Personal injury Law and legal funding

Lawsuit Funding – the truth behind the BUSINESS

Often times personal injury lawyers are asked about “legal funding” I wanted to go over a few points about legal funding so more people can be educated.  Say you were in a car accident, and maybe your attorney is reasonable certain there will be a settlement at some point, you may opt to borrow some of the money before the case is final.

Car accident Clearwater

Legal funding, or as they are now known all over America ‘Lawsuit funding’ started to spread its wing in 1997. It is relatively a new ‘industry’ but one that has already garnered much attention due to its ‘controversial’ nature. Voicing one’s opinion about it is not easy as there are two sides involved, one that is made up of industry members, lobbyists the ‘pro’ side and the other made up of insurance companies, legislatures and finance experts the ‘con’ side. Depending on what views you have regarding this nascent industry and its ‘products’, you are sure to incur the wrath of one of the sides. In recent times, numerous bills have been filed in the state legislature for ‘regulating’ this industry. With the help of this article, we would like to share our perspective on this industry its different aspects and even on whether it needs to be regulated.

Lawsuit funding is basically ‘cash advances’ offered to plaintiffs and / or attorneys which are provided with a ‘promise’ to be repaid once the case settles or a favorable verdict is reached in court. They are termed as ‘funding’ instead of ‘loan’ for a reason, as they are ‘non-recourse’, meaning the borrower (plaintiff) does not need to pay back the loans if the case is not settled or an unfavorable verdict is reached. Moreover, the companies themselves don’t want to term the products as loans, the reason for it we will discuss later in this article.

Currently, the total business done by major players in the Lawsuit funding industry is over $100 million each year. The business is still in nascent stages and the companies involved in lawsuit funding, find it a lucrative field with chances of exponential growth in the coming years. Why is there so much hoopla over it and why it’s such an attractive field that new entrants are entering the business almost every week, these questions can only be answered once one knows how the business works.

How it works

Lawsuit funding companies advertise about their products / services with campaigns like “Need cash now? Get a cash advance for your pending lawsuit”. A plaintiff sees these advertisements and approaches the company. The company asks the plaintiff or in most cases the attorneys representing the plaintiff about the case details. Once the documents are submits, they evaluate the merits of the case and hand over the money to the plaintiff if they find the case ‘suitable’. The pre settlement funding advances can be anywhere between $500 to over $100,000 depending on the nature of the case and what the funding company estimates the value of the eventual settlement or verdict

The lawsuit funding company charges an interest per month, over the amount it has advanced but rather than saying ‘interest charged’ they prefer using the term ‘fee charged’ and call it ‘monthly fee’.

If the case is settled or the plaintiffs is awarded damages he / she needs to pay back the amount (principal) given as advance along with the cumulative ‘monthly fee’. If the plaintiff loses the case he / she owe the funding company nothing.

The ‘don’t pay if you lose’ nature of the funding is what attracts plaintiffs to apply for these type of funding and also works as a great PR tool for the funding companies.

NOTE – The State of Florida and the Florida bar association prohibits its members from getting involved in any process of evaluation by a Lawsuit funding company. (We think this this is a good policy for personal injury lawyers

 Monthly Fee (Interest rate)

This is where the problem and ‘controversial’ nature of the business lies. The average interest rate (what is termed as monthly fee) charged by the leading industry players is in between 2.5%- 5% P.M. At times, it can be as high as 15% P.M.!

Let’s look at it in a detailed financial perspective –

Suppose a plaintiff gets a funding of $10,000 for his /her case from the funding company at an interest rate of 3.5% P.M.

If he eventually gets a settlement or is awarded the damages claimed, this is what he / she will owe the company –

After 1 year- $15,639

After 2 years – $23, 632

After 3 years – $36,960

That means if somehow the case drags on for 3 years, which is likely in a lot of cases, the plaintiff will owe nearly 4 times the amount he borrowed. This is when we chose an interest rate below the median of what the industry charges; sometimes the interest rates are as high as 100% a year.

This is the perhaps the most significant reason why the lawsuit funding industry doesn’t terms its products as Loans and instead terms it as ‘advances’, as soon as you tell someone that you are providing them a loan, the first question they ask is – what is the interest being charged? What better way to conceal the information than selling the product under a different name.

The other significant reason for not calling the products as loan is to avoid falling under the usury laws. The usury laws arethe laws which prohibit a business entity or individual from charging excessive rates for the loans offered.

 

The funding companies project their ‘cause’ as helping the plaintiffs when they are in dire straits. They offer reasoning that if they will not offer their services the plaintiffs will be compelled to take lower value settlements as due to their financial condition, they won’t be able to fight their cases for a long time. The question to be asked is – don’t all types of predatory loan providers prey on distressed borrowers?

Regulations

Personal injury law

Currently, there are no regulatory authorities who govern the conduct and practices of this type of funding companies. Unlike other financial institutions which have fiduciary duties toward their clients, the lawsuit funding companies don’t come under any rule of law in terms of how they conduct their business or what interest rate they charge etc. It seems like the companies themselves don’t want to be regulated and are trying to avoid regulations. What else can explain the refusal to use the term ‘loan’ and advertising non-recourse funding, if not to avoid the regulatory authorities?

Conclusion

We agree that at times a plaintiff has to go through daunting financial times, especially plaintiffs of personal injury cases and at those times they need immediate money but that should not be a reason for a company or an organization to take advantage of. We don’t dispute the fact that in some cases getting a funding like this can really help but being attorneys ourselves we know law is not all that simple. One cannot ‘estimate’ anything when a case is sub judice and it affects the client-attorney relationship when a client starts estimating about monetary compensation he/she will be awarded.

Additionally, we will advise plaintiffs to make use of lawsuit funding only when they have exhausted all other options available to them. It can be a really painful experience when after fighting for long, when a judgment is declared and compensation is awarded, most of it goes in paying the funding and in such circumstances instead of questioning the reasoning behind taking such funding in the first place, most plaintiffs complain that the attorney or law firm representing them couldn’t get a ‘fair’ compensation awarded to them.

If you have any questions about your personal injury case feel free to email or call me.

Advocating for the average person in the personal injury field

Advocating for the average person in the personal injury field

[Mark Perenich & the Perenich Caufield Avril Noyes team]

Apart from being a law firm that has fought for and represented victims in Florida, since past many decades, we are also a firm that believes in protecting the rights of the citizens of Florida wherever they are being neglected or harmed. There are various issues for which reforms are needed and we, not only as Lawyers but also as common citizens support them.

Bodily Injury Liability Protectioncar accident

It’s hard to believe but Florida is among the only two states in the country with no ‘Bodily Injury Liability Protection’. Currently financial responsibility that needs to be demonstrated by vehicle owners of private passenger cars is fulfilled by only two ‘Protections’, namely – Property damage liability protection & Personal Injury Protection. It is not required under law for a private passenger car owner to have Bodily injury liability protection i.e. if someone gets seriously injured due to their vehicle, the driver of the vehicle does not need to have Insurance for paying the compensation and other costs to the seriously injured victim.

We support the Financial Responsibility Legislation, which will make the present self-insurance requirements more secure and will require a private passenger car owner to have a minimum Bodily injury liability protection of $25,000 per person or $50,000 per incident. This legislation will help in reducing the insurance premiums paid by financially responsible car owners and will go on in ensuring that the taxpayers of Florida and the Trauma centers operating in the state of Florida save millions over the years.

Bad Faith Protection

When policyholders pay their premiums to insurance companies for liability policies, they are doing so to ensure that their business does not face a crisis or goes bankrupt if their business becomes liable to someone. Sometimes, the insurance companies fail to inform the policyholder regarding settlement in a case or simply refuse to accept reasonable settlements; basically they act in bad faith even though the laws in Florida require them to act in good faith to their policy holders.

We are against the bad faith that the Insurance companies demonstrate and also against the Insurance companies who do so. If the Insurance companies are allowed to evade their responsibility, it will possess a significant risk to businesses of Florida as businesses can face excess judgments because the Insurance companies didn’t do their Job properly or acted in bad faith.

Protection of Best Interest of Children Having Birth Related Neurological Injury

In 1988 Florida Legislature created NICA or (The Florida Birth-Related) Neurological Injury Compensation Association. It was created to provide benefits to children who had sustained a spinal cord or brain injury caused by mechanical injury or oxygen deprivation during labor, delivery, or in the immediate post-delivery period. The program was also created to avert an Insurance crisis being faced by Doctors and healthcare establishments practicing Obstetrics and as a mean to provide compensation on ‘no-fault’ basis to the class of children who suffered a significant Neurological Injury due to the reasons mentioned above and left the children “permanently and substantially mentally and physically impaired.”

The Florida Legislature had enacted Sections 766.301-766.316, Florida Statutes, to create NICA as a benefit program but today most of the executive staff and ‘board members’ in NICA are representatives from Healthcare and Insurance industries and not people from the affected families.

Needless to say, a conflict of interest exists between people who sit on NICA’s board and the people whose children suffer from birth related Neurological Injury, which can be seen from the numerous litigations in the past among the two parties who have now become ‘adversaries’.

We support the legislation that incorporates changes to the statues that govern NICA and make it a body that goes on to deliver on the promises it intended to and for which it was originally created.

Against the proposed curbs and limitations on Medical Payments

Doctor

A victim who has been injured has all the rights to seek the best medical care possible but a bill was filed in 2013 according to which in a trial a jury will assess and grant past and future medical expense in cases of wrongful death and personal injury.

We are against the bill as the provisions in it are already fulfilled, Sections 501.1(a) and (b), Florida Standard Jury Instructions, state “you should award claimant an amount of money that the greater weight of the evidence shows will fairly and adequately compensate him/her for his/her loss, injury or damage, including any damage claimant is reasonably certain to have/experience in the future…” and section 501.2(b) states that a jury is to award, “the reasonable value or expense of hospitalization and medical and nursing care and treatment necessarily or reasonably obtained by claimant in the past or to be so obtained in the future.”

The only thing this bill will do is increase the cost of litigations especially for the plaintiffs who will have to bear additional expenses to get properly compensated for the medical expenses they bore and/or will bear in future.

 Mark Perenich is a personal injury lawyer in Clearwater please call him if you would like to know more about your case 727-386-9677

How much does it cost to hire a Personal Injury Attorney (Clearwater Florida)

How much does it cost to hire a Personal Injury Attorney in Florida

 

An attorney or Law firm charge fees for the Legal services either on a per hour basis or Contingent fee basis, though some also charge a ‘fixed’ fees. Most of the attorneys or Law firms who handle personal injury, medical malpractice or workers compensation cases work on a Contingent fee basis.

 What is Contingent fee?

It is an arrangement between a client and the attorney (or law firm) who will be legally representing the client, in which the client agrees to pay a pre-decided fixed share (percentage) of damages awarded to the client if the result of the litigation is in favor of the client.

The Contingency fee agreement has to be signed by the attorney (or law firm) and the client they are going to represent, prior to taking up the case. The percentage of the recovery to be kept by the attorney (or law firm), the costs that will be deducted from the recovery and in what ways will they be deducted, all of this needs to be stated in the agreement.

Normally, no fee or expenses incurred in the suit is paid in advanced by the client, if the attorney (or law firm) works on contingent fee basis. (Some attorneys or law firms might charge for the costs associated with the case like medical reports, filing fee etc., even if working on contingent fee basis)

There are certain Rules of Conduct prescribed by the Florida Bar, which includes the rules for charging fees and costs for Legal services. The rules contain certain limitations that the Florid Bar imposes on charging Contingent fee in cases of Personal Injury, Medical Malpractice (keep in mind medical malpractice caps) and other tort cases.

Limitations

  • 33.33% of any recovery till $1 million – If the case is settled prior to filing of an answer or demand for appointment of arbitrators or if a lawsuit has already been filed, as late as the time till defense files an answer or makes a demand for appointment of arbitrators.
  • 40% of any recover till $1 million – If the case is settled after the lawsuit has been filed and the defense has filed an answer or makes a demand of appointment of arbitrators or, if neither has an answer been filed nor demand for appointment of arbitrators is made, the expiration of the time period provided for such action, through the entry of judgment. Keep in mind, that your attorney will ask for your approval when filing suit.
  • 30% of any recovery between $1-2million (In the first two scenarios) – If the case is settled, or a favorable verdict is reached in trial.
  • 20% of any recovery above $2 million (In the first two scenarios) – If the case is settled, or a favorable verdict is reached in trial.
  • 33.33% any recovery till $1 million, 20% of recovery between $1-2 million and 15% of  recovery above $2 million – If liability is admitted at the time of filing answers and the case goes on trial only for deciding on the damages.
  • 5% additional on any recovery– If the case is appealed / requirement of action for recovery of the Judgment / Post-Judgment Relief.

Charging fee above the standard is considered to be ‘excessive’. However, if a client wishes to pay a greater fee, they can approach the court before filing the case or during filing their case for removal of the fee limitation.

Additional Limitations for Medical Malpractice Cases

There are additional limitations placed on how much a Lawyer can charge for medical malpractice cases by Article I, section 26 of the Florida Constitution.

  • Victims of Medical Malpractice are entitled to no less than 70% of first $250,000 in damages ( excluding the costs )
  • Victims of Medical Malpractice are entitled to 90%  of all damages above $ 2,50,000 (excluding the costs)

If an attorney is representing a client of Medical Malpractice, he is bound by the rules of conduct to first furnish a copy of the constitution’s fee limitations, before taking up the case. In addition to this an attorney is required to inform the client that these limitations will be in effect, till the client waives the constitutional limitation of Medical Malpractice fee and the attorney should also advise the client that they can consult with other attorney(s) before waiving the right or can also ask for a hearing before a judge for explaining the waiver.

If the client opts for waiving the constitutional right, the client is entitled to receive a detailed waiver form from the attorney.

Fee Division

If a personal injury or property damage (resulting from wrongful conduct) case is being handled by two attorneys, then the attorney with primary responsibility is entitled to no less than 75% of the total fee while the attorney with secondary responsibility is entitled to no more than 25% of the total fee.  In a case where both the attorneys take equal responsibility of the case, the court will decide on how the fee will be split.

When a case of a client ends, an attorney is required to furnish itemized bill of the costs and expenses incurred in the particular case and if the case has been won then the fee too. The client needs to sign the bill statement along with all the attorneys who represented the client in the case.

Points to remember –

  • It is not always possible for a lawyer to give you a complete estimate while taking up your case.
  • The associated costs involved in a case are uncontrollable as they depend on a variety of factors.  Extra costs may be necessary to get your case settled or to trial.
  • Some attorneys charge a ‘retainer’ or ‘advance’  for costs involved even though they might be working on Contingent fee basis, these ‘retainer’ or ‘advance’ can be refundable or non-refundable.

When hiring an attorney you should first meet them and get to know how they work.  It is important to establish a relationship with them, because they will be taking case of an aspect of your life for a few months to years.  If you’d like to know more about attorneys fees, or if you have been involved in an car accident please call mark today 727-386-9677 or go to www.1forjustice.com