Settlement loan companies receive applications for a wide variety of lawsuits. By far the most common lawsuit financing transactions involve personal injury accidents. A large portion of these PI cases are car accident lawsuits alleging negligence of the other driver.

This post will discuss “no fault” auto insurance legislation and its effect on the lawsuit financing industry.

A change in personal injury law for car accidents

Decades ago, because the lawsuits for accidents involving soft tissue injuries were plentiful. So plentiful in fact, certain insurance interests sought liability reform because of alleged abuses.

In response, legislative reform has been passed in many jurisdictions. While the details varied, the “no-fault” insurance regulations imposed certain restrictions on suing negligent parties. The legislation limited the type of injuries compensable for negligence in auto accidents. In most cases, only permanent conditions evidenced by imaging studies, broken bones or loss of body parts, etc. could form the basis of a successful personal injury claim.

Essentially, auto accident personal injury actions must meet a two-pronged test in no-fault states.

1. The injury must be permanent in nature and evidenced by objective medical evidence.

2. The injury must have a significant negative impact on the plaintiff’s life.

Tip one: objective medical evidence

The first aspect of many no-fault provisions is that there must be objective medical evidence of the injury.

Because many medical tests involve testing patients for range of motion, insurers believed the results were too easy to falsify. For example, a doctor manipulates certain parts of the patient’s body and will then inform him when the movement is causing him pain. As such, these tests are subjective in the sense that the results are based solely on feedback from the patient himself.

Objective tests, such as X-rays, MRIs, CT scans, and the like, are not dependent on patient feedback. There is an anomaly or there is not. There is no gray area and there is no room for the defense to claim that the patient is faking an injury. You just can’t fake a herniated disc or a broken bone. Either it is or it isn’t.

Using this filter eliminated a large number of soft tissue lawsuits in no-fault states. Soft tissue injuries are defined as injuries in which there is an injury, but no abnormalities are detected on any objective medical test.

For example, a plaintiff who was injured in a car accident, whose neck and back were sore due to whiplash, would otherwise have a cause of action against the negligent party for damages. Without a positive finding of abnormality in an objective medical study, this plaintiff will not be able to recover under certain no-fault tort laws.

Second tooth: significant impact on the plaintiff’s life

We previously discussed that many no-fault tort laws contain provisions that require plaintiffs in auto accident personal injury actions to have permanent injuries with objective medical evidence of injury. In some jurisdictions, court decisions and / or statutes also require that the resulting injury had a “significant” impact on the life of the plaintiff. This issue is normally left to a jury to decide after hearing all the evidence in the case. This includes how the accident and the resulting injury negatively affect the plaintiff’s quality of life.

For example, a person who, before the accident, played a lot of basketball at the local gym, could pass this standard if he was unable to play after the accident. Other examples could include a grandfather who was no longer able to play with his grandchildren or a weekend ballroom dancer who was unable to dance due to his injury.

Involvement in claims financing requests

By design, the passage of no-fault auto insurance regulations severely limited the type of compensable injuries sustained as a result of an auto accident.

Unsurprisingly, the presence of no-fault insurance laws makes injuries such as herniated discs, ligament sprains, disc bulges and soft tissue “whiplash” or similar injuries difficult for advance financing companies to finance. cash for lawsuits. Placing these restrictions on negligence cases creates an additional barrier to recovery. If questions like what is a “significant impact” on the life of a litigant are left to a jury, there is simply more risk than in other jurisdictions. Perhaps the jurors will not appreciate the plaintiff or will think that he is not sincere.

Of course, the plaintiff could seem really sympathetic to the jury and have it award more damages than typical. However, this does not help the lawsuit financing team because they are not earning more than what was agreed in the contract at the time of financing.

However, many settlement loan companies offer “fringe” advances in states with no-fault insurance laws. Often times, amounts advanced or contractual repayment provisions reflect this additional risk.

While the not-guilty statutes changed the landscape of personal injury litigation, injured parties can still recover for damages. Therefore, it only changes the rules of the game, not the game itself.

Thank you for your interest in the settlement financing business.