Third-Party Litigation Funding Drives Up Tort Costs, New Data Shows
New data links third-party litigation funding to rising tort costs and verdict amounts.
Why it matters: Litigation finance affects how legal risks are managed and settlements negotiated. Rising tort costs impact law firms, insurers, and corporate legal teams by increasing litigation expenses and complexity.
- Third-party litigation funding (TPLF) market reached $15.2B in 2023, forecasted to hit $31B by 2028.
- Direct annual losses from TPLF-related tort costs hit $35.8B in 2024, affecting over 454,000 jobs.
- Median general liability verdicts above $1M rose 26% from 2010 to 2019, from $8.2M to $10.3M.
- Trucking accident verdicts surged 850% between 2010 and 2018, averaging $22.2M in 2018.
Third-party litigation funding (TPLF) involves outside investors financing lawsuits in exchange for a portion of the settlement or judgment. This funding model, fueled by hedge funds and private equity, is reshaping U.S. tort litigation.
The commercial litigation funding market was valued at $15.2 billion in 2023 and is projected to grow to $31 billion by 2028, according to legalclarity.org (legalclarity.org).
Research from the American Tort Reform Association shows direct annual tort losses linked to TPLF reached $35.8 billion in 2024, with broader economic impacts including $54.2 billion in gross product losses and 454,450 jobs affected (atra.org).
Increased tort costs align with rising verdict sizes. Median general liability awards over $1 million climbed nearly 26%, from $8.2 million in 2010 to $10.3 million in 2019. Trucking accident verdicts spiked by 850% from 2010 to 2018, averaging $22.2 million in 2018 (ciab.com).
Experts link these trends to TPLF’s role in litigation. Rebecca Fozo, Vice President at Zurich North America, explains that financiers "make it harder and more expensive to settle cases," driving higher settlement amounts and costs. Rob Berkley, CEO of Berkley Insurance, calls TPLF "jet fuel" that emboldens plaintiffs and amplifies verdicts, intensifying "social inflation"—the rising costs from broader societal and jury attitudes.
While TPLF provides plaintiffs with resources to pursue valid claims, it raises concerns about increased legal expenses and transparency. This evolving funding model complicates legal risk economics and poses challenges for law firms, insurers, and corporate legal departments.
By the numbers:
- $15.2 billion — commercial litigation funding market size in 2023
- $35.8 billion — direct annual tort losses attributed to TPLF in 2024
- 850% — increase in average trucking accident verdicts between 2010 and 2018
Yes, but: TPLF can increase access to justice for plaintiffs lacking resources but also drives up litigation costs and may reduce transparency.
What's next: Ongoing debates over tort reform and transparency in litigation funding could lead to new regulations affecting TPLF practices.