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Your personal injury settlement’s value is based upon three key items: damages, liability and insurance. 

Damages

The most important key variable in your settlement amount is damages.  Damages are best described as the injuries you suffered as a result of another party’s actions.  For example you get rear-ended by someone and sustain herniations or bulges in your back and neck.  You’re at work and you fall off a ladder and break your leg.  You slip and fall on a wet grocery store floor where they have no signs and you break your arm.  You get surgery and the doctor operates on the wrong side of your body. 

These damages need to be treated until you reach maximum medical improvement.   Treatment takes time and money and should be paid for by the at-fault party in the form of a settlement. 

Damages also include missed time from work.  You may miss work after being in an accident because you’re in too much pain to work, your injuries prevent you from doing your job properly or your employer fires you. 

If you don’t have any damages, have injuries, but aren’t treating for them you will have a hard time collecting any substantial settlement. 

Liability

The next variable in your settlement calculation is liability.  Who is at fault for your personal injuries?  In a rear-end auto accident, liability is clear cut.  The person who rear-ended you with their car is always at fault because they are obligated to keep a safe distance from the car in front of them. 

Liability in other cases isn’t always cut and dry.  The accident may partially be your fault.  If liability is shared it is up to the insurance companies to determine what percentage of fault each driver has.  If the accident is primarily your fault it will be more difficult to settle for damages. 

The litigation finance industry has been referred to as "the wild west of finance."  You’ll find many articles on the web pointing to interest rates in excess of 100%.  You may be asking yourself one, isn’t that usury and two, why would anyone in their right mind pay that much?  Well it’s not technically usury.  Under the current laws usury applies to loans and since repayment is contingent upon the outcome of a lawsuit, it’s not considered a loan.  People are willing to pay this much to borrow money because they have no other options.  If you’ve been in an accident, are out of work, have no savings and a low credit score what other options are there?  Also, when the plaintiff repays the amount owed, it comes from the proceeds of their lawsuit so they don’t feel it as much as if it were coming from their paychecks.

If you're researching lawsuit loans and wondering how they work a hypothetical example may help you understand the process.  

Case 1: Motor Vehicle Accident

A plaintiff was rear ended in a car accident where they suffered bulging and herniated discs of the neck from whiplash.  The plaintiff will be out of work for a few months.  The plaintiff’s rent and car payment is due at the end of the month.  They have exhausted all their savings and due to poor credit are unable to borrow money from a bank.  The lawyer thinks the client’s case is worth $50,000, but the insurance company has only offered $10,000.  Because of the state court’s heavy caseload, the lawyer informs their client that the case will take approximately 12 months to settle.

Option A. The client decides to take the $10,000 offer in opposition to their attorney’s advice.  After the attorney takes a third of the settlement in fees and the medical providers take another $2,000, the client is left with $4,700.

If you’ve been injured in an accident and need cash to cover expenses you may be searching for a lawsuit loan.  While a lawsuit loan is the most common search term for plaintiffs looking to borrow money against their case, it is not actually a loan. 

You may be wondering if you borrow money and have to pay it back, how is it not a loan?  Well, in the event that you lose your case, you won’t have to pay back the money you borrowed. 

First and foremost it’s important to note that while the term “lawsuit loans” is commonly used to search for pre-settlement and post-settlement funding, they are not actually loans. 

The Wall Street Journal recently published an article titled “Burned Carlyle Investor Backs Suit Against Private-Equity Firm.” 

The plaintiff is Louis J.K.J. Reijtenbagh, a Dutch investor who lost $60 million investing a fund titled Carlyle Capital Corporation, Ltd.  Carlyle Capital Corporation invested residential mortgage backed securities (MBS) tied to home mortgages in the United States.  In 2008 when the housing market collapsed, Carlyle Group was forced to liquidate the fund. 

In addition to Reijtenbagh and his affiliated companies suing Carlyle, there is also an entity representing the interests of other shareholders called Defendant Stichting Recovery CCC (“SRCCC”).  A “stichting” is a corporate entity formed to pursue what would be considered a class action suit in the US.  The formation of this entity speaks to the fear class action lawyers and firms have for litigation finance. 

There are two types of people who receive structured settlements

1. Those being compensated from personal injury lawsuits
2. Lottery winners

Structured settlements are designed to replace the income lost due to an injury to the plaintiff (and help the insurance company paying their settlement stay solvent) and so a lottery winner doesn’t squander their wealth.  While they have good intentions, there may come a time where the recipient needs a lump sum instead of periodic payments.  Recipients can sell their payments to a third party for a lump sum.  The amount they receive varies from company to company so it’s important to shop around.  You can sell a portion of your structured settlement rather than the entire thing.  For example you could keep 40% of the payments and give 60% of the payments to a third party in exchange for x amount of dollars.  Beware of offers that sound too good to be true or that can be completed in just 24 hours.  Structured settlements are complicated and take time.