Litigation Funding and Social Inflation: What’s the Connection?

Litigation funding – in which third parties assume all or part of the cost of a lawsuit exchange for an agreed-upon percentage of the settlement – is often cited as contributing to social inflation.

But, like so much else associated with social inflation, it’s unclear how widespread the practice is.

With historical roots in Australia and the United Kingdom, funding of lawsuits by investors has taken hold in the United States in recent years.

On the positive side, it can let plaintiffs employ experts to develop effective strategies – options once only available to large corporate defendants.

But it also can contribute to cases making it to court based more on investor expectations than on plaintiffs’ best interests.