Underwriting is a thing not everyone is familiar with. For different industries it can mean different things. In litigation finance, sometimes called legal lending, an underwriter is a very important part of the process. In many cases underwriters are attorneys or paralegals; people with expertise in the law. It’s their job to see if the case that you applied for funding on is solid enough to fund.
How Does it all Work?
Why is it important that an underwriter evaluate a case? Well, for one, attorneys are biased. NO attorney takes a case they know will lose. It would be a waste of time and sometimes money. If someone were to ask an attorney “How much is this case worth?”, their answer could be higher than was reasonable. Some attorneys see cases with rose-colored glasses. They only consider the good aspects (bad injuries, a big insurance policy) and will discount or ignore the bad (four prior accidents, the police report is unclear who caused the accident).
So underwriters can’t just rely on an attorney’s word. That’s why many underwriters are attorneys. They are basically doing the attorney’s job, at least as far as estimating the case value. While underwriters vary from company to company, in general, here’s how they operate:
1) They read the application to get an overview of the case
They’ll see how old the plaintiff is, the plaintiff’s account of what happened in the accident, what the injuries are, and what state the client lives in. This provides a framework for him or her to start working.
2) They’ll review the documents received
This is everything from medical records (showing your injury) to liability documents proving who caused the accident (in the form of a police report, incident report, or witness statements), insurance documents (so they know how much money is available to pay out), and court documents (to show what has happened so far in the lawsuit). From this, some underwriters can already make an estimate of your case’s value based on the documents alone.
3) Other times, underwriters may have additional questions
This depends on the underwriter’s personality, the company’s guidelines, and how complex the case is. Some companies are quicker obtaining information than others. For instance, Uplift Legal Funding’s team of underwriters can often make a decision without having a long back-and-forth with the attorney. This speeds up getting you an answer greatly.
4) Some underwriters make a recommendation as to the rate and fees that should be charged
This is based on how risky the funding is. Not every case is a slam dunk. Some require the company to take a leap of faith. However, this varies by company.
All in all, the underwriting process, which is the most important part in determining if a funder can provide money, can take anywhere from hours to days. One of Uplift’s greatest strengths is its speed.
If your case is denied, does that mean the underwriter thinks your case is worthless? No. Not at all. There are many reasons an underwriter and company could deny a case. Here are some possible scenarios:
The case is a fifty-fifty case
It may settle, and if it does it could be for HUGE dollars, but it could also fail. Some companies are more comfortable putting out big bucks on a coin flip than others.
The case has value and will almost certainly settle, but there are some liens already on the file
Liens don’t mean a funder won’t fund, but if the underwriter thinks your case might settle for $100,000, and there is $40,000 in liens that have to be paid to medical providers, they might deny it to make sure you get a nice settlement when the suit wraps up.
The case could take too long
Because most funders work on a rate that compounds over time, the longer a case takes the more you would have to pay back. Sometimes a case is a gold mine but it could take four years to settle. To fund that case now would cause the plaintiff to pay too much at the end. In this case, a good company would tell you to try back after the case moves further along.
Not enough information is known
Sometimes a case could be great but not enough information is known. For instance, if the injury is terrible and the liability is great, it doesn’t matter if there is no confirmation of insurance policy. If there’s no guarantee there’s even money available to pay, there is no reason to fund. The solution here is the same: just give it some time.
Overall, the underwriter is an essential piece of the approval puzzle. If your case is strong and the underwriter is good at his or her job, it could mean you getting money in your pocket in just a matter of days.