exponentially in both the volume of cases and the size of verdicts. As more lenders continue to invest in litigation, more victims are empowered to seek large verdict awards.

The Tripartite System

By backing a significant injury claim with the potential for a large verdict, investors stand to make a large return on investment—collecting on high interest rates, management fees, and often a significant cut of the settlement. Before anyone else, the financier gets paid their part, which can range from 10 to 20 percent, according to US News & World Report.

Not only are litigation loans favorable for lenders, they’re also financially attractive for plaintiffs and attorneys. Plaintiffs who have been severely injured get an immediate windfall of cash to help cover legal fees and living expenses, with no immediate risk. In many cases, keeping even a small percentage of their settlement can be more than a plaintiff could afford to leverage on their own.

Plaintiff attorneys, on the other hand, can command high contingency fees, regardless of the outcome. On top of that, they can possibly receive a cut of the resulting settlement—a high reward for very little risk. The risk to the plaintiff attorney and the financial institution that loaned the money is that the plaintiff is not successful at trial—and is overall quite low since 90% of all trials result in a verdict for the injured plaintiff.

Litigation Funding and Specialized Transportation

Litigation funding is an ominous threat for specialized transportation companies. Eliminating the financial barrier for plaintiffs likely means a continued increase in claims and litigation. Coupled with trends in reptile theory and social inflation, it’s easy to imagine how one transportation-related incident could result in a debilitating verdict for your company.

We’re here to tell you that it’s not all doom-and-gloom. The insurance industry—and NBIS specifically—implements risk management programs to help improve driver habits and lower accident frequency. It’s easier to make upfront investments on relatively low-cost behavior modification measures such as training, telematics, and dashboard cameras than to try and withstand a nuclear verdict. When an incident inevitably occurs, tools such as NBIS Driver Insights will provide you with information to defend your drivers or settle earlier.

Remember – tactics like the reptile theory target companies who are left scrambling after an incident happens. Preparation is the best defense, and NBIS can help you with that. Reach out to us at or by calling (866) 668 – 6247.