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Commercial Deals

High-Volume Claims Funding: Strategies for Efficiency and Risk Management

By Louisa Klouda |
May 13, 2024

High-Volume Claims Funding: Strategies for Efficiency and Risk Management

The following is a contributed piece by Louisa Klouda, CEO at Fenchurch Legal.

Litigation funding is a well-established concept that provides essential financial support for legal claims. While financing for high-value lawsuits is commonplace, small-ticket funding, especially at high volumes, remains a niche area.

This article explores the challenges and opportunities of funding high volumes of small-ticket claims. It outlines the strategies employed by some small-ticket litigation funders to efficiently manage these claims while ensuring investor confidence.

The Challenge of High-Volume Claims

While a single small claim might seem manageable, the sheer volume of “no win, no fee” cases can overwhelm a law firm’s financial and operational resources. Each claim demands substantial time and effort for investigation, evidence gathering, and legal representation.

Without additional funding, managing multiple cases simultaneously becomes a significant financial burden. This can limit a firm’s ability to take on new clients or dedicate sufficient resources to each claim.

Litigation funding bridges this gap by providing the resources law firms need to handle a high volume of claims effectively. Securing funding to cover the costs of these claims allows law firms to build strong processes and procedures, ultimately benefiting from economies of scale.

Strategies for Success

Firms specialising in high-volume claim funding can achieve success through a combination of technology, experienced teams, and robust processes.

  • Technology: State-of-the-art software isn’t just an advantage – it’s an imperative. It can streamline every aspect of the operations, automating repetitive tasks and facilitating efficient case vetting through rigorous risk management, ensuring efficient and reliable funding solutions.
  • Experienced Team: A knowledgeable team plays a crucial role in assessing claims, managing risk, and ensuring compliance with regulations. A team must go beyond just general experience – they should possess deep market knowledge and a nuanced understanding of the specific claim types.
  • Robust Processes: Clearly defined processes for loan approval, monitoring, and repayments are essential for maintaining transparency and accountability.

The Importance of Software

Limitations of manual processes can hinder efficiency. Software solutions can streamline the loan process, enhance risk management, and provide robust audit trails. This software should:

  • Facilitate Efficient Case Vetting: Streamline the process of assessing claims for eligibility.
  • Enhance Risk Management: Built-in safety measures can prevent errors like double-funding and identify potential risks.
  • Ensure Transparency and Accountability: Robust audit trails provide a clear picture of the funding process.

Funders like Fenchurch Legal have gone further. Recognising the limitations of off-the-shelf loan management software, they have built their own bespoke software, which serves as the backbone of their operations and enables them to manage a high volume of claims efficiently. It eliminates manual errors and incorporates built-in safety measures, such as preventing double-funded cases and cross-referencing duplicate data across the platform. This seamless approach is essential for managing drawdowns and repayments and ensuring the integrity of their funding processes.

A Streamlined Funding Process

An efficient funding process benefits both law firms and funders.  Here’s a simplified example of how it might work:

  1. Clear Eligibility Criteria: Law firms understand the types of cases that qualify for funding based on pre-agreed criteria (i.e., success rate thresholds).
  2. Batch Uploads: Law firms can easily request funding by uploading batches of cases to a secure online platform.
  3. Auditing and Approval: A sample of cases is audited to ensure they meet agreed upon terms. If approved, funding is released in a single lump sum.
  4. Monitoring and Repayment: Software facilitates seamless monitoring of the loans and the repayment status, ensuring efficient management of repayment schedules.

Managing Risk in High-Volume Funding

Risk management is vital in high-volume funding. Here are some strategies that can be employed to mitigate risk effectively:

  • Diversification: Spreading funding across different law firms and case types is a crucial strategy for mitigating risk in high-volume claim funding. It minimises overexposure and creates a well-balanced portfolio.
  • After the Event (ATE) Insurance: Provides an extra layer of protection for investments in high-volume claim funding. It specifically covers the legal costs if a funded claim is unsuccessful.
  • Rigorous Due Diligence: Thorough assessment of cases and the law firm’s capacity to handle them ensures informed decision-making.
  • Continuous Monitoring: Proactive risk identification and mitigation safeguard investments. This includes requesting regular updates and performance data from law firms.

Conclusion

By leveraging technology, team expertise, and robust processes, funders can efficiently manage high-volume small claims, presenting a compelling investment opportunity. This approach can minimise risk and ensure transparency throughout the funding process.

Fenchurch Legal specialises in this niche area, efficiently managing and supporting a high volume of small-ticket consumer claims with an average loan value of £3,000 each. They handle diverse areas such as housing disrepair and personal contract payment claims. Their proven track record of funding over 12,000 cases is driven by their bespoke software, knowledgeable team, and robust processes.

About the author

Louisa Klouda

Louisa Klouda

Commercial

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Case Developments Commercial

Pogust Goodhead Seeks Interim Costs Payment

By John Freund |

Pogust Goodhead, the UK law firm leading one of the largest group actions ever brought in the English courts, is seeking an interim costs payment of £113.5 million in the litigation arising from the 2015 Mariana dam collapse in Brazil.

According to an article in Law Gazette, the application forms part of a much larger costs claim that could ultimately reach approximately £189 million. It follows a recent High Court ruling that allowed the claims against BHP to proceed, moving the litigation into its next procedural phase. The case involves allegations connected to the catastrophic failure of the Fundão tailings dam, which resulted in 19 deaths and widespread environmental and economic damage across affected Brazilian communities.

Pogust Goodhead argues that an interim costs award is justified given the scale of the proceedings and the substantial expenditure already incurred. The firm has highlighted the significant resources required to manage a case of this size, including claimant coordination, expert evidence, document review, and litigation infrastructure. With hundreds of thousands of claimants involved, the firm maintains that early recovery of a portion of its costs is both reasonable and proportionate.

BHP has pushed back against the application, disputing both the timing and the magnitude of the costs being sought. The mining company has argued that many of the claimed expenses are excessive and that a full assessment should only take place once the litigation has concluded and overall success can be properly evaluated.

The costs dispute underscores the financial pressures inherent in mega claims litigation, particularly where cases are run on a conditional or funded basis and require sustained upfront investment over many years.

Case Developments Commercial

Litigation Capital Management Faces AUD 12.9m Exposure After Class Action Defeat

By John Freund |

Litigation Capital Management has disclosed a significant adverse costs exposure following the unsuccessful conclusion of a funded Australian class action, underscoring the downside risk that even established funders face in large-scale proceedings.

An article in Sharecast reports that the AIM-listed funder revealed that the Federal Court of Australia has now quantified costs in a Queensland-based class action brought against state-owned energy companies Stanwell Corporation and CS Energy. The court ordered costs of AUD 16.2 million in favour of each respondent, resulting in a total adverse costs award of AUD 32.4 million. The underlying claim was dismissed earlier, and the costs decision represents the next major financial consequence of that loss.

While LCM had after-the-event insurance in place to mitigate adverse costs exposure, that coverage has now been exhausted. After insurance, an uninsured balance of AUD 19.9 million remains. LCM expects to contribute AUD 12.9 million of that amount directly, with the remaining balance to be met by investors in its Fund I vehicle.

The company has emphasized that the costs awarded were standard party-and-party costs, not indemnity costs, and stated that the outcome does not reflect adversely on the merits of the claim or the conduct of the proceedings. Nonetheless, the market reacted sharply, with LCM’s share price falling by more than 14% following the announcement.

LCM also confirmed that it has already lodged an appeal against the substantive judgment, with a two-week hearing scheduled to begin in early March. In parallel, the funder is considering whether to challenge the costs quantification itself, alongside an appeal being pursued by the claimant. The company noted that discussions with its principal lender are ongoing and that its previously announced strategic review remains active, with further updates expected in the coming months.

Commercial

Avoiding Pitfalls as Litigation Finance Takes Off

By John Freund |

The litigation finance market is poised for significant activity in 2026 after a period of uncertainty in 2025. A recent JD Supra analysis outlines key challenges that can derail deals in this evolving space and offers guidance on how industry participants can navigate them effectively.

The article explains that litigation finance sits at the intersection of law and finance and presents unique deal complexities that differ from other private credit or investment structures. While these transactions can deliver attractive returns for capital providers, they also carry risks that often cause deals to collapse if not properly managed.

A central theme in the analysis is that many deals fail for three primary reasons: a lack of trust between the parties, misunderstandings around deal terms, and the impact of time. Term sheets typically outline economic and non-economic terms but may omit finer details, leading to confusion if not addressed early. As the diligence and documentation process unfolds, delays and surprises can erode confidence and derail negotiations.

To counter these pitfalls, the piece stresses the importance of building trust from the outset. Transparent communication and good-faith behavior by both the financed party and the funder help foster long-term goodwill. The financed party is encouraged to disclose known weaknesses in the claim early, while funders are urged to present clear economic models and highlight potential sticking points so that expectations align.

Another key recommendation is ensuring all parties fully understand deal terms. Because litigation funding recipients may not regularly engage in such transactions, well-developed term sheets and upfront discussions about obligations like reporting, reimbursements, and cooperation in the underlying litigation can prevent later misunderstandings.

The analysis also underscores that time kills deals. Prolonged negotiations or sluggish responses during diligence can sap momentum and lead parties to lose interest. Setting realistic timelines and communicating clearly about responsibilities and deadlines can keep transactions on track.