How Does Pre-Settlement Funding Impact My Settlement Negotiations?

Funding does not directly affect negotiations — but removing financial pressure gives plaintiffs the ability to wait for fair offers rather than accepting inadequate early settlements.

Pre-settlement funding does not give the funder any role in your settlement negotiations — your attorney handles all negotiations exclusively on your behalf. But funding can affect the negotiation dynamic indirectly, in a way that typically benefits the plaintiff.

Financial pressure is one of the most effective tools insurance companies and defense counsel use to push plaintiffs toward early, inadequate settlements. A plaintiff who cannot pay rent, is behind on medical bills, and has no income is often willing to accept a significantly below-market settlement offer simply to end the financial uncertainty. Pre-settlement funding disrupts this dynamic by removing the financial emergency.

A plaintiff who is financially stable — whose immediate needs are covered — can follow their attorney's advice on when to settle and at what amount, rather than settling based on personal financial crisis. This is the mechanism by which pre-settlement funding theoretically improves settlement outcomes: it gives plaintiffs the ability to pursue the litigation on its merits rather than on their financial need.

One caveat: if the settlement negotiations involve disclosure of funding (which is required in some jurisdictions and cases), the defense may factor the existence of a funding obligation into their negotiating calculations. Your attorney will advise you on whether disclosure is required and how to manage that aspect of the negotiation.

Source: ABA Formal Opinion 484 (2019). ALFA Consumer Litigation Funding Code of Conduct.

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