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Missouri bill calls for regulation of third-party litigation financing

Posted On: Feb. 25, 2022 10:37 AM CST

Missouri capitol

A bill introduced in the Missouri House of Representatives Wednesday would require that loans provided by third parties to finance lawsuits be regulated by the state Department of Commerce and Insurance.

The measure was welcomed Friday by the American Property Casualty Insurance Association, a Washington-based industry trade group.

HB 2771, the Consumer Litigation Funding Model Act, would require all participants in litigation financing arrangements to disclose their existence – including to the insurers of individuals filing suit – as part of discovery during personal injury litigation.

The bill states that “a consumer or the consumer's legal representative shall, without awaiting a discovery request, provide to all parties to the litigation, including the consumer's insurer if prior to litigation, any litigation financing contract or agreement under which anyone, other than a legal representative permitted to charge a contingent fee representing a party, has a right to receive compensation or proceeds from the consumer that are contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.”

HB 2771 also outlines a series of consumer rights, such as allowing individuals filing suit to cancel litigation funding contracts without penalty within five business days.

If there is no recovery of any money from a legal claim or if there is not enough money to satisfy the portion assigned to a funder in full, individuals filing suit will also not owe anything in excess of their recovery, the bill states.

Litigation funding, in which capital is provided by a third party to finance lawsuits in return for a share of the ultimate settlement or award, has been growing and is estimated to be an $11 billion to $12 billion industry in the United States.

The American Property Casualty Insurance Association issued a statement in support of the Missouri legislation.

“The legislation introduced in Missouri puts commonsense guardrails on third-party litigation financing and provides consumer protections by requiring that these loans be regulated by the state Department of Commerce and Insurance,” Hilary Segura, assistant vice president for state government relations for APCIA, said in a statement.