Canadian individual plaintiffs involved in personal injury actions have been able to obtain loans from third party funders in Canada for at least the past 10 years. The primary and most common type of loan provided to such plaintiffs is used towards paying their basic daily living expenses. The benefit of this type of loan allows the plaintiff to pursue their litigation and obtain a fair value for their damages rather than accept a lower value.
Experienced third party funders such as BridgePoint are conscious of the fact that plaintiffs are at a vulnerable stage in their lives when they approach a third party funder for financing. Most plaintiffs have very limited financial resources to see their litigation through to its end. Third party funders can provide flexible and creative solutions to keep financing costs down, such as staging the loan over a period of time rather than providing a lump sum at the outset or providing a smaller loan than requested and assessing further requests as the litigation progresses.
Another type of loan to the plaintiffs is used to pay for medical and rehabilitation benefits that have been terminated or denied by insurers pending the resolution of litigation. This type of loan allows plaintiffs to recover more quickly from their injuries and resume some semblance of their pre-accident life.
Other types of third party financing available in Canada include:
- Lines of credit to law firms primarily offering services under contingency fee arrangements to assist in financing disbursements for client files;
- Financing for disbursements not only in personal injury claims but also in commercial litigation and class and mass tort actions; and
- Cost indemnities in personal injury, class, and mass tort actions.
The first two of these types of funding allow the law firm to properly invest and pursue the litigation for the benefit of the plaintiff or class members.
The latter is a unique product to Canada as an unsuccessful litigant here can be ordered by the Court to pay some or all of the other side’s legal fees and disbursements. A concern that arises with respect to this type of product is whether or not discussions and agreements between the plaintiff and third party funders for this type of product are considered privileged. The caselaw is currently unsettled, especially in the class action field as some provincial Courts will recognize the agreement is privileged while others Courts do not.
Third party financing is still in its early stages in Canada. Ordinary financial institutions cannot meet this type of demand because the risks involved in litigation do not conform to a financial institution’s underwriting criteria for loans. Further, financial institutions do not provide cost indemnities. As a result, it is anticipated that the demand for such services will continue to rise in Canada.
This guest blog post was written by Grace Tsang of BridgePoint Financial Services Inc, a third-party litigation funding company based out of Toronto, Canada.