As litigation financing becomes more and more prevalent, defense attorneys need to know how to address it head-on in the defense of the case. This article will suggest some of the options available to defense counsel.
Perhaps at one time, there was a justification for litigation financing. Whatever it was, that need has been overshadowed by the resulting control the financing company obtains over the litigation – to the detriment of all parties.
Typically, the contract which the plaintiff signs with the financing company requires that the Plaintiff not submit her medical bills to any health insurer. The reason for this is clear – an insurer will be able to satisfy the bills for less than the face value. The lower number reduces the settlement value of the case, any likely verdict or settlement, and the repayment of principal and interest to the financing company.
The typical off-shoot of such a provision is that either the financing company or Plaintiff’s counsel sends the plaintiff to a select group of medical providers who have agreed in advance to treat all patients referred by the financing company or plaintiff’s counsel under a Letter of Protection (or some similar arrangement). The medical providers’ charges may or may not be in keeping with that charged in the community. In that way, the provider’s bills are not reviewed by an insurer, are not reduced by insurer payment, and do not have to be paid until the conclusion of the case. Presumably, a premium is added to the charge to account for a delay in payment.
Plaintiff thereby falls out of the standard medical care network and into a network of providers who are incentivized to run tests, diagnose conditions, and prescribe treatment at the outer limits of or beyond what is reasonable and necessary.[1]
All of this is done to artificially increase the value of the case. In all jurisdictions, the Plaintiff has a duty to mitigate her damages. Failure to submit the bills to a health insurer is a failure to mitigate damages. Unnecessary treatment and exorbitant charges under a Letter of Protection fail to meet the legal requirements of treatment that are a proximate result of the accident, of treatment that is necessary for the condition, and of charges that are in keeping with those in the relevant medical community. They may even raise issues about the actual existence of the condition purportedly diagnosed. Evidence of this conduct is discoverable and admissible.
Lastly, it is easy for a plaintiff to over-extend with the borrowing so that he/she is “upside-down” in what is owed to the financing company. That is because the money is so enticing and easy at the beginning, the plaintiff continues to borrow at an exorbitant interest rate and ends up borrowing more than the case is worth. Such a condition leads to greater intervention by the financing company in the control of the case and further entices unnecessary referrals, tests, diagnoses, and treatment.
Defense counsel should actively investigate the presence of litigation financing, issue discovery to find out if it is present, issue subpoenas to the financing company where it is present, consider retaining an expert to respond to these issues, and pursue any other discovery necessary to position herself to prove these issues at trial. The only way to stop this activity is to bring it to light before the jury and thereby eliminate any financial incentive to participate in it.
[1] There can often be emails in the financing company files specifically referring the plaintiff to a certain doctor in order to obtain a plaintiff-friendly diagnosis.
A founding member of Christian & Small, Eddie Eliott was a long-time partner with its predecessor firm, Rives & Peterson, and has been trying cases in federal and state court for more than 30 years. Eddie’s experience includes retail and premises liability, transportation, product liability, pharmaceutical litigation, medical malpractice, and a variety of insurance cases. He combines his courtroom expertise and knowledge with the best technology available, efficient management of rigorous discovery demands, and an impeccable ability to organize and comprehend massive amounts of documentation. His reputation as a skilled litigator is recognized by his inclusion in the American Board of Trial Advocates (ABOTA), Best Lawyers in America® and Alabama Super Lawyers® in areas including Insurance Law, Transportation Law, Personal Injury Litigation and Mass Tort Litigation.
About Christian & Small
Christian & Small LLP represents a diverse clientele throughout Alabama, the Southeast, and the nation with clients ranging from individuals and closely-held businesses to Fortune 500 corporations. By matching highly experienced lawyers with specific client needs, Christian & Small develops innovative, effective, and efficient solutions for clients. With offices in Birmingham, metro-Jackson, Mississippi, and the Alabama Gulf Coast, Christian & Small focuses on the areas of litigation and business, is a member of the International Society of Primerus Law Firms, and is the only Alabama-based member firm in the Leadership Council on Legal Diversity. Our corporate social responsibility program is focused on education, and diversity is one of Christian & Small’s core values.
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