Commercial Litigation Funding and Liability Insurance: Mirror Images

Both liability insurance and litigation funding are designed to help the party deal with the consequences of litigation by shifting the costs and risks to someone else.   In both instances, three parties are involved: the funder, the lawyer and the client.  Insurance is on the defense side; litigation funding is on the plaintiffs’ side of the litigation. Litigation funding is seeking to maximize recovery to the plaintiff and insurance is trying to minimize payment to the plaintiff. Liability insurance is more widely accepted; people are more familiar with it as it was first introduced in the late 18th century, whereas litigation funding is a newer financial tool, being introduced almost a century later. The below chart provides a very general overview of similarities and differences between litigation funding and liability insurance.

	Insurance Companies	Litigation Funders
Similarities	Triangle: client, counsel, carrier	Triangle: client, counsel, funder
	Protect defendant from loss	Aid plaintiff in recovery of loss
	Manage case fees and costs	Track fees and costs for plaintiff
Differences	Exclusive control over litigation	Cannot control litigation
	Manages day-to-day litigation decisions, absent conflict	No management of day-to-day decisions
	Impose guidelines on lawyers	No right to audit or impose guidelines