On April 21, 2025, Georgia became one of the first states to enact a statute to permit the discovery of litigation funding, paving the way, perhaps, for a number of other states to soon follow.
The Georgia legislature addressed the regulation of third-party litigation funding by enacting Senate Bill 69 (amending Title 7 and Article 5 of Chapter 11 of Title 9) of the Official Code of Georgia. This amendment:
• Establishes clear requirements for disclosing third-party funding agreements exceeding $25,000;
• Mandates that litigation financing companies register with the Georgia Department of Banking and Finance; and
• Limits the recovery rights of litigation funders and holds them accountable for promoting frivolous litigation.
The statute does not, however, automatically permit these agreements to be admissible at trial.
Other states are considering similar legislation. Currently, the New York senate has passed Senate Bill S1104 regarding the regulation of third-party litigation funding. The Bill was delivered to the Assembly, where it has yet to be calendared for a vote on the Assembly Floor. This act will prohibit litigation funders from having any role in deciding whether, when and how much a legal claim is settled for, and it requires the third-party company to include certain, clear language within the contract between the company and borrower. While this bill does not permit discovery of these agreements, this proposed bill is a step forward in the right direction.
West Virginia has also passed legislation involving the disclosure of litigation agreements. Other jurisdictions, including Louisiana, Wisconsin, Montana and Indiana, have proposed bills to permit discovery of third-party litigation funding agreements.
Impact on Civil Litigation
As we all know, litigation loan funding is problematic for the insurance industry because it can artificially inflate the value of claims and prolong litigation. When plaintiffs receive third-party funding, they may be less inclined to settle reasonably, knowing they have financial backing regardless of the case’s merits. This delays resolution, increases defense costs and may encourage frivolous lawsuits, ultimately driving up premiums and burdening the legal system with unnecessary litigation. Hopefully, this is a step in the right direction to roll back the shadow that this has cast over our industry.
