Trending Now
  • Invenio Partner Warns Automation Bias Is the Real AI Risk in Funding Underwriting
  • New York Times Investigation Examines Securitization of Consumer Legal Funding Advances
Commercial Special Features

Key Takeaways from LFJs Digital Event: Litigation Finance: What to Expect in 2024

February 12, 2024

Key Takeaways from LFJs Digital Event: Litigation Finance: What to Expect in 2024

On February 8th, 2024, Litigation Finance Journal hosted a special digital event titled ‘Litigation Finance: What to Expect in 2024.’  The event featured Gian Kull, Senior Portfolio Manager at Omni Bridgeway, David Gallagher, Co-Founder of LitFund, Justin Brass, Co-CEO and Managing Director of JBSL, and Michael German, Co-Founder and CIO at Lex Ferenda. The event was moderated by Peter Petyt, founder of 4 Rivers. The discussion covered a range of topics pertinent to the litigation funding space. Below are some key takeaways from the event: Which areas are you particularly interested in investing in over this coming year?  MG: There is a supposition that this industry will continue to grow in 2024. All of the indicators suggest that the industry will continue to grow–nearly all of the funders are funding bankruptcy-related cases, and three quarters are funding patent cases. Those are areas of interest to us, and I think that will continue to make sense, given the types of commercial cases they are – complex cases that require significant amounts of attorney time and defendant time,  and yield significant costs to the litigaiton. JB: We’re going to see a continued expansion into the mass arbitration space. That is something that has been coming up with more frequency. Mass torts has been staying quite busy. And where we see a lot of potential is with the evolution of the secondary market. There are a lot of funders coming up with maturing cases, and it makes sense for those funders to redeploy that capital into other opportunities – not necessarily exit that case – but just sell a minority stake or a portion of it. We that in traditional fixed income classes, so we think that is going to continue in the funding market as well. Are you seeing any kind of appetite to invest in jurisdictions you haven’t previously invest in? Have some jurisdictions matured to the point where you now will give them a serious look?  GK: That’s a hard question to ask Omni Bridgeway as a whole, because we try to be in a lot of places. But from my own experience in Europe, we’ve gotten quite comfortable in the Netherlands, we have a very large investment in Portugal. Spain is next on the list. Italy is after that. The jurisdiction I’ve been most disappointed in – aside from the UK with the regulatory issues there – is Germany. For such a large economy, from a commercial collective redress perspective that is a dead end. As we move through Europe, I’ll be watching the regulatory regimes and how those are tested over the coming years. Are you seeing many requests for monetization of judgements or awards, or is that not an area that you are particularly interested in?  DG: We’re especially interested in that, largely because my partners have spent a lot of their careers making those types of investments. And just speaking from my own experience, that has always been an important part of the market, and continues to be an important part of the market. I think the availability of judgement preservation insurance makes funding more available and appropriate both on the funder’s side and the client’s side. In my view, it’s very interesting to see the number of people in the market moving into the insurance space. In my view quite a surprising number – it’s certainly indicative of a trend. LFJ just announced today that Ignite has launched a capital protection insurance resource. So there are a lot of interesting things happening here. Is it still early days for this space, because there are a lot of people moving into it with interest?  MG: I share the sentiment of having a general level of surprise with how many folks from the litigation finance industry insurance has drawn. From the Lex Ferenda perspective, insurance has proven to be a very expensive option, that ultimately my clients and I don’t feel is worth the cost. But the vast majority of our investments – from an insurer’s perspective – are probably the least good fit, so that’s probably why it’s reflecting in the price. JB: I think the insurance aspect of litigation finance is here to stay. There will be growing pains along the way. I think even as recently as last week, there were disclosures in the Affordable Care Act fee dispute where the law firm got an insurance policy related to its fee award. What was interesting there, was the law firm was seeking disclosure about the policy, and in essence how it worked. So not only is it new and here to stay, we’re seeing it become public. The risk to early-stage cases is the pricing can be expensive, but what will happen over time, is like anything else, the insurers will be tracking the progress on those cases, and as funders come back as repeat customers, they’ll be looking at you and factoring that relationship into their pricing, just like how a bank factors that into a credit score. I think the best path forward is figuring out how to work together and create a level of transparency and trust, because it’s not going away. For the full recording of the event, click here.

Commercial

View All
Commercial

Invenio Partner Warns Automation Bias Is the Real AI Risk in Funding Underwriting

An Invenio LLP partner has published a detailed argument that the principal danger of artificial intelligence in litigation finance underwriting is not fabricated citations but the quiet erosion of the human judgment that underwriting depends on.

According to Real Talk About AI in Litigation Finance Underwriting, written by Brenna Legaard, large language models perform reliably on well-defined, data-rich tasks such as analyzing prior art and preparing claim charts, and they work without fatigue or anchoring bias. What they cannot do is predict case outcomes, because the training data does not contain them. Models learn from published opinions, while the vast majority of disputes end in confidential settlements that are never mapped. Legaard writes that models "have known knowns, perhaps known unknowns, and no unknown unknowns whatsoever."

The piece cites a 2024 study finding hallucination rates between 58% and 88% on factual legal questions, with the weakest performance on less prominent cases, and notes that model accuracy degrades as input length grows. Its sharper concern is automation bias: decision-makers deferring to polished output under time pressure, so that "the model's confident framing then becomes an unwary underwriter's confident framing."

Legaard draws a parallel to McKinsey research on insurance underwriting, where firms that mandated black-box models over human judgment found that staff lost faith in the models and underwriting skills atrophied. The recommended response is cultural rather than technical: open discussion of where AI use introduces confirmation bias, and hiring underwriters who interrogate outputs rather than merely producing them faster.

Commercial

Indemnity Costs Order Turns Prince Harry Claimants’ ATE Shortfall Into a Live Liability

The seven celebrity claimants in the failed privacy action against the Daily Mail have been ordered to pay costs on the indemnity basis and to make a payment on account of £9.54m by 28 August, crystallising a gap between their after-the-event insurance cover and the publisher's claimed costs.

As reported by the Law Society Gazette, Mr Justice Nicklin found that the case went "well outside the norm" and that its "conduct was unreasonable to a high degree." The judge described the action as "litigation conceived and pleaded on an unjustifiably wide canvas," which was "speculative at origin and depended substantially on inference," with serious allegations maintained over a prolonged period on an inadequate evidential foundation.

The claims of unlawful information-gathering, brought by claimants including the Duke of Sussex, Baroness Lawrence and Sir Elton John, were dismissed last month following an 11-week trial. Associated Newspapers had exceeded its approved budget by more than £18.6m, with total costs amounting to what claimant lawyers called an "eye-watering" £34,481,622.54. The claimants hold legal expenses insurance covering £16.2m.

Nicklin J declined to impose a cap on recoverable costs, though he described the publisher's costs as "striking." The payment on account was set at £9,544,355, close to the £9,950,624.37 sought by Associated, which represented 65% of incurred pre-budgeted costs and 90% of budgeted costs.

The order converts a previously theoretical insurance shortfall into an immediate obligation, and stands as a reminder of how far ATE limits can fall short of defendants' actual costs in heavily contested, long-running litigation.

Commercial

Rugby Head Injury Claimants Appoint Independent Counsel Over Funder and Law Firm Group Ties

Hundreds of struck-out rugby head injury claims have been granted relief from sanctions in principle after the players switched solicitors, in a ruling that also records the appointment of independent counsel to advise the claimants on their position relative to their new law firm and their litigation funder, which sit in the same corporate group.

As reported by Legal Futures, Senior Master Cook allowed the claims to proceed despite non-compliance with unless orders on disclosure of medical records, taking "comfort" from the change of solicitor. The litigation involves around 1,000 claimants across rugby union and rugby league who allege serious head injuries from collision forces in matchplay and training, and that the governing bodies did not do enough to protect them. Between the two groups, 530 claimants stood struck out.

The players moved from Rylands Garth, described by the judge as "a relatively new firm with one qualified solicitor," to class action specialists KP Law, with Leigh Day assisting. Master Cook said that had the original solicitor continued to conduct the litigation, "I could not have had any confidence that future court orders would be complied with timeously or at all."

A witness statement from former Wales international Alix Popham, on behalf of the union players committee, said the players have appointed James Oldnall, managing partner of Milberg London, as independent counsel to advise them on their position "vis-à-vis KP Law and [litigation funder] Asertis (as Asertis and KP are part of the same corporate group)."

Relief will be subject to conditions to be decided at a further hearing, with minimum terms including payment of the defendants' costs of securing compliance and production of the missing documents.