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Understanding Pre-Settlement Funding: A Resource for Plaintiffs Facing Long Legal Battles

By Harry Moran |
February 25, 2025

Understanding Pre-Settlement Funding: A Resource for Plaintiffs Facing Long Legal Battles

Rockpoint Legal Funding has released a new educational overview on the role of pre-settlement funding for individuals involved in personal injury and other civil lawsuits. As court dockets swell and case timelines extend, plaintiffs often encounter mounting financial pressures that can influence their legal decisions. This overview examines the mechanics of pre-settlement funding, the considerations for deciding whether it is an appropriate option, and the broader context of litigation finance in the United States.

Pre-settlement funding—also known as legal funding or lawsuit advances—is a financial arrangement in which a provider offers immediate funds to plaintiffs who have an active legal claim. The advance is typically “non-recourse,” which means that the plaintiff is only obligated to repay if the underlying case results in a monetary settlement or award. This structure aims to relieve short-term economic stress, such as covering medical bills or everyday living costs, without imposing the risk of personal liability if the case does not succeed.

Why Litigation Timelines Can Be Lengthy

In many jurisdictions, personal injury and other civil claims progress through multiple stages. The initial filing, discovery period, settlement negotiations, and potential trial can each introduce procedural delays. Moreover, defense counsel or insurance companies may seek extensions or engage in protracted negotiations, especially if the case is complex or involves substantial damages. These drawn-out timelines can place significant strain on plaintiffs who are juggling medical appointments, lost wages, or other unexpected expenses stemming from the incident in question.

How Non-Recourse Funding Operates

Non-recourse funding arrangements differ from traditional loans in two key ways. First, plaintiffs do not make monthly payments during the lawsuit’s duration. Second, if the case concludes without a settlement or court award, the plaintiff typically owes nothing. However, if there is a successful outcome, the provider recovers its advance from the proceeds, plus any agreed-upon fees or charges. Because repayment depends on the lawsuit’s success, funding companies evaluate the viability of a claim by reviewing documentation such as medical records, police reports, and legal filings. This vetting process helps determine both eligibility and the potential amount of funding offered.

Considerations for Plaintiffs

While pre-settlement funding can offer financial breathing room, it is not a universal solution for every litigant. Plaintiffs are advised to consult closely with their attorneys before deciding to move forward with an advance. An attorney can provide guidance on whether anticipated settlement amounts reasonably justify the costs associated with funding. Additionally, plaintiffs should take time to review any contract terms carefully, paying particular attention to fee structures and potential caps on interest. Regulatory requirements for transparency vary from state to state, and consumer protection advocates often encourage individuals to ask prospective funders for itemized disclosures that outline how expenses and interest accumulate over time.

Balancing Immediate Needs with Long-Term Outcomes

For many plaintiffs, the main appeal of pre-settlement funding lies in the ability to cover urgent expenses without feeling pressured to accept a premature or undervalued settlement. Financial stress can sometimes overshadow the pursuit of a fair legal resolution. Having access to funds to pay rent, medical bills, and utility costs can enable individuals to focus more effectively on recovering from injuries and collaborating with their legal teams. At the same time, the additional fees tied to funding must be weighed against the potential difference a plaintiff might receive if they negotiate a higher settlement by waiting. Striking a balance between meeting immediate needs and preserving future gains is a critical part of the decision-making process.

Regulatory Landscape and Industry Best Practices

The legal funding industry is subject to varying degrees of oversight. Several states have enacted or proposed regulations to ensure consumer protections. In some jurisdictions, legislators have mandated clear and conspicuous disclosures regarding interest rates, fee schedules, and any other costs that might be included in the repayment obligation. These efforts aim to safeguard plaintiffs from overextending themselves financially or unknowingly entering into agreements with unfavorable terms. Reputable legal funding companies generally support transparent industry standards, seeing them as essential for maintaining trust and helping plaintiffs fully understand the implications of the agreements they sign.

Potential Impact on the Legal Process

Plaintiffs considering pre-settlement funding often wonder whether accessing an advance will change how negotiations proceed. While the presence of funding does not directly alter the defendant’s or insurance company’s approach, plaintiffs who relieve their short-term financial hardships may feel less pressure to settle immediately. This dynamic can sometimes allow parties to conduct more thorough investigations, secure additional expert opinions, or wait for crucial evidence to come to light. Nonetheless, case outcomes depend on numerous factors—including liability assessments, the strength of the evidence, and judicial proceedings—and not solely on whether the plaintiff has opted for a funding advance.

Addressing Myths and Misconceptions

Despite growing awareness, misconceptions about lawsuit funding persist. One common myth is that plaintiffs give up control of their case when they secure an advance. In practice, a reputable funding provider does not direct case strategy or negotiations; plaintiffs and their attorneys maintain full authority over legal decisions. Another misconception is that high rates inevitably accompany all pre-settlement advances. While some companies may impose significant fees, others strive for more balanced terms. Conducting comparative research and consulting third-party resources can help plaintiffs identify funding options that align with their specific needs.

Informing Plaintiffs and Attorneys

Through its resource materials and ongoing educational initiatives, Rockpoint Legal Funding aims to clarify how pre-settlement advances fit into the broader legal landscape. Attorneys can benefit by understanding the various funding options available to clients, enabling them to offer well-rounded advice. Meanwhile, plaintiffs gain insight into navigating what can be a confusing world of financial products and services. Informed decision-making involves not only estimating the value of a legal claim but also realistically appraising personal financial requirements and the time it may take to resolve a case.

About Rockpoint Legal Funding

Rockpoint Legal Funding provides non-recourse cash advances to plaintiffs in personal injury and other civil cases. The company’s primary goal is to help individuals facing extended litigation address pressing financial concerns so they can pursue a fair legal outcome. Through transparent practices, Rockpoint endeavors to equip both plaintiffs and their attorneys with clear information, enabling them to decide whether a funding advance is appropriate for their circumstances.

For more information about Rockpoint Legal Funding, visit rockpointlegalfunding.com.

About the author

Harry Moran

Harry Moran

Consumer

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Consumer

The Fundamental Distinction Policymakers Cannot Ignore

By Eric Schuller |

The following was contributed by Eric K. Schuller, President, The Alliance for Responsible Consumer Legal Funding (ARC).

If policymakers want to understand consumer legal funding, they should start with insurance, not lending. At first glance, insurance and consumer legal funding may appear unrelated. One protects against risk. The other provides funds to plaintiffs in pending lawsuits to help pay for their day-to-day expenses. But structurally, they share a defining characteristic: risk is assumed by the capital provider, not imposed on the consumer. That single feature separates consumer legal funding from loans and aligns it more closely with underwriting.

Public policy depends on accurate classification. When a product is mischaracterized, regulation can miss its mark. Consumer legal funding is frequently labeled a "loan," yet its mechanics contradict that description. A loan creates a guaranteed repayment obligation. Consumer legal funding does not. To regulate wisely, lawmakers must understand that distinction.

Insurance is built on underwriting risk. An insurance company evaluates probabilities. It examines health risks, property risks, liability exposure, accident frequency. It prices policies accordingly. The insurer does not lend money to the policyholder. Instead, it assumes risk in exchange for compensation. If the insured event occurs, the insurer pays. If the event does not occur, the insurer retains the premium. In either case, the insurer's business model depends on accepting uncertainty. Insurance is not debt. It is risk transfer.

Now consider consumer legal funding. A funding company evaluates a legal claim. It assesses liability, damages, collectability, procedural posture, and likely duration. It underwrites the case. Instead of collecting premiums, it provides monies to the plaintiff. Its return depends entirely on a defined event: recovery in the lawsuit. If recovery occurs, the provider receives its agreed return from the proceeds. If recovery does not occur, the provider receives nothing. The funding company has effectively underwritten litigation risk. That is not lending. That is risk assumption.

The central question in distinguishing loans from contingent capital is simple: Who bears the risk of failure? In a loan, the borrower bears the risk. Repayment is mandatory regardless of outcome. In insurance, the insurer bears the risk. Payment depends on whether a covered event occurs. In consumer legal funding, the funding company bears the risk. Repayment depends on whether the case succeeds. If a plaintiff loses their case, they owe nothing. There is no collection action, no wage garnishment, no deficiency balance. The capital provider absorbs the loss. That structure is fundamentally inconsistent with debt.

To see the contrast clearly, consider the defining characteristics of a traditional loan: an unconditional obligation to repay, repayment regardless of performance or outcome, interest accrual over time, recourse against income or assets, and credit-based underwriting. If you borrow money to open a business and the business fails, you still owe the bank. If you lose your job after taking out a personal loan, you still owe the lender. If you use a credit card and experience hardship, the balance remains. Debt survives failure. Consumer legal funding does not. If there is no recovery in the legal claim, there is no repayment obligation. That single fact removes the defining feature of a loan.

Insurance companies price risk across portfolios. Some claims will generate losses. Others will generate gains. Sustainability depends on aggregate performance. Consumer legal funding companies operate similarly. Some cases succeed. Others fail. Pricing reflects probability of recovery, expected timeline, and litigation risk. Like insurers, funding providers must absorb unsuccessful outcomes as part of their business model. If policymakers were to impose lending-style interest caps on insurance premiums, the insurance market would collapse. Premiums are not structured like loan interest because repayment is not guaranteed. Similarly, consumer legal funding cannot be evaluated as if repayment were certain. The risk of total loss is real. When regulation ignores that risk allocation, it misunderstands the economics.

Labeling consumer legal funding as a loan may appear harmless, but it has significant policy consequences. Lending regulations are built around products where repayment is guaranteed and borrowers bear default risk. Those regulations assume predictable interest accrual and enforceable repayment obligations. Consumer legal funding lacks those features. If policymakers apply lending frameworks to non-recourse, outcome-dependent arrangements, they risk imposing regulatory structures that do not fit the product, distorting pricing models built around risk of total loss, reducing availability of funding for injured consumers, and eliminating a non-recourse option that differs fundamentally from debt. Regulation should reflect economic reality, not rhetorical convenience.

For injured plaintiffs, litigation is rarely quick. Cases may take months or years to resolve. During that time, medical bills accumulate. Rent is due. Utilities must be paid. Families rely on a steady income that may no longer exist. Traditional loans require fixed repayment regardless of outcome. Insurance does not. Consumer legal funding does not. That distinction explains why some consumers choose it. They are not borrowing against wages or income. They are accessing funds tied to a potential asset — their legal claim. If that asset produces value, repayment occurs from that value. If it does not, there is no personal debt. That is not debt stacking. It is risk sharing.

The core issue is risk transfer. Debt transfers risk to the borrower. Insurance transfers risk to the insurer. Consumer legal funding transfers litigation outcome risk to the funding company. The defining feature of a loan is an unconditional promise to repay. Without that promise, the structure changes entirely. If there is no recovery and the consumer owes nothing, the essential element of debt is absent. Policy debates should begin with that structural truth.

None of this suggests that consumer legal funding should operate without oversight. Transparent contracts, disclosure requirements, and consumer protections are appropriate in any financial arrangement. But regulation must match mechanics. Insurance is regulated as insurance because it is risk underwriting. Debt is regulated as lending because repayment is guaranteed. Consumer legal funding is non-recourse and outcome-dependent. It should be evaluated through that lens. When lawmakers start from the wrong definition, unintended consequences follow.

Consumer legal funding is non-recourse, payable only from legal proceeds, transfers outcome risk to the capital provider, and creates no unconditional repayment obligation. It shares structural similarities with insurance underwriting and other contingent compensation arrangements where payment depends on performance. The defining feature of a loan is guaranteed repayment. Consumer legal funding has no such guarantee. Before regulating it as debt, policymakers should ask a simple question: If the case fails and the consumer owes nothing, where is the loan? Sound public policy begins with structural accuracy.

Consumer

Legal-Bay Flags $8.5M Uber Verdict in Arizona Bellwether

By John Freund |

Legal-Bay has highlighted an $8.5 million jury verdict against Uber in an Arizona bellwether trial arising from allegations of sexual assault by a rideshare driver. The verdict, delivered in a court proceeding serving as a bellwether for related claims, underscores potential jury reactions to evidence and theories that may recur across similar cases. For funders and insurers, an early result of this size in a bellwether setting can shape expectations for settlement ranges, defense costs, and the duration of case cycles.

An article in PR Newswire states that Legal-Bay, a legal funding firm, is drawing attention to the $8.5 million award and positioning capital to plaintiffs pursuing claims tied to rideshare assaults. The company notes that the Arizona outcome is a meaningful datapoint for pending litigation and that it stands ready to evaluate funding requests from claimants awaiting resolution.

According to the release, the firm continues to underwrite pre-settlement advances across personal injury and mass tort matters, including ride-hailing cases where plaintiffs may face lengthy timelines before payment. The statement frames the verdict as a signal that juries may credit evidence of inadequate safety practices, while acknowledging that individual results will vary by jurisdiction and fact pattern.

If additional bellwethers produce comparable results, parties could move toward structured settlement programs and more predictable valuation bands. Funders will likely revisit pricing, case selection, and exposure caps in rideshare assault portfolios. Appeals and post trial motions in Arizona bear watching as they may affect timing and recovery risk. Insurance programs for platform operators may also adjust assumptions.

Announcements Consumer

Legal-Bay Expands Pre-Settlement Funding Services

By John Freund |

Legal-Bay announced an expansion of its legal funding services, aiming to offer clients more flexible options for pre-settlement funding. The move reflects rising demand from plaintiffs who need interim cash while cases progress and highlights the competitive dynamics in consumer legal funding.

According to the company, the initiative is intended to broaden availability of non-recourse advances and to streamline decisioning so applicants can access funds more predictably during litigation. Although the funder did not disclose detailed terms, the emphasis on flexibility suggests adjustments to how advances are sized and timed relative to case milestones, as well as potential enhancements to intake and support. For claimants, the changes could translate into more tailored funding paths during a period of financial strain.

A press release in PR Newswire states that Legal-Bay is expanding its legal funding services to provide clients with more flexible options for pre-settlement funding, signaling a renewed focus on access and responsiveness. The release characterizes the update as a client-centric step and reiterates the company’s commitment to supporting plaintiffs seeking bridge financing while their matters are pending. It does not enumerate product features, timelines or pricing, but it frames the initiative as an effort to meet a wider range of circumstances and case timelines.

For the litigation finance industry, expansions like this reinforce steady demand among cash-constrained plaintiffs and continued product iteration by consumer funders. If flexibility becomes a wider theme, expect tighter competition on approval speed, disclosures and service quality, alongside ongoing attention to compliance in states evaluating consumer legal funding rules.