As the New York state Legislature convenes for its new session, new bills and regulatory proposals are being introduced, and PIANY is carefully assessing their potential impact on the insurance industry to shape its advocacy priorities for the year ahead.
In doing so, PIANY has recognized the strong need to support S.1104/A.3225, the Consumer Litigation Funding Act, which would introduce critical regulations to protect consumers from predatory litigation financing. Without proper oversight, litigation funding companies exploit plaintiffs, drive up settlement costs, and ultimately, increase insurance premiums for businesses and consumers across New York state. It’s time for the state Legislature to act.
PIANY supports this common-sense, bi-partisan legislation, which was reported out of the Senate Consumer Protection Committee (7-0) on Feb. 12, 2025. On March 3, 2025, the bill passed the Senate (61-0) and is now delivered to the Assembly.
The hidden dangers of litigation financing
Litigation financing allows third-party companies to provide cash advances to plaintiffs in exchange for a portion of their future settlement or judgment. While this may seem like a financial lifeline, the reality can be far more troubling. Often, these funding arrangements come with exorbitant, compounding fees, leaving plaintiffs with little to no recovery after legal expenses and financing costs are deducted.
Unlike traditional loans, litigation finance contracts are nonrecourse—meaning plaintiffs only must repay if they win. Because these agreements are classified as investments rather than loans, they are excluded from state usury laws, which typically cap interest rates on traditional lending.
This loophole allows funders to charge extremely high repayment amounts—often far exceeding the original advance—with consumers unaware of the full costs until it’s too late. This lack of transparency enables funding companies to exploit vulnerable individuals already facing financial hardship.
How litigation financing drives up insurance costs
Beyond harming individual plaintiffs, unchecked litigation financing has serious consequences for New York state’s insurance market. Often, litigation finance companies push for inflated settlement demands and prolonged lawsuits, forcing insurers to either overpay or engage in costly, drawn-out legal battles.
The result? Higher insurance premiums for all New Yorkers. As litigation expenses rise, insurance companies must adjust their rates to cover increased claim costs. This affects businesses, homeowners, and drivers, making insurance coverage less affordable for everyone.
By regulating litigation funding, S.1104 would help stabilize the insurance market by reducing unnecessary legal costs and preventing these excessive fees from being passed on to policyholders.
A balanced approach to consumer protection
S.1104 introduces key protections to curb these abuses, including:
- fee limitations to prevent excessive charges;
- clear disclosures so consumers understand the true cost of financing; and
- a right to rescind agreements, giving plaintiffs more control over their legal outcomes.
It is important to note that S.1104 would not ban litigation financing—it would introduce reasonable regulations to ensure fairness and transparency. By requiring licensing, clear disclosures, and reasonable fee caps, this bill would protect plaintiffs from predatory contracts while preserving access to responsible funding options.
Join PIANY in supporting S.1104
PIANY urges lawmakers to act now to pass S.1104. Without reform, litigation finance companies will continue to take advantage of vulnerable plaintiffs and drive-up insurance costs statewide.
By supporting this legislation, we can protect consumers, promote fairness in the legal system, and keep insurance affordable for all New Yorkers.
For more information on PIANY’s advocacy efforts, or to follow the status of this bill, visit PIA Advocacy.
To learn more about predatory litigation financing, PIA members can access What is third-party litigation funding? How it works and its impact on insurance in the PIA QuickSource library.
Danielle Caswell, Esq.
Danielle Caswell joined PIA Northeast as associate counsel in the Government & Industry Affairs Department in 2023. She earned her bachelor’s degree from New York University and her law degree from Brooklyn Law School with a particular focus on intellectual property, information, and media law. Prior to joining PIA, Danielle was an associate at a law firm in New York City where she focused primarily on intellectual property and entertainment-related transactional and litigation matters.
