There are many terms commonly used in the legal funding industry and are important for plaintiffs to understand when entering into funding agreements. This week we’re taking a look at underwriting and how it works in the legal funding process.
Underwriting in legal funding refers to the process by which a funding company evaluates the merits and potential outcomes of a lawsuit before providing financial assistance to the plaintiff or law firm. The underwriting process helps the funding company assess the risk involved in providing funding and determines the terms of the funding agreement.
The underwriting process in legal funding is designed to assess the viability of a case and ensure that the funding company makes informed decisions about providing financial assistance while managing its own risk.
Let’s take a look at how underwriting works in most situations.
Case Evaluation
The underwriting process begins with a thorough evaluation of the legal case. This includes reviewing relevant documents such as the complaint, evidence, legal briefs, and any other pertinent information provided by the plaintiff or their attorney.
Assessment of Merits
The funding company assesses the strength of the case, including the likelihood of success based on legal precedent, the strength of the evidence, and the credibility of witnesses.
Evaluation of Damages
The underwriter examines the potential damages that the plaintiff may be entitled to if the case is successful. This includes assessing economic damages (such as medical expenses, lost wages, and property damage) as well as non-economic damages (such as pain and suffering).
Review of Legal Fees and Costs
The underwriter considers the estimated legal fees and costs associated with pursuing the case, including attorney fees, court expenses, expert witness fees, and other litigation costs.
Financial Situation of the Plaintiff
The underwriter may also assess the financial situation of the plaintiff to determine their ability to cover legal expenses independently.
Risk Assessment
Based on the information gathered during the evaluation process, the funding company assesses the risk of providing funding for the case. This involves weighing the potential rewards against the risks involved, including the likelihood of success, the amount of damages sought, and the overall financial viability of the case.
Offer Terms
Once the underwriting process is complete, the funding company determines the terms of the funding agreement, including the amount of the advance, the funding fee, the repayment terms, and any other relevant conditions.
Decision
Finally, based on the underwriting analysis, the funding company decides whether to offer funding to the plaintiff or law firm and communicates the terms of the offer.
Legal Funding From Cash Now Funding Group
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