Case Cost Advance

Funds a law firm advances on behalf of a contingency-fee client to cover the out-of-pocket costs of prosecuting a claim — filing fees, expert witness fees, deposition and court reporter costs, medical record retrieval, travel, and similar disbursements — with repayment contingent on the case producing a recovery. Case cost advances are distinct from the contingency fee itself: the fee compensates the firm for legal services, while cost advances are reimbursed off the top of any recovery, before or after the contingency percentage is applied depending on the fee agreement's terms. State ethics rules generally permit firms to advance litigation costs to a client on a contingent, non-recourse basis but restrict firms from advancing a client's personal living expenses, which most jurisdictions treat as improper financial assistance to a client under rules derived from ABA Model Rule 1.8(e). For firms running high case-cost practices — mass tort, product liability, medical malpractice — cumulative cost advances across an active docket can represent one of the largest balance-sheet items the firm carries, since advanced costs sit as an unrecovered outlay for the full duration of the litigation, often years, with recovery entirely contingent on case outcome.

Aggregate advanced case costs are the primary driver of a contingency-fee firm's working-capital need, because costs are paid in cash today against a fee that may not materialize for years. Firms with heavy cost-advance exposure — particularly in mass tort dockets requiring expert-intensive causation proof — are the most frequent users of law firm lines of credit and receivables financing.

A funder or lender evaluating this exposure prices it against the firm's historical cost-to-recovery ratio and cost recoupment rate on resolved matters, since a firm that systematically underestimates per-case costs will burn through committed capital faster than its docket resolves.