Lawsuit Funding – Settlement Loans for Auto Accident Cases in No – Fault States
Settlement loan companies receive applications for a wide variety of lawsuits. By far the most common lawsuit funding transactions involve personal injury accidents. A large portion of these PI cases are automobile accident lawsuits alleging negligence of the other driver.
This post will discuss so called “No-Fault” automobile insurance legislation and its effect on the lawsuit funding industry.
A Change In Personal Injury Law For Automobile Accidents
Decades ago, car accident lawsuits involving soft tissue injuries were plentiful. So plentiful in fact, certain insurance interests sought tort reform because of alleged abuses.
In response tort reform legislation was passed in many jurisdictions. While specifics varied, so called “no-fault” insurance regulations mandated certain restrictions on suing negligent parties. The legislation limited the type of injuries compensable for negligence in auto accidents. In most cases, only permanent conditions as evidenced by imaging studies, fractured bones or loss of body parts, etc. could form the basis of a successful personal injury lawsuit.
Essentially, actions for personal injury for car accidents must meet a two pronged test in no-fault states.
1. The injury must be permanent in nature and evidenced by objective medical evidence.
2. The injury must have a significant negative impact on the plaintiff’s life.
First Prong -Objective Medical Evidence
The first prong of many no-fault provisions is that there must be objective medical evidence of injury.
Because many medical tests involve the testing of range of motion on patients, insurers believed the results were too easy to fake. For example, a doctor manipulates certain body parts on the patient who will then inform them when the movement is causing pain. As such, these tests are subjective in that the results are solely based on feedback from the patient himself.
Objective tests, such as x-rays, MRI’s, CT Scans and the like do not depend on patient feedback. There is either an abnormality or there is not. There is no grey area and no room for the defense to claim the patient is faking injury. You simply cannot fake a herniated disc or broken bone. It either is or it isn’t.
Utilizing this filter removed a great deal of soft tissue lawsuits in no-fault states. Soft tissue injuries are defined as injuries in which there is an injury but there is no finding of abnormality on any objective medical tests.
For example, a plaintiff who was injured in a car accident, whose neck and back were sore because of whiplash would otherwise have a cause of action against the negligent party for damages. Without a positive finding of abnormality on an objective medical study, this plaintiff will be barred from recovery under certain no-fault tort laws.
Second Prong – Significant Impact On Plaintiff’s Life
Above we discussed that many no-fault tort laws contain provisions requiring plaintiffs in auto accident personal injury actions to have permanent injury with objective medical evidence of injury. In some jurisdictions, judicial decisions and/or statutes also mandate the resulting injury have made a ‘significant’ impact on the plaintiff’s life. This issue is normally left for a jury to decide after hearing all of the evidence in the case. This includes how the accident and resulting injury negatively effects the plaintiff’s quality of life.
For example, a person who, prior to the accident, played a great deal of ‘pick-up’ basketball at the local gym, might pass this standard if after the accident was unable to play. Other examples might include a grandparent who was no longer able to play with his grandchildren or a weekend ballroom dancer being unable to dance because of her injury.
Implication on Lawsuit Funding Applications
By design, the passing of no-fault auto insurance regulations severely limited the type of compensable injuries sustained as a result of a car accident.
As you might expect, the presence of no-fault insurance laws make injuries such as herniated discs, ligament sprains, disc bulges and soft tissue “whiplash” or similar injuries difficult to fund for lawsuit cash advance funding companies. Placing these restrictions on the negligence cases creates an additional barrier to recovery. If questions such as what is a “significant impact” on a litigant’s life is left to a jury, there is simply more risk than there would be in other jurisdictions. Perhaps the jurors will not be fond of the plaintiff or think that he/she is insincere.
Of course, the plaintiff could come off as really sympathetic to the jury causing them to award more than typical damages. However, this does not help the lawsuit funding outfit because it does not earn any more than what is contractual agreed to at the time of funding.
Nonetheless, many settlement loan businesses offer advances on “marginal” cases in states with no-fault insurance laws. Often, the amounts advanced or the contractual repayment provisions reflect this additional risk.
While no-fault statutes changed the personal injury litigation landscape, injured parties are still able to recover for damages. Thus only changing the rules of the game, not the game itself.
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