Legal funding companies determine the amount of funding for a personal injury case based on a thorough evaluation of the case. This guide will explain the key factors that affect both the potential settlement value and the funding amount that may be provided. Understanding these factors can help plaintiffs know what to expect and how funding companies determine the appropriate advance.
What Determines Case Value
Legal funding companies assess important details about a case to determine its value. These companies, along with insurance companies and lawyers, typically evaluate the same key factors.
Personal injury cases typically involve two types of damages:
- Economic Damages: These are easily measurable financial losses, such as medical bills and lost wages.
- Non-Economic Damages: These are more difficult to calculate, such as pain and suffering.
How Funding Companies Determine Advances
Funding companies usually provide an advance based on a percentage of the expected settlement amount. This helps make sure that, after paying attorney fees, medical bills, and the advance, most of the settlement money is still left for the plaintiff.
To calculate the advance, funding companies start by reviewing important documents, such as medical records, accident reports, insurance papers, and the attorney’s assessment of the case. They also look at similar cases in the same area to help estimate the settlement amount. The estimate is then adjusted based on factors like how far along the case is, how strong the evidence is, the amount of insurance coverage available, the experience of the attorney, and how long it will take to resolve the case.
What Determines Settlement Value
In personal injury cases, medical expenses are typically the starting point in determining settlement value. Insurance companies often base the initial settlement offer on the total medical bills, adjusting the value according to factors such as the severity of the injuries, the duration of the treatment, the presence of permanent injuries, and the impact on the individual’s quality of life.
The Funding Approval Process
After the case value is estimated, the funding approval process generally takes 1-2 days. The steps include:
- Reviewing the application
- Verifying details with the attorney
- Analyzing the case documents
- Assessing the risk
- Determining the funding amount
- Preparing and signing the contract
Factors Impacting the Funding Amount
It is important to understand that legal funding companies are cautious when estimating how much funding to approve. Several factors can influence the final amount, such as disputes over liability, incomplete medical treatment, limited insurance coverage, prior legal funding, challenges in proving the cause of the injury, jurisdiction-specific issues, uncertainties regarding the case timeline, the strength of the defense, and past settlements in similar cases.
Case Study
Background:
Sarah, a teacher injured in a car accident, faced $85,000 in medical bills and $25,000 in lost wages. Her attorney estimated the case could settle for $250,000, but she needed financial relief to cover expenses.
Advance Calculation:
A legal funding company evaluated Sarah’s case by:
- Estimating a $250,000–$275,000 settlement based on damages and jurisdiction.
- Reviewing liability evidence, which strongly favored her claim.
- Assessing risks, including completed medical treatment and available insurance.
To ensure Sarah retained most of her settlement, the company approved a $25,000 advance (10% of the estimated settlement).
Outcome:
The advance helped Sarah cover expenses without settling prematurely, leading to a $275,000 final settlement.
Calculate Potential Settlement Value
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Conclusion
Legal funding is non-recourse, meaning repayment only occurs if the case is successful. The funding agreement will clearly outline the initial funding amount, the fee structure, repayment terms, payment priority, attorney obligations, settlement procedures, payoff calculations, and cancellation rights.
While calculators provide estimates, every case is unique. The actual settlement value and funding amount depend on the specific circumstances of each case. Working with experienced attorneys and reputable funding companies helps ensure fair funding while preserving the majority of the settlement for the plaintiff.
Note: This article provides general information about legal funding calculations. Specific funding amounts and terms will vary based on individual case details and funding company policies.
