How the Pandemic creates Risk and Opportunity
The pandemic has brought litigation to a halt, with courts closing and most cases at a standstill. As the courts get ready to reopen, however, a wave of lawsuits is expected, with scores of businesses pursuing related insurance coverage claims. Many are seeking remedies against their carriers for business interruption and force majeure actions, according to the New York Law Journal.
Clients are looking to pay counsel on a contingency fee basis instead of billable hours. Law firms are turning to litigation funding with increasing frequency. But funders are experiencing stress as well, resulting in lengthier approvals and tighter requirements.
The COVID crisis has created a domino effect, with repercussions across the legal, business, and insurance landscapes. These are desperate times requiring creativity and a fresh approach to stay afloat and keep things moving ahead.
Cash is King
The most obvious impact for many law firms is a cash crunch, making it challenging to meet operational expenses, much less fund costly and time-consuming litigation. The situation has created a flood of inquiries for litigation funding firms, even in practice areas not familiar to this form of financing.
For example, Burford Capital reported a jump in inquiries from patent law firms, which historically have not used litigation funding. Validity Finance has also seen a spike in demand. Laina Miller Hammond, their manager and legal counsel, said: “The demand for capital is very real, and in many cases, it’s pressing… Validity is anticipating more finance opportunities in contract litigation, such as force majeure clauses, insurance recovery work, especially claims involving business interruption, and bankruptcy litigation.”
Pre-settlement litigation funding, however, is a risky and expensive capitalization source. It can involve a line of credit with monthly debt service on a one-year repayment schedule, or a non-recourse transaction with fees so high that the attorney retains a de minimus balance of the legal fee. Further, given the current economic volatility, many funders backed by hedge funds or family offices are refraining from extending new or additional capital, especially considering that many potential defendants may wind up insolvent due to the pandemic.
So, faced with the double whammy of a cash crunch and litigation funding reluctance, where can law firms turn to for immediate and pressing capitalization needs?
Post-settlement Funding Provides Immediate Relief
Post settlement funding can come to the rescue when your firm is under assault from pandemic- related issues, such as court slowdowns, defendant insolvency, and lack of other financing alternatives. It may not fix everything – but it will address cash needs with an infusion from cases that have settled with a delayed payout.
RapidFunds, for example, provides post-settlement funding to attorneys on contingent fee cases (i.e., class actions, wage and hour litigation, complex litigation, personal injury, medical malpractice, product liability, employment litigation, etc.) RapidFunds does not lend capital; instead, we purchase a portion of the plaintiff attorney’s anticipated receipt of a legal fee on a settled case. These transactions are non-recourse, and the amount of the fee assigned is transferred to RapidFunds when the plaintiff’s attorney receives his/her legal fee.
With the courts reopening soon and a tidal wave of litigation expected at a time when cash is king, RapidFunds can help provide that critical funding solution.
Connect with the RapidFunds Team
As an attorney, you know how much time it can take to receive settlement proceeds. Reach out to us at RapidFunds to learn more about reducing this window by contacting us using the form below or submitting an online application today.