Insurer Group Honors 3 Tennessee Lawmakers for Litigation Funding Law

The National Association of Mutual Insurance Companies presented its State Legislator of the Year Award to three Tennessee state legislators.

Reps. Curtis Johnson and Charles Sargent and Sen. Jack Johnson were recognized for helping to improve the insurance market in the state.

NAMIC specifically cited their efforts in making Tennessee the first state in the country to enact a law capping the interest rates charged by third-party litigation funders, or lawsuit lenders, which insurers say contribute to unnecessary costs in the judicial system.

This financing practice is currently unregulated in most states. “Capping interest rates will ensure a larger portion of judgments or settlements are preserved for injured parties, rather than paying uncapped interest rates to financers,” said Neil Alldredge, NAMIC’s senior vice president of state and policy affairs.

Litigation funding firms provide financing for lawsuits in exchange for a share of any settlement or judgment, if there is one.

“Together, Representatives Johnson and Sargent and Senator Johnson showed that third-party litigation funders could have a negative effect on the citizens of Tennessee,” said Charles M. Chamness, NAMIC president and CEO. “Lawsuit financing interferes with the claims settlement process, discourages reasonable settlements, increases litigation costs, and potentially increases litigation, which could result in higher premiums for insurance consumers.”

The U.S. Chamber of Commerce Institute for Legal Reform, a critic of third-party litigation funders, has urged they be regulated by the U.S. Federal Trade Commission and that their participation in lawsuit be disclosed.

Days after the Tennessee Litigation Financing Consumer Protection Act went into effect on July 1, a litigation funding firm said it would leave Tennessee. Ralph Shayne, CEO of Illinois-based Oasis Legal Finance, called the law a victory for the insurance industry over consumers.

“We weren’t bluffing. We told lawmakers the industry would have no choice but to cease service to Tennessee consumers, which is exactly what we are doing,” said Shayne. “It is lose-lose in Tennessee. Consumers will lose access to funding. Funding company employees will lose their jobs. The only winner is a billion-dollar insurance industry that now has even greater leverage over injured Tennessee citizens seeking fair settlements.”

Related Articles:

• States Need to Regulate Litigation Financing Industry: Professor
• Businesses Call for Controls on Litigation Funding Firms
• Litigation Financing Firm Exits Tennessee As New Law Goes Into Effect

Topics Lawsuits Mergers & Acquisitions Carriers Legislation Market Tennessee