Can You Still Get Paid Even After Losing a Case?

By Jonathan R. Tung, Esq.

We’ve all heard of car insurance, but what about case insurance? Well, that’s the basic service being offered by two personal injury lawyers out in Florida who launched their company Level Insurance last month.

It’s too soon to tell if this is going to be a golden goose for them, but it does raise some interesting strategy (and ethics) questions. But with the shifting paradigms of litigation financing, we’re hardly rattled anymore.

The Contingency Chasm

It basically goes something like this. A personal injury case (particularly a complex one) can take years and many dollars out of the plaintiff’s attorney. In most PI cases, the plaintiff’s attorney signs on with the injured party for a contingency fee. The percentage can range anywhere from very low to as high as 40 percent.

The problem, as we all know, is that there is no guarantee of winning. This translates into lost effort, time and investment. Pretty soon, you could find yourself in a chasm of debt for a client’s case that didn’t go the way you originally intended.

Enter a Safety net

The two lawyers in question, Justin Leto and Larry Bassuck launched their case-insurance company last month with the hopes of getting in on the ground floor of what could be a big niche market. The idea is that, for a flat fee of 7 percent, Level Insurance will cover your lost fees and other costs up to $100,000. The catch is that you must lose your case.

That’s right. Your case has to go into a steaming pile of a wreck and you must lose. There is no settlement. There is no dismiss. The necessary condition is that you lose in court.

No Conflicts, of Course!

You’ve already thought up of the potential kink in the business plan, we’re guessing. Why not just throw your case and forget the ethics, as can happen at as a strategy at the Olympics?

Well, there is at least one safeguard against doing that. First, you must purchase Level Insurance’s plan 90 days before filing court papers. This at least is one filter. We’re also guessing that the pair also invests heavily in investigators who make sure that policy-holders aren’t up to any fraud shenanigans.

The founders don’t seem to be particularly worried, apparently. “Your end game with a contingency-fee case after 2-3 years of hard-fought litigation is to earn that fee,” Bassuk says. “If I give you back all your costs with no interest I don’t see that as an incentive to swing for the fences.”

What if You Could Be Paid to Lose a Case?

By Lisa Needham

Garden variety litigation financing has been around quite a while in the personal injury arena. Parties (typically plaintiffs) are given up-front cash in exchange for a portion of their payout from a case when they win. Of late, it has expanded to other lines of practice and warrants keeping an eye on it if you practice in family law or business litigation.

Those types of arrangements offer your client some security, but what about you? Is there any recourse you have to guarantee that you get paid if you have a case that goes sideways? Apparently, yes.

Attorneys Justin Leto and Larry Bassuk launched Level Insurance last month and it’s too early to say whether the product is a success but they hope to carve out a niche in competition with existing lenders who finance plaintiff lawyers with high-interest loans, often secured by personal property. […]

Leto and Bassuk, Miami personal-injury lawyers, decided insurance could provide a better mechanism for keeping the litigation rolling. Level is offering insurance policies for up to $100,000 at a flat fee of 7%. Lawyers must purchase the policies within 90 days of serving papers on the defendant and they only collect if they lose.

The appeal of this is easy to see. If you’re working on contingency, you can run up an awful lot of fees and costs and end up with nothing. It raises some ethical quandaries, however. What about the idea that an attorney would consider just tanking a case to get the $100K and be done with something thorny or long-running?

Well, first there’s the hope that people just wouldn’t do that because it is unethical as can be. The real line of defense, most likely, is that you have to lose. Not settle, not remove yourself from the case. Lose.

For most attorneys, the idea of losing at trial (or via a motion to dismiss or summary judgment) is pretty unappealing to one’s ego and reputation. That said, Level Insurance isn’t vetting the cases they insure, which means that someone unscrupulous might take a complete loser of a case just for the payout.

No matter what, it’s a brave new world for litigation financing when attorneys can insure themselves against their own losses. Expect a range of ethics issues we haven’t even thought of yet to spring from this.

Lawyers Launch Insurance For When A Case Crashes

By Daniel Fisher

You buy insurance to cover you in case your car crashes. Now lawyers can buy insurance in case their case crashes. It’s another take on a movement that has some academic street cred: Financing plaintiffs so they can persist longer in litigation against corporations and insurance companies that normally have cash and time on their side.

Attorneys Justin Leto and Larry Bassuk launched Level Insurance last month and it’s too early to say whether the product is a success but they hope to carve out a niche in competition with existing lenders who finance plaintiff lawyers with high-interest loans, often secured by personal property. Another alternative is financing companies — for legal reasons, they say they aren’t lenders — who “invest” in personal-injury suits for a percentage of any winnings.

There are conflicts inherent in any such arrangement, especially if lawyers put pressure on their clients to accept a settlement in order to pay back their own loans. Ethics rules in every state prohibit investors from exercising any type of control over the conduct of litigation they finance, but nasty fights can break out when plaintiffs sell pieces of their case to multiple lenders and don’t collect enough to pay them all off.

Leto and Bassuk, Miami personal-injury lawyers, decided insurance could provide a better mechanism for keeping the litigation rolling. Level is offering insurance policies for up to $100,000 at a flat fee of 7%. Lawyers must purchase the policies within 90 days of serving papers on the defendant and they only collect if they lose. Level is the managing general agent and Aspen Insurance insures the risks.

“At the end of day if I have a bad case and it goes real far south the only asset I have to cover costs is personal assets or the assets of the firm itself,” said Bassuk. “This provides blanket coverage so the focus isn’t on dollars and cents but on the merits of the case.”

Unlike litigation-finance shops, Level isn’t vetting cases. Doesn’t that give lawyers an incentive to buy a policy and blow $100,000 on a long-shot case?

“Your end game with a contingency-fee case after 2-3 years of hard-fought litigation is to earn that fee,” said Bassuk. “If I give you back all your costs with no interest I don’t see that as an incentive to swing for the fences.”

Costs mount quickly in a med-mal or complex injury case. A neurosurgery expert can cost “$50,000 and well into six figures,” Bassuk said. “And if there’s a trial loss that money’s gone.

Level faces stiff competition from established plaintiff lenders including Oasis Finance and Gerson Keller Capital. It joins a number of firms targeting the low end of the litigation market, and it remains to be seen if the returns there justify the investment.

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