More than 20 states pass litigation funding disclosure laws

More than 20 states have passed laws requiring disclosure of third-party litigation funding, and North Carolina bans litigation investment outright, according to an Insurance Information Institute issue brief reported by Insurance Business America on Oct. 21.

North Carolina's HB 315 allows civil penalties of up to $50,000 per violation, and Triple-I said the state was the first to do so. Four other states passed laws this year: Ohio (HB 105), Mississippi (SB 2747), Tennessee (HB 2108) and Utah (HB 280). Those statutes require funders to register or disclose their involvement, restrict funding from foreign entities, or limit funders' control over litigation. The coverage does not say which of the four adopted which provision.

For allocators, those three categories define the diligence file: who must register, where foreign capital is barred, and how much control a funder may keep over a case it pays for. North Carolina sits outside that pattern — HB 315 prohibits the investment and attaches a penalty of up to $50,000 per violation. A fund sold to wealth clients across state lines now has to answer which states its deals touch, and a claim governed by North Carolina law is a different question from one in Ohio.

The Western District of Louisiana introduced a standing order on litigation funding disclosure in September. Elsewhere the issue is decided case by case, according to the brief.

Triple-I frames funding as a cost input for liability insurers. An analysis by the institute and the Casualty Actuarial Society estimated that legal system abuse trends, including litigation funding, added $231.6 billion to $281.2 billion to liability insurance losses over the past decade.

Large awards are climbing alongside it. Verdicts over $10 million reached a record $25.6 billion across 190 cases in 2025, according to Marathon Strategies. Swiss Re estimates the global litigation funding market at about $17 billion, with annual investment projected to reach $31 billion by 2028.

Triple-I points to Florida as evidence that legal reform can move costs the other way. Since the state's 2022 and 2023 reforms, property insurance rate changes have averaged -1.7% through June 30, 2026, and 51 of its 67 counties saw average premium decreases in the first half of the year. Homeowners insurers' defense costs fell from 8.4% of premium in 2022 to 1.9% in 2025. Florida has not passed legislation on litigation funding.

The Litigation Funding Transparency Act, introduced in Congress in February, has not advanced, according to the brief. In March, the U.S. Chamber Institute for Legal Reform and Lawyers for Civil Justice asked the Federal Civil Rules Advisory Committee to adopt a uniform disclosure standard. More than 200 major U.S. companies, including dozens of insurers, supported the request. The brief says the request may be considered at the committee's Oct. 21 meeting.