States Tighten Rules on Litigation Funding Disclosure
New laws aim to increase transparency in legal investments to help stabilize insurance costs for households and businesses.
Updated on Oct. 29, 2026 in Insurance
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Should states restrict third-party litigation funding to help lower costs for insurance policyholders?
More than 20 states have enacted laws in 2026 to regulate third-party litigation funding, a practice where outside investors finance lawsuits in exchange for a portion of potential jury awards. These legislative moves aim to increase transparency in legal proceedings and address potential impacts on insurance costs.
Why it matters
Lawmakers and insurers are scrutinizing outside legal investment as jury awards exceeding $10 million hit $25.6 billion in 2025. These regulations reflect a broader effort to mitigate litigation-related expenses that critics suggest contribute to rising insurance premiums for homeowners and businesses.
Legislators in over 20 states have moved to regulate litigation funding, addressing a market projected to grow from $17 billion to $31 billion by 2028. In North Carolina, new legislation enforces this by authorizing civil penalties of up to $50,000 per violation.
The players
Swiss Re
A global reinsurer that provides risk management and insurance financial analysis.
U.S. District Court for the Western District of Louisiana
A federal judicial body that has implemented local disclosure requirements for legal funding.
The details
Litigation funding allows third-party investors to finance legal battles in exchange for a stake in the outcome. By requiring transparency or prohibiting the practice entirely, states aim to curb the influence of outside capital on high-value litigation. These measures follow industry observations that homeowners insurance defense costs in states like Florida dropped from 8.4% of premiums in 2022 to 1.9% in 2025 after localized legal reforms.
Timeline
2022: Florida enacted significant legal reforms and monitored insurance defense costs.
2025: Total jury awards exceeding $10 million reached $25.6 billion.
February 2026: The Litigation Funding Transparency Act was introduced in Congress.
June 30, 2026: Florida property insurance rates saw a recorded average change of -1.7%.
October 21, 2026: The Federal Civil Rules Advisory Committee held a scheduled meeting.
Money Landscape
The push for litigation funding transparency aligns with the Litigation Funding Transparency Act at the federal level. This trend marks a significant shift in oversight as regulators attempt to balance legal access with the rising costs that often influence insurance market stability.
Changes in litigation funding regulation may influence long-term stability in liability and property insurance premiums. Households should monitor local insurance renewals and discuss potential premium shifts with a licensed insurance professional to understand how legal reform in their state impacts coverage costs.
The takeaway
Increased transparency in lawsuit funding aims to curb the influence of outside capital on massive jury awards. Review your current insurance policy declarations to track any shifts in premium costs or legal expense surcharges as these regulations take effect nationwide.
Further reading
For more background on how legal costs affect your coverage, see our guide on Insurance.
Source note: This article includes information reported by MyChesCo.
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Should states restrict third-party litigation funding to help lower costs for insurance policyholders?
