How the Pandemic Has Affected Litigation Financing

COVID-19 and the Future for Litigation Funders

Now, over seven months into the COVID-19 pandemic, uncertainty continues to loom for nearly every industry. Even companies that had seen a shutdown related frenzy, such as online loungewear retailers, have struggled in one way or another. Supply-chain issues, the inability to keep up with demand, or a complete lack of demand has left many businesses reeling.

Litigation financing has not been immune to the pandemic’s economic impact. As discussed in Bloomberg Law’s recent Big Law Business Column article “Litigation Funders See Fewer Safe Lawsuit Bets in Pandemic,” the industry has had its own set of struggles.

What Happened to the Expected Boom

Many expected that third-party litigation financing would be a booming business during the coronavirus. During the 2008 financial crisis, litigation funders served as a necessary lifeline to many law firms that were turned away from traditional lenders.

The pandemic, however, has proven different. As has been said over and over again, we are certainly living in unprecedented times. The Bloomberg article points to the fact that the coronavirus did not provide the lawsuit investment opportunities that many thought it would.

Initial litigation claims were based on things like insurance companies failing to provide coverage under business interruption claims. Courts seemed to side more with insurance giants stating that they could deny coverage since the economic losses were related to pandemic shutdowns – an exclusion in the fine print of some policies. Without legislative support, it is unclear that insurance companies will be forced to pay up.

Another potential explanation for the less than expected bump for litigation financers was prolonged court closures. The health crisis brought most litigation to a standstill. Courtrooms stayed shuttered for longer than anybody could have anticipated, and another wave may bring more shutdowns. 

What to Expect in 2020 and Beyond

Despite all of this, the future is not all grim. Litigation financing is not doomed; it has survived and thrived in economic turmoil. Well-grounded companies will continue to be a necessary financial support system for law firms. One of the biggest takeaways: pop-up litigation funders who thought they could make a quick dollar probably won't last.

It is always best to partner with a third-party lender that has weathered previous economic storms. Litigation financing can play a pivotal role in helping law firms, even the playing field. It provides necessary cash flow as litigation costs continue to soar and bridges the gap between case retention and recovery.

Who We Are and What We Do

Amicus Capital Group, LLC, has been Transforming the Business of Law? for over 25 years, offering crucial financing for law firms across the country. Despite market disruptions like that caused by the pandemic, we are able to provide critical funding for lawyers through different types of loans catered to their specific needs.

Learn how Amicus can help get you the cash infusion you need to keep your law firm afloat during tough economic times. Contact our office at (877) 926-4287 to determine how we can help enhance profitability or fill out our Pre-Qual Loan Application to get started.

This blog post does not contain legal or financial advice. Author and publisher disclaim any and all warranties, liabilities, losses, costs, claims, demands, suits, or actions of any type or nature whatsoever, arising from or any way related to this blog, the use of this blog, and/or any claim that a particular technique or device described in this blog.