Personal injury lawsuits, such as motor vehicle accidents, are normally governed by state negligence laws. Whether protection is recognized by past case law or by statute, states protect their citizens against damages caused by the negligence of others. This protection is given in varying degrees from jurisdiction to jurisdiction.
Comparative v. Contributory Basics
One common example is the difference between comparative and contributory negligence. Contributory negligence is the legal doctrine which precludes recovery if a plaintiff “contributed” to the injury – EVEN IN THE SLIGHTEST DEGREE. An example of this would be barring an injured pedestrian who was j-walking when he was hit by another vehicle. If a jury or judge found that the j-walking helped cause the accident, the plaintiff would be barred from recovery entirely. collection laws in California
Sensing the unfairness of this arrangement, most states adopted a comparative negligence standard which only reduces the amount of damages by the percentage amount of the plaintiff’s fault. That is, if a jury found a pedestrian walking outside the crosswalk 10% at fault for the accident, the amount of recovery would be reduced by that amount. Many jurisdictions only allow recovery if the defendant was 51% at fault or greater.
Potential Lawsuit Funding Pitfalls
In light of the foregoing, the differences between comparative and contributory negligence among different jurisdictions raise significant issues for the advance funding of lawsuits for profit.
Lawsuit loans are structured so that if there is no recovery, the pre settlement advance does not get repaid. As such, any lawsuit funding investment places the ENTIRE amount of advanced capital at risk. Unlike other investments, such as taking a loss on the price of a stock or bond, a funded lawsuit which loses on its merits is a TOTAL loss for the lawsuit funding enterprise. Since it may be the difference between winning or losing the case, the applicable negligence standard is a significant factor when underwriting a lawsuit for purposes of funding.
Further, a lawsuit may be subject to a change of applicable negligence law during the proceeding. A possible scenario could involve a lawsuit initially filed in a comparative negligence jurisdiction but later is moved to federal court where a contributory negligence standard is applied. This could occur for various legal reasons.
Skillful attorneys can make an argument any plaintiff was at least partially at fault in an accident. This possibility may reduce or even eliminate the ability to collect monetary damages at all. For the lawsuit funding outfit, the chances of recovering the cash advance can be massively reduced.