Association for Public Policy Analysis & Management

Consumer litigation funding, a growing industry in the United States, is an alternative credit source for cash-strapped personal injury plaintiffs. Financiers give plaintiffs nonrecourse loans that are premised on lawsuit outcomes. This paper is the first to empirically examine the effect of these nonrecourse loans. Specifically, I use data on closed claims initiated from 2004 to 2012 from the National Practitioner’s Data Bank and employ difference-in-differences using state actions affecting funding to examine the effect of nonrecourse loans on medical malpractice litigation outcomes. Results provide evidence that funding increases claim payments, duration, and the filing rate.