American Property Casualty Insurance Association Urges IL Gov. Pritzker to Veto Weak Third Party Litigation Financing Bill

CHICAGO, Illinois, April 21 (TNSPol) -- The American Property Casualty Insurance Association issued the following news release:

The American Property Casualty Insurance Association (APCIA) is asking Illinois Gov. J.B. Pritzker to veto SB 1099, which would establish insufficient regulatory safeguards for third-party litigation financing transactions.

This legislation was approved earlier this month by the legislature with little debate and it will exacerbate an alarming trend in lawsuit abuse that preys on injured Illinoisans. "These transactions are essentially investments and have the effect of degrading the integrity of our civil justice system," said Steve Schneider, vice president, state government relations for APCIA.

Typically, these financing transactions are structured as an investment by the funder in a lawsuit in exchange for an agreed-upon payment by the litigant to the funder from the proceeds of the legal proceeding.

"A major concern regarding these transactions is that the litigant/borrower is often assessed a high interest rate," said Schneider. "SB 1099 authorizes an interest rate that shall be calculated as not more than 18 percent of the funded amount, assessed every six months for up to 42 months. The legislation does not outline if the 18 percent interest rate calculation is simple, compound interest, or cumulative interest over the 42-month period. This lack of clarity is problematic, as a cumulatively calculated interest rate could run as high as 126 percent! It is essential for the protection of consumers that this interest rate calculation be clarified."

Further, and equally important, the parties to these funding agreements are not required to disclose their existence, so that the courts and defendants are typically not aware of the presence or identity of the funders as parties with an interest in the litigation. It is in the financial interest of these funders that the litigation is prolonged, which discourages the amicable settlement of disputes. "It is critical, and we believe only fair, that all parties engaged in the litigation be informed of the existence of these agreements to ensure that both plaintiffs and defendants are equally equipped to pursue justice. This would more closely conform with existing Illinois law," said Schneider."

Without clarifying the interest rate calculation and including appropriate disclosure requirements, the enactment of this legislation will burden, not improve, Illinois's civil justice system, said APCIA in its veto request.