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Commercial

Out of the Shadows: The Mainstreaming of Litigation Finance

April 22, 2021

Out of the Shadows: The Mainstreaming of Litigation Finance

Litigation funders provide non-recourse funding to litigants, in order to enable them to pursue a meritorious case they couldn’t otherwise afford. It’s a straightforward process with a net societal gain of increasing access to justice. So why aren’t more people making use of it? The CLS Blue Sky Blog details that a newly-published article in the Vanderbilt Law Review, The Shadows of Litigation Finance, explores how Litigation Finance can overcome barriers that have been placed in its path. In the piece, authors Suneal Bedi (Professor at Indiana University and Maurer School of Law) and Willian C Marra (Investment Manager at Validity Finance), examine the awareness problem that plagues the industry, and lay out a scholarly framework with which to evaluate the full impact of litigation funding pre-trial, during the case, and after a case is resolved. Third-party legal finance is an enormous step forward in terms of social justice. Until this industry came to be, those who lacked financial means often lacked any way to seek justice when wronged—particularly by a large business, utility, or government. Litigation funding allows average citizens to pursue valid cases while preventing frivolous claims from clogging court dockets. After all, no funder wants to invest in a frivolous case that’s unlikely to be profitable. One of the interesting points made in the article is that there’s no specific framework to measure the success and benefits of non-recourse legal funding, hence it is difficult to counter the assertion that the use of litigation funding necessitates increased regulation. The pre-claim and post-claim impact of litigation funding are some of the key measurements explored by Marra and Bedi. By examining how funding changes the behavior of litigants at these stages, the authors hope to illustrate the heretofore unseen benefits of litigation funding—such as increased compliance and more equitable bargaining.

Commercial

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Commercial Deals

Slater and Gordon Secures Renewed £30M Financing with Harbour

By John Freund |

Slater and Gordon has announced the renewal of its committed financing facility with Harbour, securing an enhanced £30 million loan agreement that strengthens the firm’s financial position and supports its ongoing strategic plans.

According to Slater and Gordon, the facility replaces the previous arrangement and will run for at least three years, underscoring the depth of the relationship between the firm and Harbour, a long-standing provider of capital to law firms.

The renewed financing follows a £30 million equity raise earlier in 2025 and is intended to provide financing certainty as Slater and Gordon continues to invest across its core practice areas and enhance its client service offering. Chief executive Nils Stoesser highlighted the progress the business has made in recent years and said the renewed facility provides confidence as the firm pursues its longer-term strategic priorities.

Ellora MacPherson, Harbour’s managing director and chief investment officer, described the commitment as the next stage in a constructive and established partnership. She noted Harbour’s support for Slater and Gordon’s ambitions, particularly around improving service delivery and outcomes for clients.

Over the past two years, Slater and Gordon has focused on strengthening its family law, employment, and personal injury practices, while also expanding its capacity to handle large-scale group actions. The firm has also continued to invest in technology and operational improvements aimed at improving the overall client experience.

Commercial

Litigation Finance Faces Regulatory, MSO, and Insurance Crossroads in 2026

By John Freund |

The litigation finance industry, now estimated at roughly $16.1 billion, is heading into 2026 amid growing uncertainty over regulation, capital structures, and its relationship with adjacent industries. After several years of rapid growth and heightened scrutiny, market participants are increasingly focused on how these pressures may reshape the sector.

Bloomberg Law identifies four central questions likely to define the industry’s near-term future. One of the most closely watched issues is whether federal regulation will finally materialize in a meaningful way. Legislative proposals have ranged from restricting foreign sovereign capital in U.S. litigation to taxing litigation finance returns. While several initiatives surfaced in 2025, political gridlock and election year dynamics raise doubts about whether comprehensive federal action will advance in the near term, leaving the industry operating within a patchwork of existing rules.

Another major development is the expansion of alternative investment structures, particularly the growing use of management services organizations. MSOs allow third party investors to own or finance non legal aspects of law firm operations, offering a potential pathway for deeper capital integration without directly violating attorney ownership rules. Interest in these models has increased among both litigation funders and large law firms, signaling a broader shift in how legal services may be financed and managed.

The industry is also watching the outcome of several high profile disputes that could have outsized implications for funders. Long running, multibillion dollar cases involving sovereign defendants continue to test assumptions about risk, duration, and appellate exposure in funded matters.

Finally, tensions with the insurance industry remain unresolved. Insurers have intensified efforts to link litigation funding to rising claim costs and are exploring policy mechanisms that would require disclosure of third party funding arrangements.

Taken together, these dynamics suggest that 2026 could be a defining year for litigation finance, as evolving regulation, new capital models, and external pushback shape the industry’s next phase of development.

Commercial Regulatory Issues

Liability Insurers Push Disclosure Requirements Targeting Litigation Funding

By John Freund |

Commercial liability insurers are escalating their long-running dispute with the litigation funding industry by introducing policy language that could require insured companies to disclose third-party funding arrangements. The move reflects mounting concern among insurers that litigation finance is contributing to rising claim costs and reshaping litigation dynamics in ways carriers struggle to underwrite or control.

An article in Bloomberg Law reports that the Insurance Services Office, a Verisk Analytics unit that develops standard insurance policy language, has drafted an optional provision that would compel policyholders to reveal whether litigation funders or law firms with a financial stake are backing claims against insured defendants. While adoption of the provision would be voluntary, insurers could begin incorporating it into commercial liability policies as early as 2026.

The proposed disclosure requirement is part of a broader push by insurers to gain greater visibility into litigation funding arrangements, which they argue can encourage more aggressive claims strategies and higher settlement demands, particularly in mass tort and complex commercial litigation. Insurers have increasingly linked these trends to what they describe as social inflation, a term used to capture rising jury awards and litigation costs that outpace economic inflation.

For policyholders, the new language could introduce additional compliance obligations and strategic considerations. Companies that rely on litigation funding, whether directly or through counterparties, may be forced to weigh the benefits of financing against potential coverage implications.

Litigation funders and law firms are watching developments closely. Funding agreements are typically treated as confidential, and mandatory disclosure to insurers could raise concerns about privilege, work product protections, and competitive sensitivity. At the same time, insurers have been criticized for opposing litigation finance while also exploring their own litigation-related investment products, highlighting tensions within the market.

If widely adopted, insurer-driven disclosure requirements could represent a meaningful shift in how litigation funding intersects with insurance. The development underscores the growing influence of insurers in shaping transparency expectations and suggests that litigation funders may increasingly find themselves drawn into coverage debates that extend well beyond the courtroom.