The Impact of Insurance on the Litigation Finance Market

In a significant development for UK collective actions, the Competition Appeal Tribunal (CAT) has granted a Collective Proceedings Order (CPO) in the landmark case Spottiswoode v Airwave Solutions & Motorola. The case—brought by Clare Spottiswoode CBE—accuses Motorola of abusing its dominant position in the UK's emergency services network by charging excessive prices through its Airwave network, which the Home Office claims resulted in £1.1 billion in overcharges to UK taxpayers.
According to iclg, the class action is being funded by the UK Home Office itself, which is also the complainant in an associated CMA enforcement action. In its judgment, the CAT concluded that Spottiswoode is an appropriate class representative, and that the claim—which covers a proposed class of over 100,000 public service bodies—is suitable for collective proceedings. The case will proceed on an opt-out basis for UK entities, with opt-in available for overseas claimants.
The Tribunal emphasized that funding by a government department does not compromise the independence of the class representative, and that the Home Office’s funding arrangement complies with legal and procedural requirements. Notably, the judgment paves the way for governmental entities to play a dual role—as both complainant and funder—in future competition-based collective actions.
This case raises fascinating implications for the legal funding industry. It challenges traditional notions of third-party funders and opens the door to more creative and strategic funding models initiated by government entities themselves, particularly in cases with broad public interest and regulatory overlap.
A notable shift is underway in the legal‑services world as institutional investors increasingly direct capital toward law‑firm ownership—particularly via the alternative business structure (ABS) model in Arizona.
According to a recent article in Bloomberg, large asset managers and venture‑capital firms are positioning themselves to participate in legal‑services revenues in a way that diverges from traditional contingent‑fee funding of lawsuits. The piece identifies heavy hitters such as Benefit Street Partners and Crossbeam Venture Partners as recent entrants into the ABS‑enabled law‑firm ownership space. Benefit Street’s application for a new Arizona law‑firm entity lists tort litigation, IP claims and bankruptcy matters as focal areas.
The ABS pathway in Arizona has grown rapidly. In 2021, the state approved 15 ABS licences; by 2024, that number rose to 51, bringing the overall total to approximately 153. The regulatory flexibility in Arizona contrasts with the majority of U.S. jurisdictions, where non‑lawyer ownership of law firms remains prohibited or severely constrained. Meanwhile, states such as California have reacted by imposing restrictions—e.g., California's recent ban on contingency‑fee sharing with out‑of‑state ABS models.
For the legal‑funding and law‑firm investment ecosystem, this development carries multiple implications. First, it signals that investors view law‑firm ownership as a viable risk‑adjusted investment category beyond pure litigation funding. Second, it raises governance and regulatory questions around outside ownership of law firms, especially as the lines blur between funders, back‑office providers and equity owners. Finally, firms, funders and law‑firm owners may need to reassess their strategies and compliance frameworks in light of the shifting landscape of capital entry and structural innovation.
A new California law—Assembly Bill 931, signed by Governor Gavin Newsom—prohibits California‐licensed attorneys and law firms from entering into contingent‐fee sharing arrangements with out‑of‑state “alternative business structures” (ABS) or law firms owned, in whole or in part, by non‑lawyers.
According to Reuters, the law targets a key business model of mass‑tort and personal‑injury practices, where fee revenue is shared with non‑lawyer entities or firms located in jurisdictions that permit non‑lawyer ownership or alternative legal structures (such as Arizona, Utah, Puerto Rico and the District of Columbia). The law was narrowed during legislative debate to apply specifically to contingent fees rather than flat‑fee or fixed‑fee arrangements.
Under the statute, contracts beginning on or after January 1, 2026, that violate the prohibition will expose the California lawyer or law firm to minimum fines of $10,000 per infraction. The legislation expressly allows fixed‑fee sharing for specific dollar amounts and non‑lawyer involvement in back‑office or support services, but draws the line at traditional contingency‑fee tying arrangements with ABS entities.
For the litigation finance industry, this legislative shift signals a tightening of rules around fee‑sharing and ownership arrangements, particularly for cross‑jurisdictional structures that rely on non‑lawyer capital. The change may hamper integration between California‑based counsel and out‑of‑state firms that depend on contingency‐driven revenue sharing.