Legal funding glossary

A

Advance: The money a funding company pays a plaintiff before their case resolves. Called an advance rather than a loan because it is drawn against an asset you already own — your claim — instead of being lent to you personally. #
Adjuster: The insurance company employee who investigates your claim and decides what the insurer is willing to pay. Their job is to close the file for as little as possible, which is why an early offer is rarely the best offer. #
Attorney acknowledgment: A short document your lawyer signs confirming they are aware of the funding agreement and will pay the funder out of the settlement proceeds at disbursement. It does not make your attorney responsible for repaying anything. #
Attorney of record: The lawyer formally representing you in the claim. Legal funding requires one, because the funder relies on that attorney for case documents and for repayment at settlement. #

B

Bodily injury coverage: The part of an at-fault driver's auto policy that pays for injuries they cause. Its limit is often the practical ceiling on what a car accident case can recover, which makes it one of the first things an underwriter checks. #
Buyout: When one funding company pays off a plaintiff's existing advance from another company and replaces it with a new agreement. Usually done to consolidate multiple advances or to move off worse terms. #

C

Cap: A contractual ceiling on the total amount a plaintiff can owe on an advance, regardless of how long the case takes. Not every agreement has one — if yours does, it should be stated plainly on the first page. #
Case value: A conservative estimate of what a claim is likely to recover, based on liability, injuries, treatment and available insurance. Funding decisions are built on this number, not on what a plaintiff hopes to get. #
Champerty: An old legal doctrine against outsiders funding someone else's lawsuit in exchange for a share of the proceeds. Most states have narrowed or abandoned it, and consumer legal funding is expressly permitted in many, but it is the historical reason the industry is structured as a purchase. #
Comparative negligence: The rule in most states that reduces your recovery by your own share of fault. If you are found 20% responsible, you collect 80%. Underwriters weigh this because it directly shrinks the pot the advance is repaid from. #
Compounding: When the cost of funding is charged on the balance including previously accrued charges, so the amount owed grows faster over time. The alternative is simple, non-compounding pricing, where charges are calculated only on the original advance. #
Contingency fee: The arrangement where your attorney is paid a percentage of what they recover for you and nothing if they lose. Legal funding requires it, because it aligns your lawyer's incentive with yours and with the funder's. #

D

Damages: The money a claim seeks. Economic damages are things with receipts — medical bills, lost wages, property damage. Non-economic damages cover pain, suffering and loss of enjoyment of life. #
Demand letter: The package your attorney sends the insurer laying out liability, injuries, treatment and the amount they want. It is often the single most useful document an underwriter can read, because it is your own lawyer's valuation of the case. #
Disbursement: The final step of a case, when the settlement money is divided: attorney fees, case costs, medical liens, any funding advance, and then the plaintiff's share. Funding is repaid here and nowhere else. #
Discovery: The pretrial phase where each side exchanges documents, answers written questions and takes depositions. It is the single biggest reason cases take years, and the main reason plaintiffs run out of money before settlement. #

E

Equitable lien: The interest a funder takes in the proceeds of your claim. It attaches to the money your case produces, not to you, your income, or your property. #

F

Funding agreement: The contract between you and the funder. It should state the amount advanced, exactly what you will owe at settlement, the cancellation period, and the fact that repayment comes only from the proceeds of your claim. Read it. Ask about anything you do not understand before signing. #

L

Letter of protection (LOP): A promise from your attorney to a medical provider that the provider's bill will be paid out of your settlement, so you can get treated now without paying up front. Common in injury cases where the plaintiff has no health insurance. #
Lien: A claim against your settlement money that must be paid before you receive your share. Medical providers, health insurers, Medicare and funding companies can all hold one. The total of all liens is why underwriters care about more than headline case value. #
Liability: Legal responsibility for causing the harm. In funding, "clear liability" means fault is not seriously in dispute — a rear-end collision, a documented code violation — and it is the strongest single factor in an approval. #
Lawsuit loan: The everyday term people search for when they mean pre-settlement funding. It is not accurate: a loan must be repaid regardless of outcome, while a non-recourse advance is repaid only from a recovery. The phrase persists because that is what people type. #

M

Mass tort: Litigation where many plaintiffs are injured by the same product, drug or event but each keeps a separate case with its own damages. Distinct from a class action, where one judgment covers everyone. #
Mediation: A settlement conference run by a neutral third party. Many cases resolve here rather than at trial, and a scheduled mediation date is a useful signal to an underwriter that a case is approaching resolution. #
MMI (maximum medical improvement): The point at which a doctor concludes your condition will not improve further with treatment. Attorneys usually wait for it before valuing a case, because until then nobody knows the full extent of the injury. It is also a common reason cases sit unresolved for a year or more. #

N

Non-recourse: The defining feature of legal funding. The funder's only source of repayment is the proceeds of your claim. If the case recovers nothing, the plaintiff owes nothing, and the funder cannot pursue their wages, bank accounts or property. #
Negligence: The failure to use reasonable care, and the legal theory behind most injury claims. Proving it generally requires showing a duty, a breach of that duty, and harm caused by the breach. #

P

Plaintiff: The person bringing the claim. In legal funding, the plaintiff is the customer — the advance is made to them, not to their attorney or their firm. #
Policy limits: The maximum an insurance policy will pay. When damages exceed the limits and the defendant has no other assets, the limits effectively become the case value — which is why underwriters ask about coverage early. #
Pre-settlement funding: Cash advanced to a plaintiff against a portion of the expected proceeds of a pending claim, repaid only if and when the claim recovers. The industry's own name for the product described throughout this site. #
Prior funding: An advance a plaintiff has already taken on the same case, from any company. It has to be disclosed, because it reduces how much of the expected recovery is left to support new funding. #

R

Rescission period: A window after signing during which you can cancel the funding agreement, return the money, and owe nothing further. Several states require one by law. Check the first page of any agreement for how many days you have. #
Recovery: Any money your claim produces, whether by settlement, arbitration award or jury verdict. "No recovery" is the condition under which a non-recourse advance is never repaid. #

S

Settlement: An agreement to resolve the claim for a stated sum without a verdict. The overwhelming majority of injury cases end this way, which is why funding decisions are built around expected settlement value rather than trial outcomes. #
Statute of limitations: The legal deadline for filing a claim, which varies by state and by claim type. Miss it and the claim is gone. Any question about your deadline is one for your attorney, not for a funding company. #
Simple (non-compounding) pricing: A structure where the cost of funding is calculated only on the amount originally advanced, so the balance grows in a straight line rather than accelerating. Meaningfully cheaper than compounding on a case that runs for years. #
Subrogation: The right of a health insurer or government program that paid your medical bills to be reimbursed out of your settlement. It is one of the liens that comes out of the pot before you see your share. #
Surgery funding: Funding arranged so a plaintiff can get a needed procedure while a case is pending, when no health insurance or letter of protection is available. See surgery and medical funding. #

T

Tort: A civil wrong that causes harm and gives the injured person the right to sue. Personal injury law is tort law. #
Third-party claim: A claim against someone other than your employer or your own insurer. It matters in work injuries: workers' compensation alone often cannot be funded, but a third-party claim arising from the same accident frequently can. #

U

Underwriting: The review a funding company performs to decide whether and how much to advance. In legal funding it examines the claim — liability, injuries, treatment, coverage, venue, stage — and never the applicant's credit, income or employment. #
Uninsured / underinsured motorist (UM/UIM): Coverage on your own auto policy that pays when the at-fault driver has no insurance or not enough of it. In many car accident cases it is the only real source of recovery, so underwriters look for it. #

V

Venue: The court where a case is filed. It affects both how long a case takes and what juries in that area typically award, so it is a genuine underwriting factor even though it has nothing to do with the plaintiff. #
Verdict: A jury's decision at trial. Rare — most cases settle — but a verdict in the plaintiff's favor is a recovery, and a non-recourse advance is repaid from it the same way it would be from a settlement. #

A term you don't see here?

Call or text (323) 366-8083 and ask. If it appears in a funding agreement you have been handed — ours or anyone else's — we will explain what it does. Nothing on this page is legal advice; for questions about your specific case, ask your attorney.

Every term you'll run into, in plain English.

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D

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N

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