Insurers Wage ‘Logically Inconsistent’ War on Lawsuit Investors

Some of the largest US insurance companies are ramping up attacks on litigation funders, even as their peers offer related products.

Insurers blame outside funders behind plaintiffs’ lawyers in mass tort cases—like those alleging harm from talc, opioids, and weedkiller Roundup—for flooding the courts and driving up premiums. They’ve promised to keep up the pressure after legislation to impose a 40% tax on funders stalled in Congress, including by refusing to write policies for litigation finance companies.

But the pushback extends beyond the funders fueling mass tort suits. It also targets those who put money behind a wide range of commercial disputes, including many for which insurers offer their own contingent risk policies.

“I find it logically inconsistent,” said Ed Gehres, managing partner at Invenio LLP, a law firm focused on litigation finance transactions. “Whether they like it or not, the insurance companies cannot escape the fact that they are participants in the monetization of litigation.”

Major insurance brokerage firms like Marsh McLennan, Lockton, Willis Towers Watson, and Alliant offer litigants and law firms policies covering contingent risk. The policies underwrite case dockets, allowing policyholders to get cheaper capital from funders. Some insurers will also directly underwrite funders’ investments.

Still, insurers have joined the chorus of corporate interests to bring more regulation to the $16.1 billion litigation finance industry. Nationwide, Liberty Mutual, and Sentry were among the massive insurers who lobbied on the litigation finance tax bill, public records show.

The leaders of Chubb and Marsh McLennan pledged to continue fighting the industry after the measure was dropped from the sweeping tax and spending bill signed by President Donald Trump on July 4. They said rising jury awards for car accident cases have spiked the price of auto insurance, and blamed litigation finance for driving advertising in mass tort cases.

Marsh, an insurance broker and subsidiary of Marsh McLennan, places contingent risk policies but does not work with litigation funders, according to Daniela Raz, a senior vice president for the company. Raz worked at litigation funder Omni Bridgeway before joining Marsh in 2023 to work in its contingent liability group.

“Litigants and law firms on the plaintiff side of ‘the v’ seek out insurance solutions for a number of reasons, including that they can retain more proceeds than they would in an uninsured litigation finance transaction,” she said. “Marsh helps those clients by sticking to our knitting, which is insurance.”

Chubb, Lockton, Willis Towers Watson, and Alliant did not respond to requests for comment.

Products at Odds

Contingent risk policies put insurers at odds with their messaging. The product is often used in the M&A context, insuring against litigation to help a deal move forward, but there are also a variety of products used by and in tandem with litigation funders.

WIP, or “work in progress” insurance, allows law firms to insure their case dockets. The firms can then take out loans from funders against the policies. Funders will also insure their deals to protect their investment or provide funding to pay premiums to insurance companies.

Marsh places policies for litigation relevant to M&A, “works in progress” or WIP insurance for law firms on the plaintiffs’ side, and some defense-side judgment preservation insurance, according to Raz. The company does not place policies with litigation funders and has not placed WIP policies with mass tort or personal injury law firms, because their courtroom opponents tend to also be insured.

“Law firms focused on consumer litigation, including mass tort and personal injury cases, raise more concerns for insurers because the defendants in those cases are typically insured,” said Raz. “Conversely, commercial litigation firms specialize in cases alleging claims like antitrust, contract, and IP, in which there is typically no insurance on the defense side.”

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The litigation finance industry is typically broken up into two different categories: those who finance commercial cases like antitrust, breach of contract, and intellectual property, and those who issue loans to mass tort and personal injury law firms against their docket of cases. Some funders participate in both areas.

Consumer legal funding involves loans directly to plaintiffs, rather than their lawyers. The loans, against a potential award in a pending legal claim, are used for claimants’ personal expenses, not litigation.

The tax bill did not distinguish between these categories.

“It’s three distinct buckets and three distinct purposes,” said Eric Schuller, president of the trade group Alliance for Responsible Consumer Legal Funding. “So why are you lumping them all together and saying we’re going to do a one-size-fits-all?”

For Stef Zielezienski of insurance industry trade group American Property Casualty Insurance Association, the different types of funding are similar enough. The group, which says its members include 1,200 insurance companies, has lobbied on new regulations.

“The whole thing is third-party litigation finance,” said Zielezienski, APCIA’s executive vice president and chief legal officer. “I prefer to package it together. “

Insurers continue to issue new litigation-related policies after a short pause while the tax bill was pending, according to three people who work in the space.

Insurers’ concerns about litigation finance driving up costs doesn’t apply to commercial litigation, they said. Defendants in those cases rarely have insurance covering liability for business disputes.

Although the litigation finance bill died in Congress, Zielezienski said similar measures could appear again. President Donald Trump has urged lawmakers to continue using the reconciliation process to advance his agenda.

“If there’s an opportunity to pursue a taxation, it’ll be pursued,” Zielezienski said. “If there’s a second reconciliation effort, third reconciliation effort, I expect the [third party litigation finance] tax provision to be a part of that.”

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