Third-Party Litigation Funding Disclosure Laws and Commercial Casualty Risk in 2026
Most commercial buyers picture a lawsuit as a contest between two parties and their lawyers. Increasingly, there is a third seat at the table — an investor. Third-party litigation funding, or TPLF, is capital supplied by an outside financier who covers a plaintiff’s legal costs in exchange for a share of any settlement or verdict. The funder is not a named party, bears no risk of a counterclaim, and often stays invisible to the defense. What began as a niche way to bankroll a single large case has matured into an asset class: Swiss Re and industry trackers put U.S. commercial litigation-finance assets under management at roughly $16.1 billion in 2024, and some 82% of U.S. law-firm lawyers now report using it — up from 9% in 2012.
This matters to you not because you plan to sue anyone, but because the capital flows the other way. When the plaintiff’s bar is backed by patient outside money, cases that once would have settled early are financed to hold out for a larger number. That is the quiet mechanism reshaping your casualty renewal — and most owners never see it working.
For years, funding agreements stayed hidden; no uniform rule required anyone to disclose them. That is changing. Across 2025 and 2026, a wave of states moved to surface what had been concealed. Georgia enacted litigation-funding transparency legislation in April 2025. Oklahoma and Utah — the latter through HB 330 — followed with transparency statutes of their own. New York’s Consumer Litigation Funding Act, effective June 2026, caps a consumer funder’s charge at 25% of the recovery. North Carolina went furthest: House Bill 315, signed in June 2026, bans the practice outright and authorizes civil penalties up to $50,000 per violation. Tennessee and Michigan are weighing their own measures.
Washington is moving in parallel, if slowly. The Tackling Predatory Litigation Funding Act, introduced by Senator Thom Tillis in May 2025, would impose a 40.8% federal tax on the profits funders earn, stripping away what supporters call a tax advantage. A separate effort, led by the U.S. Chamber’s Institute for Legal Reform, filed a March 2026 proposal to amend the federal civil rules so funders and their agreements must be identified at the outset of a case. These laws are meant to illuminate who is really financing the fight. None of it is settled, and the contrast between an outright ban in one state and mere disclosure in another is exactly the patchwork buyers must now navigate.
The link between funding and your premium runs through social inflation — the tendency of jury awards and settlements to rise faster than economic inflation can explain. Swiss Re attributes roughly 60% of the past decade’s growth in U.S. liability claims to non-economic factors rather than wages or medical prices. Nuclear verdicts — awards above $10 million — more than quadrupled between 2020 and 2024, with more than 130 recorded in 2024 alone, and the median award more than doubled over the same window. Jury attitudes have shifted alongside the money: 76% of consumers said damage awards were too low in 2025, against 58% in 2016.
Outside capital intensifies all of this. Funded plaintiffs can decline reasonable settlements and push toward trial or multi-district consolidation, which now accounts for a majority of federal civil cases. Defense costs climb, claims stay open longer, and carriers watch loss severity outrun the assumptions they priced against years earlier.
The arithmetic eventually reaches reserves. The “other liability” line — the bucket that holds your general liability, umbrella, and excess exposure — recorded its highest reserve charges in a decade in 2024, with adverse development reaching back to accident year 2015. When carriers discover that old claims cost more than they booked, they do two things at renewal: they raise price, and they narrow appetite. For middle-market buyers, that surfaces as firmer umbrella pricing, tighter limits offered per carrier, and sharper scrutiny of your claims history.
Here is the uncomfortable truth for a business owner — a single severe injury claim against a mid-sized company can now draw a verdict its limits were never built to absorb. Smaller firms carry thinner capital buffers and lower limits, yet juries will return a nuclear number against them when the facts are bad enough. Limits adequacy is no longer a box to check against last year’s renewal; it is the question.
You cannot legislate social inflation out of existence from your conference room, but you can refuse to renew on autopilot. The disciplined response is to treat casualty limits as a strategic decision rather than a renewal afterthought. That is the work our 4-Step Strategic Process is built for: Strategic Discovery to uncover your true exposure, Risk Assessment to test your limits against realistic verdict scenarios, Solution Design to structure primary and excess layers with intention, and Ongoing Optimization to adjust as the legal landscape keeps shifting. The firms that fare best are not the ones that chased the lowest number — they are the ones who took ownership of the risk before the market forced the conversation.
Sources: Risk & Insurance — Liability Claims Crisis: Non-Economic Inflation Reshapes Insurance Markets (January 2026); Claims Pages — Liability Claims Surge as Non-Economic Inflation Drives Nuclear Verdicts, Swiss Re Warns (January 2026); U.S. Chamber Institute for Legal Reform — A Uniform Federal Rule for Third-Party Litigation Funding Disclosure (March 2026); CaseGlide — Litigation Funding Disclosure Requirements by State (July 2026); Congress.gov — S.1821, Tackling Predatory Litigation Funding Act (119th Congress, 2025-2026); Proskauer Rose LLP — Senator Tillis Introduced a Bill Taxing Proceeds of Litigation Financing Agreements (May 2025); Actuary.info — Social Inflation & Litigation Trends 2026: The $529 Billion Challenge Reshaping Casualty Insurance (2026); Insurance Information Institute (Triple-I) — Legal System Abuse, Social Inflation Add Costs and Challenges for U.S. Casualty Insurance: AM Best (2024)
— Ryan Mefford, President & Risk Advisor