Florida bill targeting third-party litigation financing stalls in House

Lawmakers who wrote the legislation intend to try again next year

Florida bill targeting third-party litigation financing stalls in House

Legal Insights

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A bill in the Florida legislature that would increase regulation of third-party financing of lawsuits is stalled in the state House.

The measure is stuck in the House Judiciary Committee and it might not emerge before lawmakers go home on March 8.

“Nothing is dead until the end of session,” Rep. Toby Overdorf, R-St. Lucie, said in a statement emailed through an aide. “However, the likelihood of the bill moving forward is low.”

Overdorf, who wrote the bill along with Rep. Tommy Gregory, R-Manatee, intends to introduce it again next year. The Senate Fiscal Policy Committee approved that chamber’s version of the bill earlier this month, 15-5. The Senate author, Republican Jay Collins of Tampa, also plans to re-introduce his bill in the next session of the legislature, an aide said.

The bill – H.B. 1179 and S.B. 1276 – would prohibit anyone financing a lawsuit from making any decision related to the civil action, administrative proceeding or claim, such as appointing counsel, selecting expert witnesses or devising litigation strategy.

Percentage of U.S. Home Insurance Lawsuits that Originate in Florida

The bill also would require attorneys accepting third-party funding to disclose the move to all parties involved in the case. Other provisions require indemnification of specified fees, costs and sanctions and void certain litigation financing agreements, among other restrictions.

The legislation targets an increasingly popular way to fund litigation in which a third-party, such as a private equity fund or a foreign sovereign wealth fund, provides financing in exchange for a portion of the settlement, if their side wins in court.

Helping plaintiffs or clogging courts?

Proponents of the approach say it helps plaintiffs take on deep-pocketed corporations. Critics say third-party funding has resulted in a spike in lawsuits that clogs court systems. In Florida, third-party funding is prominent in commercial litigation, property and personal injury claims. Swiss Re estimates the global third-party-funding market will reach $30 billion in 2028, according to CoverLink Insurance.

The bill faltering in the Florida legislature would be a step in “correcting the corrosive effect” of opaque third-party funding in Florida courts, said Mark Friedlander (pictured below), director of corporate communications for the Insurance Information Institute.

But Friedlander said he is not surprised by its demise.

“Members of the trial bar who sit in the Florida House succeeded in derailing this piece of legislation, which would have been very beneficial to Florida consumers and businesses,” Friedlander said.

The American Property Casualty Insurance Association is advocating for the Florida bill.

“Third party litigation financing is a secretive and unregulated practice that increases frivolous lawsuits and contributes to higher litigation costs, which are then passed on to households and businesses,” and can result in higher prices for gas, groceries and insurance, Logan McFaddin, APCIA vice president of state government relations, said in a statement. “Without important reforms, this issue is not going away and is likely to only get worse. In the final weeks of session, it remains critical for Florida legislators to implement common-sense reforms that address transparency and disclosure and protect consumers.”

Illuminating legal financing

But the International Legal Finance Association said Florida lawmakers were right to put the brakes on the third-party financing bills.

“ILFA is pleased to see that members of the Florida legislature have seen the preposterous and false premises of the claims pushed by the US Chamber of Commerce, including that national security could be implicated by commercial legal finance,” an ILFA spokesperson said in a statement.

As third-party funding of lawsuits becomes more prevalent, so has public awareness of the activity, said Michael John Miguel, a principal at the law firm McKool Smith.

“Funding has been around for quite a while, but it’s been prolific for the last 10 years,” Miguel said. “Companies want juries to know there’s money backing the plantiff.”

Indiana and Montana passed third-party-funding legislation last year. On the federal level, Sen. John Kennedy, R-La., has introduced a bill targeting international sources of lawsuit financing. Florida Republican Sens. Marco Rubio and Rick Scott sent a letter last November to federal judges in Florida asking for transparency surrounding foreign funding of litigation.

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