Third-Party Litigation Funding in Last-Mile Delivery

Nuclear verdicts in the commercial transportation industry are driving insurance premiums higher. A key contributor? Third-party litigation funding is ballooning claim payouts in these lawsuits. By understanding the impact of this trend and adopting risk management best practices, you can help safeguard your last-mile delivery business.  

What is third-party litigation funding?

Third-party litigation funding comes from a private firm that is not directly involved in the claim. These firms may secure funds from investors, who gain a payoff on their investment if a lawsuit is successful. Lawsuits funded by these third parties have become increasingly common, with plaintiffs targeting transportation companies as potentially lucrative defendants. An entire litigation funding industry has evolved, seeking to capitalize on these cases, intensifying claim frequency and magnitude.

Burdened by mounting claims and escalating settlement costs, insurers are raising rates to stay viable. Consequently, surging premiums strain transportation companies’ financial resources and impede their ability to operate profitably. 

Factors driving third-party litigation funding

Opportunistic attorneys and consultants actively seek out transportation cases, perceiving last-mile delivery companies as easy targets for substantial financial settlements. Their relentless pursuit of litigation has distorted the concept of liability. Even minor incidents can now result in exorbitant claims. 

The rapid growth of online shopping and same-day delivery services means more vehicles on the road and increased potential for accidents. Companies face a delicate balance between supplying speedy delivery (pressure for profits) and ensuring drivers adhere to safety practices. This environment provides fertile ground for litigious parties to exploit any perceived negligence. 

Some states are proposing legislation to require disclosure of third-party funding during trials, so juries have that context before deliberations. However, until there are laws to limit the impact of third-party litigation funding, nuclear verdicts will remain a threat. Accident prevention is the best way to protect both your business and the communities you serve.  

Navigating the challenges: risk management and education

In the face of rising insurance premiums and threat of third-party litigation funding, risk management and education emerge as essential strategies for your business. Here are key steps to consider: 

• Implement robust safety practices: Developing and enforcing comprehensive safety practices is paramount. By prioritizing safety within your organization, you reduce the likelihood of accidents and mitigate liability risks. 
• Publicize your safety measures: It is not enough to have safety protocols in place; your entire team must actively adhere to them. Regularly talk about your safety measures to foster a culture of accountability and ensure that everyone understands the importance of following guidelines. 
• Surround yourself with an experienced team: Your management, lawyers, safety consultants, and insurance advisors work together to safeguard your business. Make sure you have legal counsel that specializes in transportation law to help navigate the complexities surrounding third-party litigation funding. 
• Stay informed: Keep abreast of industry developments, including changes in regulations and precedents related to third-party litigation. Your specialty insurance broker can provide up-to-date information and guidance tailored to your specific needs. 

Confronting industry challenges as a unified front

The influence of third-party litigation funding on higher premiums is affecting the overall health of the commercial transportation industry. To counter this influence, all last-mile delivery businesses benefit from implementing robust risk management strategies. Well-documented safety-first practices and well-trained drivers make it harder for plaintiffs to claim negligence. By adopting a long-term perspective and committing to proven risk management protocols, the whole transportation industry can move toward a more secure and profitable future.