APCIA Annual Conference 2024: The Damaging Impact of Third-Party Litigation Funding – IA Magazine

Picture a crowded ballroom in Chicago: insurance leaders swapping catastrophe stories, policy wonks talking elections,
and lawyers doing what lawyers doturning everyday nouns into verb phrases. Then someone brings up
third-party litigation funding (TPLF), and the room gets that “oh no, not that topic” energy.
Because TPLF isn’t just a legal trend; it’s a financial product that can change how lawsuits are filed, fought, and settled
and it can ripple all the way into claims costs, underwriting, and premium affordability.

At the APCIA Annual Conference 2024, a panel of legal and policy voices described TPLF as a growing force
that makes the civil justice system less transparentand, in their view, more expensive. Independent Agent’s IA Magazine
captured the panel’s message with a blunt headline: the damaging impact of litigation funding. Let’s unpack what was said,
why it matters, and what agents, risk managers, and policyholders should watch next.

What the APCIA 2024 panel warned about

1) The transparency problem: “Who’s actually behind this lawsuit?”

The panel’s core complaint was simple: in many cases, nobody outside the funding arrangement knows who is financing
the litigation or what the funder’s rights are. That’s not a minor paperwork annoyance. If a judge can’t see
the economic players behind a case, it’s harder to spot potential conflicts of interest, assess discovery disputes,
or understand whether settlement decisions are being influenced by someone who isn’t even at counsel table.

The panel also raised a more uncomfortable angle: foreign funding. When capital can originate anywhereand the details
are often undisclosedconcerns pop up about strategic lawsuits, leverage over U.S. companies, and the exposure of confidential
information through litigation.

2) The “commercialization” critique: lawsuits as an investment product

Traditionally, a lawsuit is supposed to be a remedy: a way to make an injured party whole (or at least less un-whole).
The panel argued that TPLF can shift that purpose by injecting investors whose goal is return on capital. Think of it as
“Wall Street meets civil procedure,” except the pitch deck includes words like “interrogatories.”

That commercialization matters in insurance because the economics of litigation can shape behavior:
more cases filed, higher demands, longer timelines, and a greater appetite for “swing for the fences” trial strategies.
Even when insurers do everything “right,” a case can become costlier because the funding model rewards persistence and scale.

3) Settlement dynamics: when “yes” isn’t the plaintiff’s final answer

One of the most practical worries raised: some funding arrangements may give a funder influencesometimes heavy influenceover
settlement decisions. If a funder believes a case could produce a larger payout at trial, a reasonable settlement might be
rejected to chase a bigger number later. That can extend litigation, increase defense costs, and elevate the risk of an outsized verdict.

In plain English: if the party writing the check wants to roll the dice longer, the lawsuit can start to feel less like
“resolve a dispute” and more like “season finale.”

4) The plaintiff’s net recovery: the quiet math nobody puts on the billboard

Another point highlighted was what happens to the dollars after a funded case resolves. Between attorney fees, costs,
medical liens, and funder repayment, the claimant may receive far less than the headline number. The panel framed this as an ethical
and consumer-protection issue: juries may award damages expecting the plaintiff receives the bulk, while the reality can be very different.

Third-party litigation funding 101

What it is (and what it isn’t)

Third-party litigation funding generally means an outside entity provides money to a litigant or a law firm for litigation expenses
in exchange for a portion of a recovery. It’s often described as “non-recourse,” meaning if the case loses, the funder may not be repaid.
That’s why funders care intensely about case selection, projected damages, and time-to-resolution.

TPLF is not automatically shady or illegal. But it is frequently opaque, and the disputes are usually about transparency, control,
and downstream costsnot about whether anybody is allowed to finance anything, ever.

Why it’s grown

The growth story is partly market logic. Lawsuits can behave like financial assets: uncertain outcomes, potentially large returns,
and a time horizon that can fit certain investors. Funding can also help plaintiffs cover costs or help law firms smooth cash flow,
especially in complex litigation that requires experts, discovery, and years of work.

On the pro-TPLF side, supporters frame it as expanding access to justicehelping parties with valid claims afford a fair fight.
On the skeptical side, critics argue the model can encourage more litigation and inflate settlement values, especially when
funding is used strategically across portfolios of cases.

Why the insurance industry feels the impact first (and the public feels it later)

Social inflation: when claim costs rise faster than traditional inflation

Insurers often describe rising claim severity from litigation trends as part of “social inflation”a catch-all for legal and social factors
that push claim costs upward (including attorney tactics, jury expectations, broader definitions of liability, and large verdicts).
TPLF is frequently discussed as a contributor because it can increase resources on the plaintiff side, extend litigation,
and raise the stakes of settlement negotiations.

Nuclear verdict risk and the “long-tail” effect

Certain linescommercial auto, general liability, product liability, medical liabilitycan be especially sensitive.
If litigation becomes more prolonged and more expensive, insurers may respond with tighter underwriting, higher rates,
or reduced capacity. And because many liability claims are “long-tail,” the pricing impact can show up years after the
legal trend begins.

Discovery and confidentiality: the hidden business cost

A unique part of the APCIA panel discussion was the focus on intellectual property and confidentiality.
Litigation involves document production; document production can include sensitive commercial information.
When a third party is financing (and potentially influencing) the case, companies worry about how confidential information is handled,
who ultimately benefits from it, and whether litigation becomes a channel for competitive intelligence.

Even if courts issue protective orders, the process can be costly and risky. For insured businesses, it’s not just about the verdict;
it can be about business disruption, legal spend, and the “I can’t believe we had to produce that” factor.

The policy and regulatory response: disclosure, guardrails, and a lot of debate

Federal transparency proposals

One approach gaining traction is disclosure: requiring parties to reveal whether a funder has a financial interest in the case
and to provide funding agreements to the court (and, depending on the proposal, to other parties).
Supporters argue this helps judges identify conflicts, manage discovery, and ensure fair settlement oversight.

The political reality is messy. Transparency bills have been introduced, debated, and reintroduced in different formsoften with
bipartisan interest, but also with bipartisan resistance depending on how broad the disclosure requirement is and how it would be implemented.

State action: a patchwork is forming

At the state level, some jurisdictions have adopted rules targeting concerns such as foreign influence, funder control over litigation decisions,
or disclosure under certain circumstances. For insurers and insureds operating across multiple states, that means compliance and strategy
may vary by venueyet another reason legal trend monitoring is no longer optional.

Court rules and discovery fights

Even without sweeping legislation, courts canand sometimes dorequire disclosure in certain case types or under specific orders.
As a result, parties may fight about whether funding agreements are discoverable, whether they contain privileged material,
and how disclosure could affect litigation strategy.

Translation: it’s not just “Is there funding?” It’s “Does anyone have to tell anyone else?” and “When?” and “To whom?”

The other side: what TPLF supporters say (and why the argument isn’t going away)

Access to justice and leveling the playing field

Supporters argue that litigation is expensive and powerful defendants often have resources plaintiffs don’t.
Funding can allow meritorious claims to proceedespecially for small businesses, inventors, or individuals who cannot afford
years of fees and experts. In that framing, TPLF is less “lawsuit casino” and more “bridge financing for fairness.”

Concerns about weaponized disclosure

Another frequent argument: forced disclosure could be used strategically by opponents. If a defendant knows a plaintiff is funded,
they might assume a case is “big,” push harder on procedural delays, or seek to intimidate funders out of the market.
Funding details could also reveal litigation strategy or sensitive financial relationships.

Where compromise might live

If you want a realistic middle path, it likely includes:

• Confidential disclosure to the judge (not necessarily public posting of every detail)
• Conflict checks and recusal safeguards so judges can identify financial entanglements
• Limits on funder control over settlement decisions and case direction
• Consumer protections so plaintiffs understand the cost of funding and the effect on net recovery
• Targeted national security measures where foreign funding creates heightened risk

What independent agents, insureds, and risk teams can do right now

Talk about litigation trends without turning the renewal meeting into a law school seminar

Agents don’t need to cite statutes to have a useful conversation. A simple framing works:
“Some lawsuits are taking longer and costing more, and that can affect premiums and capacityespecially in liability lines.”
Then pivot to what the client controls.

Strengthen documentation and early-incident practices

Many expensive claims get more expensive because the record is messy. Encourage insureds to improve:

• incident reporting timelines and internal escalation
• camera retention policies (where appropriate and lawful)
• vendor contracts, indemnity clauses, and certificate tracking
• safety programs and training documentation
• consistent claim communication channels to avoid “he said, she said” spirals

Review limits and the structure of protection

In an environment where high-severity outcomes feel more plausible, clients may need a fresh look at umbrella and excess limits,
retentions, and exclusions. The right answer depends on the business, but the wrong answer is pretending the legal environment
hasn’t changed.

Looking ahead: what to watch after APCIA 2024

The APCIA panel wasn’t simply venting; it was signaling a policy agenda: more transparency and tighter guardrails.
Whether federal law advances quickly is uncertain, but the direction of travel is clearstate experimentation, court-level disclosure fights,
and continued lobbying from both critics and supporters.

For insurance professionals, this is the practical takeaway: TPLF isn’t a niche debate anymore. It’s part of the broader litigation
and social inflation conversationand it can influence underwriting assumptions, claim valuations, and even how quickly cases resolve.

From the Front Lines: 5 “Been-There” Experiences That Make the TPLF Conversation Real (About )

The most helpful way to understand third-party litigation funding is to stop thinking of it as an abstract policy issue and start thinking
about what it does to behavior. The stories below are composite scenarios drawn from common themes described by insurers,
risk professionals, and legal commentatorsshared here to show how TPLF can change the rhythm of a claim, not to accuse any one case of anything.

Experience #1: “This claim used to settle in monthsnow it’s a year-long mini-series.”

An adjuster sees a routine premises claim: moderate injury allegations, some disputed facts, and a realistic settlement range.
But the case doesn’t behave like it used to. Demands are higher, the posture is more aggressive, and there’s less interest in early resolution.
The defense counsel reports that the plaintiff side has funding for multiple experts and extensive discovery.
Whether or not funding is confirmed, the effect is familiar: longer timelines, more motion practice, and higher allocated loss adjustment expense.

Experience #2: “The settlement offer was reasonablebut someone kept saying no.”

A risk manager expects the typical arc: negotiation, mediation, and a settlement that avoids trial uncertainty.
Instead, every time it seems close, the answer turns into “not yet.” The insured business feels stuck: legal costs rise, leadership time drains,
and reputational risk grows. The suspicion is that someone behind the scenes is targeting a bigger payout. Even without proof,
the case illustrates why insurers worry about settlement control and the incentive to hold out.

Experience #3: “Discovery became the battlefieldespecially for sensitive business information.”

A technology-adjacent company faces litigation that requires producing internal documents. The legal team spends enormous effort
on protective orders, confidentiality designations, and narrow productions. The business frustration isn’t only the legal bill;
it’s the feeling of being forced to expose the company’s “how we do it” playbook. When a funded case is on the other side,
the anxiety can spike: “Who benefits from these documents?” Even if everyone follows rules, the perceived risk changes the company’s posture.

Experience #4: “Premium increases became harder to explainuntil we talked about the legal environment.”

An independent agent walks into a renewal meeting expecting the usual: inflation, rebuild costs, maybe a loss history conversation.
Instead, the client’s biggest shock is the liability pricing and the tightening terms. The agent explains, carefully:
some claims are getting more expensive because the cost of resolving lawsuits has risendriven by attorney strategies, jury expectations,
and litigation financing trends. The meeting improves when the conversation shifts from blame to strategy: risk controls, incident documentation,
and smarter coverage design.

Experience #5: “Even when we win, we don’t really ‘win.’”

A case resolves with a defense verdict or a modest outcometechnically a success. But the insured still spent months in depositions,
produced thousands of pages of documents, and paid significant defense costs. This is where the TPLF debate becomes visceral:
critics argue funding can make marginal cases more viable to pursue, while supporters argue it enables valid claims to be heard.
Either way, insurance professionals recognize the operational truth: the process itself can be punishing, and the economics of litigation
matter almost as much as the final number.

These experiences explain why APCIA’s panel framed TPLF as a system-level issue, not a one-off trend. The debate will continue
but the day-to-day impact is already visible in claim handling, defense strategy, and the “why did renewal get so expensive?” conversations.

Conclusion: Transparency is the real battleground

The APCIA Annual Conference 2024 panel messageamplified by IA Magazinewasn’t subtle: third-party litigation funding can reshape incentives,
reduce transparency, and increase costs that ultimately land on businesses and policyholders. At the same time, supporters argue
it can expand access to justice and help legitimate claims compete against better-resourced opponents.

The practical center of gravity is transparency and guardrails. If judges can identify conflicts, limit improper control,
protect sensitive information, and ensure plaintiffs understand the economics, the system can preserve fairness without turning litigation
into a black-box investment vehicle.

In the meantime, insurance professionals can’t wait for perfect policy. Build better risk controls, document incidents like they’ll be
read aloud in court (because they might), and treat litigation trends as a real underwriting variablenot a footnote.