Claimant-Funded Litigation

Claimant-funded litigation refers to cases where the claimant — rather than a third-party funder — is bearing the cost of pursuing the claim, either on a self-funded basis or through a contingency fee arrangement with counsel. While not a litigation finance structure per se, understanding claimant-funded dynamics matters to the industry because cases that exhaust the claimant's resources mid-litigation often become funding opportunities, and the transition from self-funded to third-party funded changes the parties' incentives and settlement dynamics. Defendants sometimes attempt to prolong litigation specifically to exhaust a claimant's resources, making access to third-party capital a tool for correcting this asymmetry and enabling meritorious claims to proceed to judgment.

Funders watch self-funded and contingency-only matters as a pipeline, because cases that exhaust a claimant's resources mid-litigation — or where a defendant's delay tactics are specifically designed to exhaust those resources — frequently become funding opportunities once the claimant's negotiating position has already weakened. Underwriting a matter that transitions from self-funded to third-party funded requires assessing how much leverage the claimant lost during the self-funded period, since that erosion directly affects the recovery the new capital is being underwritten against.