By: Dana Ellsworth

Personal injury cases can take months—or sometimes years—to resolve. During that time, an injured client may be unable to work while simultaneously facing medical bills, rent or mortgage payments, car payments, and ordinary household expenses. This financial pressure can become one of the most difficult aspects of pursuing a personal injury claim.
Pre-settlement funding has traditionally been marketed as a solution for the injured plaintiff. But when it’s used responsibly, it can also provide meaningful benefits to the attorney handling the case.

Giving Clients the Ability to Wait

Perhaps the most important benefit of pre-settlement funding is simple: it can give a client time.

Insurance companies understand that injured plaintiffs may be under significant financial pressure. A client who needs money immediately may be much more willing to accept an early settlement—even when the attorney believes the case is worth considerably more.

Consider a client who has been unable to work for six months following a serious accident. The client has exhausted savings, fallen behind on rent, and has an insurance company offering $75,000 to resolve a claim that the attorney reasonably believes could ultimately be worth substantially more.

From the client’s perspective, the decision may no longer be about maximizing the value of the case. It may be about making next month’s rent.

Pre-settlement funding can change that dynamic. By providing access to a portion of the anticipated recovery, funding may allow the client to address immediate financial obligations without necessarily accepting an early settlement solely because of financial distress.

That can benefit the attorney as well.

Reducing Pressure on the Attorney to Settle

Personal injury attorneys frequently find themselves wearing two hats: legal advocate and informal financial counselor.

Clients may call asking when their case will settle, whether the insurance company can “just pay something now,” or whether the attorney can somehow accelerate the process. These conversations can become increasingly difficult as a client’s financial situation deteriorates.

The attorney may know that additional discovery, another deposition, further treatment, or simply additional negotiations could materially improve the value of the claim. But every additional month becomes harder for a client who cannot even pay basic expenses.
Responsible pre-settlement funding can help separate the client’s immediate financial needs from the attorney’s litigation strategy. Instead of making decisions based primarily on the client’s next rent payment, the attorney can continue pursuing the case according to its legal merits.

Potentially Improving Settlement Leverage

Settlement negotiations are fundamentally influenced by leverage.

An insurance carrier that believes a plaintiff desperately needs money may have less incentive to increase its offer quickly. Conversely, a plaintiff who has the financial ability to continue litigating may be in a stronger negotiating position.

Pre-settlement funding does not change the underlying facts, liability, damages, or legal value of a case. What it can change is the client’s ability to withstand the time required to pursue that value.

For contingency-fee attorneys, the interests of the attorney and client are often aligned in this respect. A better recovery generally means a better outcome for the client and, correspondingly, a larger contingency fee for the law firm.

A relatively modest advance that prevents a client from accepting a substantially discounted settlement can therefore have economic benefits for everyone involved.

Helping Preserve the Attorney-Client Relationship

Financial stress and instability can also affect the attorney-client relationship.

Clients experiencing serious financial difficulties may become frustrated with how long litigation takes, even when the delay is outside the attorney’s control. Frequent calls about settlement timing can consume staff resources and create tension between clients and their legal teams.

Providing clients with information about legitimate funding options may alleviate some of that pressure.

The growth of the industry has also given attorneys a wide range of funding companies from which to choose. Companies such as High Rise Financial, for example, provide pre-settlement funding to plaintiffs while working directly with their attorneys throughout the life of the case. For law firms that regularly encounter clients facing financial pressure, developing familiarity with reputable funding providers can make it easier to give clients another option when waiting for a case to resolve becomes financially difficult.

Importantly, the attorney should not become the client’s lender or financial adviser. Instead, the attorney can explain how pre-settlement funding generally works, discuss potential implications for the case, and encourage the client to carefully review the terms before making a decision.

Funding Is Not Free Money

The benefits of pre-settlement funding must be weighed against its cost.

Funding companies assume substantial risk because repayment is generally contingent upon a successful recovery. If the plaintiff does not recover, the funding company may receive nothing. In exchange for assuming that risk, funding companies typically charge fees that can make pre-settlement advances considerably more expensive than conventional financing.

Those costs can become particularly significant in cases that remain unresolved for extended periods.

For that reason, funding should generally be approached as a strategic financial tool rather than an unlimited source of cash. Borrowing $5,000 to avoid eviction or keep a vehicle from being repossessed may have a very different cost-benefit analysis than repeatedly taking advances to support discretionary spending.

Attorneys should also be mindful of applicable ethical obligations, disclosure requirements, state law, and the potential effect funding arrangements may have on litigation or settlement proceeds.

A Tool, Not a Solution for Every Case

Pre-settlement funding has sometimes received a negative reputation because of it’s high costs and aggressive lending practices. Those concerns are legitimate, and clients should understand exactly what they are agreeing to before accepting an advance.

But dismissing litigation funding entirely overlooks the practical realities faced by many injured plaintiffs.

A client who cannot work and has no meaningful savings may technically have a valuable lawsuit while simultaneously being unable to pay the electric bill. Telling that client to simply wait another year for the case to resolve may not be realistic.

Used carefully, pre-settlement funding can provide breathing room. It can help clients meet immediate obligations, reduce pressure to accept premature settlements, and allow attorneys to pursue cases based on litigation strategy rather than financial emergencies.

Ultimately, the greatest potential benefit of pre-settlement funding may not be the money itself. It is the time that money can buy—and in personal injury litigation, having the ability to wait for the right resolution can sometimes make all the difference.