Commercial dispute funding is outside capital that pays for a business’s legal claim, often in exchange for a share of any recovery, and it reshapes your insurance picture in ways many owners overlook. Treat any funding offer as a risk transfer decision: price the cost, check who controls the case, ask whether insurance can carry part of the outcome risk, and test your own liability program against funded claims. The timing matters. Marsh reported that U.S. casualty rates rose 6% in the third quarter of 2026 even as global commercial rates fell 5%. [10]

Key Takeaways

• Third-party litigation funding is an arrangement in which a funder that is not a party to the lawsuit agrees to help fund it. Funders are typically private firms that obtain money from investors. [1]
• Commercial funding is typically in the millions of dollars and is often repaid from a share of any court award, so the terms drive your net recovery. [1]
• Return structures vary. GAO notes that a funder’s return can be a multiple of the amount invested, a pre-negotiated share of the recovery, or a percentage rate of return. [2]
• Insurance is part of the market. About 21% of new commitments in Westfleet Advisors’ 2025 report were fully or partially insured. [3]
• Judgment preservation insurance can protect an award against reversal or reduction on appeal, but it usually carries exclusions, consent requirements, and cooperation duties. [8]
• Rules are moving. Georgia, Ohio, and Delaware have acted, and federal disclosure proposals remain under review. [12] [13] [14] [16] [17]
• Defendants are affected too. Insurers have linked outside funding to higher claim costs, so review limits, retentions, and defense-cost terms before a funded claim arrives.

Introduction

A business can meet litigation from two sides. It may hold a claim it cannot afford to pursue, such as a breach of contract, a patent dispute, or an unpaid receivable. Or it may be the defendant in a suit brought by a party with a funder behind it. In both cases, the legal budget, the settlement posture, and the insurance program are tied together, yet they are often managed by different people at different times of year.

This guide walks through six considerations for owners, finance leads, and risk managers. It relies on published material from the U.S. Government Accountability Office (GAO), Westfleet Advisors, Swiss Re, Marsh, federal rulemaking records, and state authorities. Published figures are identified as such. Nothing here is legal, tax, or accounting advice, and your counsel should confirm how any law or contract term applies to your situation.

What the Published Research Suggests

• Market scale: Westfleet Advisors’ 2025 report put new U.S. commercial litigation finance commitments at about $2.8 billion, with 39 active funders. [3] [4] [5]
• Insurance use: About 21% of new commitments were fully or partially insured, up from 19% the prior year, and contingent risk insurance played a growing role. [3]

What Is Commercial Litigation Funding, and Where Does Insurance Fit?

Commercial litigation funding is financing from a party outside the lawsuit that helps a business or its law firm pay for a legal matter. It is usually repaid from the outcome rather than from the company’s operating budget. GAO divides the market into commercial funding, between funders and corporate litigants or law firms, and consumer funding, between funders and individuals. [1]

Why do businesses use it? GAO reports that corporate plaintiffs and law firms use commercial funding to cover legal expenses or supplement operating budgets. Under portfolio arrangements, a company can use funding to expand while its own budget is tied up in litigation. Two funders told GAO that funding lets corporate plaintiffs move litigation costs off their balance sheets. [2] Treat that as a funder’s description, and ask your auditors how a specific arrangement is reported.

Insurance enters at several points. Liability and management liability policies respond when you are sued. Specialized litigation risk products, such as judgment preservation insurance, can respond when you are the claimant. Your retention, limits, and policy conditions decide how much of the financial risk you keep. This glossary of commercial insurance terms explains unfamiliar terms, and the graphic below summarizes the six considerations.

Consideration 1: Know the Structure and Who Is Funding

Funding comes in different shapes, and each carries different insurance consequences. An article in the National Law Review describes single-case funding, where money is advanced for one matter; portfolio funding, where the advance is secured by a group of cases so that a loss in one can be offset by recoveries in others; and law firm lending, where funds go to the attorney rather than the party with the claim. [9] GAO adds post-settlement financing, claim monetization, and judgment enforcement financing to the list. [2]

The market is concentrated in a modest number of funders. GAO, citing a Westfleet report on 2021, identified 47 active commercial funders with $12.4 billion in assets under management and $2.8 billion committed to new agreements that year, and it cautioned that no complete estimate of the total market exists. [2] Westfleet’s 2025 report counted 39 active funders, one of them new, and reported that portfolio deals made up about 64% of commitments. [3] [4] [5]

Two shifts stand out. The share of commitments going to the 200 largest U.S. law firms fell from 37% to just under a quarter, and the share that was fully or partially insured rose from 19% to 21%. [3] [5]

Consideration 2: Understand the True Cost and What You Give Up

The headline question is price, yet the sources are candid that public pricing data is thin. GAO says publicly available data on the market are limited and that its financial information came from a nongeneralizable sample of funders. [1] Its report notes that returns can be a multiple of the amount invested, a negotiated share of the recovery, or a percentage rate of return, and that total repayment can depend on how long the money is outstanding. [2] It does not publish commercial fee benchmarks, and neither will this article. Ask each funder to model your net recovery at several outcomes and durations.

Think about cost the way an underwriter thinks about total cost of risk: premium plus retained loss plus administration. Here, the funder’s share, any fees, the time value of a longer case, and the legal spend you still carry all belong in the same table. This guide to risk financing strategies explains how to test retentions against cash capacity, and the same discipline applies to a litigation budget.

Questions to put in writing before you sign:

• How does the funder’s return change if the matter runs longer than planned?
• Who pays appeal costs, and is that covered in the agreement?

Consideration 3: Weigh Funder Control Against Your Policy Conditions

Control is where funding and insurance most often collide. GAO reports that the seven commercial funders it interviewed said they did not make decisions about litigation strategy, and three said they lacked authority over whether to settle or proceed. The same report also flags that two trade associations and one report raised the risk that a funder could exert control over a case. [2] Both facts belong in your analysis.

Insurance policies have their own control provisions. Many liability policies require the insured to cooperate with the insurer, and many require the insurer’s consent before a settlement is made. Whether those conditions apply to your policy, and how they interact with a funding agreement, depends on the wording. In practice, compare three documents side by side: the funding agreement, any litigation risk policy, and your liability and management liability forms. Look for conflicts over who may settle, who selects counsel, and who must be told about a claim and when.

State law is also drawing lines. Georgia’s SB 69, which took effect January 1, 2026, requires litigation financiers to register with the Department of Banking and Finance. [14] Insurance Journal reports that the law bars funders from making decisions about attorney representation, settlements, and expert witnesses. [15] Ohio’s House Bill 105 was signed July 7, 2026, and, according to the National Federation of Independent Business, requires funding companies to register with the Attorney General and disclose the funding agreement after the case ends. [16] The Ohio Revised Code lists October 6, 2026 as the effective date of the registration section, which requires commercial litigation financiers to register with the Attorney General before doing business in the state. [17]

Consideration 4: Use Insurance to Transfer Litigation Risk

Specialized insurance can shift part of the outcome risk. Judgment preservation insurance (JPI) is litigation risk insurance that protects the holder of an award against the award being overturned or reduced on appeal. It can apply to summary judgments, trial verdicts, and arbitration awards. [8] The National Law Review adds that if the plaintiff receives less than the judgment, the insurer covers some or all of the shortfall after premium and any retention, and that insurers do not take over the case or pay defense or settlement costs. [9]

JPI also connects to funding. A funder may buy its own policy to protect its investment, or may require the plaintiff to buy one as a condition of funding. [8] The same sources mention after-the-event (ATE) insurance and litigation funding insurance, which protects funders against losing their investment, and describe these products as relatively new, with pricing and uptake still developing. [9] The sources reviewed for this article do not publish premium ranges, so request quotes rather than relying on a rule of thumb.

Read the limits before you rely on the product:

• Exclusions: Policies often carry a narrow fraud and misrepresentation exclusion. Attorneys’ fees and appeal costs are typically not covered, though defense-cost coverage may be negotiable. [8]
• Settlements: Coverage generally does not extend to a shortfall if the plaintiff settles for less than the trial judgment before a final, nonappealable judgment, unless the insurer consents. [8]
• Collectability: JPI usually does not protect against a defendant being judgment proof. [8]
• Control and disclosure: Policies may require insurer consent to settle or change counsel, require cooperation, and a court may compel disclosure of the policy. [8]

Because the underwriting looks at the quality of the claim and the file, a business with organized documentation is generally better placed to discuss terms. This overview of factors that influence insurability is a good starting point for preparing that file.

Consideration 5: Prepare for Disclosure and Changing Rules

Funding arrangements that were once private are being pulled toward the courtroom. Delaware Superior Court Civil Rule 26(b) was amended effective September 30, 2026. Where an agreement meets the rule’s definition, opposing parties can seek discovery into its existence, the identities of the parties, and which aspects of the litigation the funder may control. Without a showing of cause, they generally cannot obtain the agreement itself, and even then production is limited to the portion addressing control rights. [12]

At the federal level, nothing is final. The Advisory Committee on Civil Rules’ May 6, 2026 report says a proposal to amend Rule 26(a)(1)(A) to require disclosure has been on the agenda for more than a decade, that the subcommittee continues to gather material, and that no amendment has been proposed for publication. [13] Dechert reports that an October 2026 subcommittee report warned that mandatory disclosure of arrangement details could raise serious work product problems. [12]

Congress is also active. On February 11, 2026, Senators Kennedy, Grassley, Tillis, and Cornyn introduced the Litigation Funding Transparency Act, which would mandate disclosure of third-party litigation funding in mass tort or class action lawsuits. [11] Check the bill’s current status before relying on it.

Consideration 6: Protect Your Balance Sheet When You Are the Defendant

Not every owner will ever seek funding, but any owner can be sued by someone who has it. Swiss Re’s 2021 report described litigation funding as a $17 billion global industry, with 52% of that money spent in the United States, and viewed it as a contributing factor to social inflation. [6] Triple-I has said that outside investors can help prolong lawsuits and may push settlements higher, which increases insurers’ legal costs, while acknowledging that the effects are hard to measure. [7] A funder-side commentator disputed Swiss Re’s link between funding and verdict size, so treat the causal question as contested. [6]

The pricing backdrop is relevant. Marsh reported that U.S. casualty rates rose 6% in the third quarter of 2026, after a 7% rise in the second quarter, while the U.S. composite rate fell 1%. [10] In other words, liability coverage is not getting cheaper in step with property. Testing your program now is more useful than discovering a gap after a suit is filed.

Walk through a funded claim against your own policies:

• Limits: Would your per-claim and aggregate limits absorb a severe but realistic verdict? This post on negligence and its impact on commercial liability shows how to frame that test.
• Retentions: Can your balance sheet fund the deductible or self-insured retention in a bad year?
• Defense costs: Do defense costs sit inside or outside your limits, and what does a longer, better-funded case do to them? Many professional liability forms extend to defense costs, as this explanation of errors and omissions coverage
• Policy triggers: Is the policy claims-made, and has every demand or notice been reported within the required window?
• Documentation: Are contracts, incident reports, and corrective actions organized and retrievable?

Practical Checklist Before You Sign a Funding Agreement

Use this list to prepare for a conversation with your counsel and your broker.

• Define whether you are seeking funding as a claimant, defending a funded claim, or both.
• Identify the structure: single case, portfolio, monetization, or law firm financing.
• Model your net recovery at several outcomes and case durations.
• Confirm what the funder is repaid from and what happens if the case is lost.
• Compare the funder’s control rights with the cooperation and consent clauses in your policies.
• Ask about judgment preservation, ATE, or contingent risk insurance, and request written quotes.
• Identify who pays appeal costs and who must approve a settlement.
• Ask counsel how privilege and work product apply to funder communications.
• Check limits, retentions, and defense-cost terms on your liability and professional policies.

Turning Funding Decisions Into Stronger Coverage

Weighing funding terms against policy language takes judgment as well as data, and a broker adds value at that point. Infinity Insurance Partners is an insurance brokerage with offices in Scottsdale, Arizona, and Albuquerque, New Mexico. Its property and casualty services include exposure analysis, retention analysis, claims analysis, loss control techniques, OSHA compliance and reporting, safety education and training, and the development of safety policies and programs. Its risk management page describes a Risk Insights publication on current property and casualty issues, and the blog offers more guidance on claims, liability, and coverage decisions.

Before a review, be ready to share:

• Several years of loss runs and current exposure data.
• Current policies, including retentions, limits, and notice provisions.
• Any funding proposal, term sheet, or litigation risk quote you have received.

Ready to compare your coverage with your litigation exposure? Contact Infinity Insurance Partners to request a consultation ahead of your next renewal.

Frequently Asked Questions

What is third-party litigation funding?

GAO defines it as an arrangement in which a funder who is not a party to the lawsuit agrees to help fund it. Funders are typically private firms that obtain funds from investors. [1]

What is judgment preservation insurance?

It is litigation risk insurance that protects the holder of an award against the award being overturned or reduced on appeal. It typically has exclusions, may require insurer consent to settle, and usually does not protect against a defendant being judgment proof. [8]

Are funding agreements discoverable?

It depends on the court and the state. Delaware’s amended Superior Court rule allows discovery into a funding agreement’s existence, the parties, and funder control rights, but not the economic terms without cause. [12] Georgia’s law makes financing agreements subject to disclosure in discovery, as Insurance Journal reports. [15]

Is there a federal rule on funding disclosure?

Not yet. The Advisory Committee on Civil Rules continues to study the question and had not proposed an amendment for publication as of its May 2026 report. [13]

Research and Further Reading

[1] U.S. Government Accountability Office, Third-Party Litigation Financing: Market Characteristics, Data, and Trends (GAO-23-105210), summary page.

[2] U.S. Government Accountability Office, GAO-23-105210, full report (PDF).

[3] Risk & Insurance, Litigation Finance Capital Commitments Rebound 23% After Two-Year Contraction (March 27, 2026), reporting Westfleet Advisors’ 2025 Litigation Finance Market Report.

[4] ABA Journal, BigLaw’s share of litigation funding dropped in 2025 (March 26, 2026).

[5] Bloomberg Law, Big Law Cuts Back on Investor-Funded Lawsuits as Scrutiny Grows (March 18, 2026).

[6] Claims Journal, Swiss Re: Litigation Funders Driving Social Inflation, ‘Outsize’ Verdicts (December 10, 2021).

[7] Reinsurance News, Third-party litigation funding is exacerbating claims inflation: Triple-I (August 15, 2022).

[8] American Bar Association, Business Law Today, Risky Business: Insuring Damage Awards (March 2024).

[9] The National Law Review, Litigation Funding Series: Types of Commercial Litigation Funding and Role of Insurance (March 25, 2024).

[10] Marsh, Global commercial insurance rates fall 5% in Q3 2026 (press release, October 21, 2026).

[11] Office of Senator John Kennedy, Kennedy, Grassley, colleagues introduce bill to expose third-party funding behind lawsuits (February 11, 2026).

[12] Dechert LLP, Delaware Narrows the Lens on Litigation Funding Discovery (October 28, 2026).

[13] Advisory Committee on Civil Rules, Report to the Standing Committee (May 6, 2026), uscourts.gov.

[14] Georgia Department of Banking and Finance, Litigation Funding.

[15] Insurance Journal, Litigation Funding, Other New Laws in SE States Could Impact Liability Insurance (January 2, 2026).

[16] National Federation of Independent Business, Small Businesses Thank Gov. DeWine for Signing Crucial Litigation Financing Bill into Law (July 7, 2026).

[17] Ohio Revised Code, Section 1357.08, House Bill 105, 136th General Assembly (effective October 6, 2026).