Floridians for Lawsuit Reform announced on X that private investors are increasingly funding large lawsuit payouts, inflating claim costs and avoiding U.S. taxes. The group said H.R. 3512 would tax these profits and help protect consumers from rising costs.
According to Floridians for Lawsuit Reform, third-party litigation funding (TPLF) has rapidly expanded, resulting in a surge of large lawsuit payouts and growing costs for claims in the U.S. legal system. The organization reports that private investors—often hedge funds and private equity—inject capital into lawsuits and receive a portion of the settlement or judgment, incentivizing higher and more frequent payouts. Floridians for Lawsuit Reform warns that unchecked TPLF drives up legal costs, inflates insurance premiums, and ultimately burdens Florida consumers and businesses with higher costs for goods and services.
According to the Insurance Information Institute, the U.S. TPLF industry is valued at more than $13 billion, with much of the capital coming from private investors seeking returns on legal settlements. The Institute highlights that many litigation funders structure investments through offshore accounts and complex financial arrangements to avoid U.S. tax obligations on their profits. This practice not only reduces tax revenue but also creates an uneven playing field in the legal system, driving up the frequency and cost of lawsuits as reported by the Insurance Information Institute.
Bloomberg Law reports that the Tackling Predatory Litigation Funding Act (HR 3512) seeks to close the tax loophole by requiring that profits from litigation funding be taxed as ordinary income, similar to other investments. According to Bloomberg Law, the legislation would also increase transparency in TPLF agreements, making it harder for investors to hide profits from U.S. tax authorities. Supporters believe this reform would help curb excessive litigation, lower claim costs, and prevent funders from passing additional expenses on to consumers through higher insurance premiums and prices.
According to its official website, Floridians for Lawsuit Reform is a nonprofit advocacy group dedicated to transparency, fairness, and balance in Florida’s civil justice system. The organization educates policymakers and the public about the impact of lawsuit abuse, promotes reforms to address excessive legal costs, and advocates for consumer and business protections. Its mission is to ensure a just legal system that does not allow unchecked litigation funding to undermine affordability and economic growth in Florida.